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2019 (2) TMI 1977
Disallowance u/s 14A - HELD THAT:- We feel that there is no merit in this argument of ld. DR of revenue that disallowance u/s. 14A cannot be lower than the amount disallowed by the assessee while filing the return of income if as per law, lower disallowance is justified. This argument of ld. DR of revenue is rejected.
We examine the applicability of the Tribunal order cited by ld. AR of assessee having been rendered in the case of ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] - As per which only those investments are to be considered for computing average value of investment which yielded exempt income during the relevant year. Respectfully following this order of Special Bench of the Tribunal, we direct the AO to determine the amount of disallowance to be made u/s. 14A on this basis.
Whether disallowance u/s 14A is to be made in a year in which there is no exempt income? - As per the judgement of Hon’ble Apex Court rendered in the case of Maxopp Investment [2018 (3) TMI 805 - SUPREME COURT] it was held that dominant purpose for which investment into shares is made by assessee may not be relevant as section 14A applies irrespective of whether shares are held to gain control or as stock-in-trade. Hence, in our considered opinion, this judgment is not relevant to decide this aspect that whether disallowance u/s 14A is to be made in a year in which there is no exempt income.
Since, the judgment of Hon’ble Delhi High Court and other High Courts are in favour of the assessee on this aspect that no disallowance u/s 14A is to be made in a year in which there is no exempt income, any adverse order of Tribunal cannot be followed by ignoring the judgment of High Court. Respectfully following the decision of Hon’ble Delhi High Court rendered in the case of Cheminvest Pvt. Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] we decide this issue in favour of the assessee and delete the disallowance made u/s. 14A. - Decided in favour of assessee.
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2019 (2) TMI 1976
TP Adjustment - comparable selection - Suo moto exclusion by assessee - HELD THAT:- Comparable suo moto excluded by CIT (A) being M/s. Microland Limited is restored back in the final list of comparables in view of this fact that it was suo moto excluded by CIT (A) and the assessee is not interested in its exclusion. Accordingly ground no. 2 of revenue's appeal is partly allowed.
Accentia Technologies, Cosmic Global Ltd.,Eclerx Services Ltd. and Infosys BPO Ltd.- Assessee is engaged in Business Process Outsourcing Services - As per order rendered in the case of e4e Business Solutions India (P.) Ltd. Vs. DCIT [2016 (3) TMI 356 - ITAT BANGALORE] we find that these four comparables were excluded from the list of final comparables. Respectfully following this Tribunal order, we hold that there is no infirmity in the order of CIT (A) in respect of this aspect of exclusion of these four comparables from the list of final comparables and hence, on this aspect, we decline to interfere in the order of CIT(A).
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2019 (2) TMI 1970
Addition on account of sundry creditors and on account of expenses of the creditors - No proof to genuineness of the credit - HELD THAT:- In the present case, the A.O. issued notice u/s 133(6) as well as summons u/s 131 to the below mentioned creditors for verifying the genuineness of the transaction.None of the above creditors have complied with the notice and summons of the A.O. The assessee did not file any confirmation or any other document from these creditors to verify the genuineness of the transactions. The assessee has been given sufficient opportunity to prove his case that he has received genuine credits in the matter.
Assessee despite giving sufficient opportunity did not produce any confirmation or the documentary evidence to prove the genuineness of the credits. One creditor Mr. Jameel Ahmad appeared before A.O. but he has not confirmed the transaction with the assessee. These facts clearly show that assessee failed to adduce any sufficient evidences on record to prove genuineness of the credits in the matter.
Tribunal has also remanded back the matter to the Ld. CIT(A) but despite giving fresh opportunity, the assessee did not do anything in the matter. Even before the Tribunal, the assessee did not make any attempt to adduce any additional evidence with prayer, which would, therefore, show that assessee has no evidence to prove genuineness of these credits. It is well settled Law that burden is upon the assessee to prove the identity of the creditors, their creditworthiness and genuineness of the transaction in the matter - assessee failed to produce any documentary evidence and confirmations from the creditors. Therefore, there is no reason to restore the matter back to the file of Ld. CIT(A) for issuing of fresh summons. No interference is called for in the matter. This ground of appeal of assessee is accordingly dismissed.
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2019 (2) TMI 1966
TDS on discount/commission made u/s 194H - sale of SIM Cards - Demand u/s. 201(1) & 201(1A) - Authorised Retailer deliver Prepaid SIM Cards / Scratch Vouchers / Recharge Vouchers / V-top up etc., to a prospective subscriber/customer only after collecting duly filled in Customer Application Form (CAF) along with copies of Proof of density (POI) and Proof of Address (POA) - case of the department is this that MRP (-) discounted price offered by the assessee to the distributor is payment of commission by the assessee to the distributor - whether once it is held that the right to service can be sold then the relationship between the assessee and the distributor would be that of "Principal and Principal" and not of "Principal and Agent"? - whether because of sub-clause (l) of Para 6.3 of the distributorship agreement, relationship between the assessee and the distributor can be termed as that of principal to agent?
HELD THAT:- When the distributor / retailer can sale at a price below MRP as per his choice and market conditions, it cannot be said that the difference between MRP and discounted prices being charged by the assessee to the distributor is a payment of commission by the assessee to the distributor. This also does not change the relationship of the assessee and its distributors from that of Principal to Principal to that of Principal and agent. In the facts of present case as discussed above, we are of the considered opinion that relationship between the assessee and the distributor is that of principal to principal and not principal to agent.
DR of revenue could not point out any difference in facts in the present case and in the case which is decided by Hon’ble Rajasthan High Cour [2018 (5) TMI 1394 - RAJASTHAN HIGH COURT]t and by the Bangalore Tribunal in assessee’s own case for earlier years [2015 (11) TMI 860 - ITAT BANGALORE] and the judgement of Hon'ble Karnataka High Court rendered in the case of Bharti Airtel Ltd. Vs. DCIT [2014 (12) TMI 642 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2019 (2) TMI 1963
Income taxable in India - balance receipts not attributable to PE in India - IPL matches - receipts from the board of control for Cricket in India - period of stay of employees in India - whether the balance receipts not attributable to permanent establishment of the assessee can be taxed as fees for technical services under Article-13 of the India-UK Tax Treaty? - assessee is a company Incorporated under the laws of United Kingdom - HELD THAT:- The assessee and board of control for Cricket in India entered into an arrangement, contract for establishment, commercialization and operation of the Indian Premier league in September 2007. The assessee entered into an initial contract and subsequent separate service agreement for the services to be provided to the board of control for Cricket in India in relation to IPL. For the purpose of provision of the services it deputed some of its employees for undertaking the on ground implementation and elated supervision activities in India. The stay of these employees has exceeded the threshold limit of 90 days in India and hence the assessee was having a permanent establishment under article 5 of the DTAA. The assessee attributed 63% of the total receipts from the board of control for Cricket in India as attributable to such PE and balance receipt of 37% was held to be not taxable in India. This was the stand taken by the assessee. According to that the receipt were not taxable in India. AO held that the above sum is taxable as fees for technical services.
As accepted by both the parties the above issue is squarely covered against the assessee by the decision of the coordinate bench in assessee‟s own case for assessment year 2010 – 11 [2016 (11) TMI 65 - ITAT DELHI] as well as for assessment year 2011 – 12 to 2014 – 15 [2018 (5) TMI 2089 - ITAT DELHI]
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2019 (2) TMI 1962
TP Adjustment - Disallowance of royalty paid by the assessee to its Holding Company - appellant company had entered into technical knowhow agreement with its Holding Company for every model of the car manufactured and the appellant company paid royalty of 5% on the domestic sales and 8% on export sales - as argued TPO /DRP were not justified in holding that the royalty payment should be bench marked separately. It was contended that the appellants “whole entity” approach of bench marking royalty payments along with all other transactions by adopting TNM method at the entity level is justifiable - HELD THAT:- As relying on assessee own case [2015 (9) TMI 962 - ITAT CHENNAI] we hold that the average royalty payment up to the rate of 4.7% on the sales is justified. Since the assesse claims that the average royalty paid is 3.64% , we hold that the Revenue is not justified in making the impugned adjustments and hence direct to delete the additions. The corresponding grounds of appeal are treated as allowed.
Capital subsidy - HELD THAT:- Since this issue is decided in the assessee’s favour by the AO in the earlier assessment year , the corresponding grounds are allowed.
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2019 (2) TMI 1959
Constitutional Validity of Section 234E - Late filing fee under Section 234E - exercise of power u/s 200A - charging of fees payable u/s 234E prior to amendment to section 200A(1)(c) of the Act vide Finance Act, 2015 w.e.f. 01.06.2015, while processing the TDS returns - HELD THAT:- As decided in SRI. FATHERAJ SINGHVI AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2016 (9) TMI 964 - KARNATAKA HIGH COURT] Amendment to section 200A(1) of the Act is prospective in nature and therefore the AO while processing the TDS statements/ returns in the present three appeals for the period prior to 01.06.20 15 was not empowered to charge fees under section 234E - Therefore, the intimations issued by the AO under section 200A of the Act in these appeals are unsustainable and the demand raised by way of charging of the fees under section 234E of the Act not being valid is deleted. - we hold that the AO is not empowered to charge fees under section 234E of the Act by way of intimations issued u/s 200A of the Act in respect of defaults before 01.06.2015 - Decided in favour of assessee.
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2019 (2) TMI 1957
TP Adjustment - Comparability - Application of onsite revenue filter – M/s. Acropetal Technologies Ltd. - HELD THAT:- We find that the DRP has excluded ‘Acropetal’ from the list of comparables on the grounds of it being functionally not comparable to the assessee in the case on hand and not on the ground of application of ‘on-site’ filter as alleged by Revenue in the grounds raised - Revenue in this appeal has neither challenged DRP’s action in excluding ‘Acropetal’ from the list of comparables on grounds of not being functionally comparable to the assessee nor has Revenue been able place on record any factual evidence to controvert DRP’s finding that ‘Acropetal’ is not functionally comparable to the assessee who is engaged in provision of ITES/BPO services - we find no merit in the grounds raised by Revenue and consequently uphold the DRP’s order excluding Acropetal Technologies Ltd., from the list of comparables as it is not functionally comparable to the assessee in the case on hand.
Exclusion of /s. Jeevan Scientific Technology Ltd., (‘Jeevan’) - Revenue has challenged the exclusion of ‘Jeevan’ from the list of comparables to the assessee by the DRP on grounds of application of service income filter of 75%; which was infact a filter applied by the TPO. Apart from raising this ground (supra), Revenue has not placed on record any factual material evidence to controvert the DRP’s finding that this company ‘Jeevan’ had passed the 75% revenue filter applied by the TPO. Even otherwise, the DRP has, inter alia, excluded ‘Jeevan’ on grounds of its huge fluctuating margins over the last few years which has not been challenged by Revenue. In this factual matrix of the case, as discussed above, we uphold the action of the DRP of excluding this company ‘Jeevan Scientific Technology Ltd.,’ from the list of comparables for failing the 75% revenue filter applied by the TPO and on account of its hugely fluctuating margins over the last few years which indicate that there were certain peculiar circumstances influencing the profit margins of the company.
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2019 (2) TMI 1956
Disallowance u/s 14A r.w.r. 8D - amount of suo moto computed by the assessee in the return income - non recording of satisfaction by AO - HELD THAT:- There is no satisfaction recorded by the AO while computing the disallowance that how the suo moto disallowance made by the assessee is wrong. Secondly also agree with the argument of the learned Counsel that the disallowance under section 14A of the Act can be reduced below the amount suo moto computed by the assessee in the return of income as it has not to be charged to tax in any case.
This view has already been taken by this Tribunal in the case of Sajjan India Ltd. [2017 (12) TMI 47 - ITAT MUMBAI], hence,we direct the AO to restrict the addition to the extent of revised computation of suo moto disallowance by the assessee i.e. only ₹ 20,18,394/- in respect to shares which has yielded dividend income.
MAT computation u/s 115JB - As regards to the computation of book profit under section 115JB of the Act no disallowance can be made in relation to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. Hence,also direct the AO to delete the addition while computing book profit. Accordingly, the appeal of the assessee is decided and partly allowed.
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2019 (2) TMI 1955
Rectification of mistake u/s 254 - CIT-A jurisdiction as contemplated in provisions u/s.251(1)(a) - HELD THAT:- CIT(A) disposed off all the grounds of appeal with a direction to verify the claim and delete the addition if found to be correct or decide as per law, without giving any independent finding, this in our view amounts to exceeding the jurisdiction as contemplated in provisions u/s.251(1)(a) - In the case of CIT v. Premkumar [2017 (10) TMI 1009 - KERALA HIGH COURT] as held that Appellate commissioner might confirm, reduce, enhance or annul assessment but he could not refer case back to AO for making the fresh assessment nor could he direct the Assessing Officer to decide in accordance with his directions.
Since the Ld. CIT(A) directed the AO to verify the claim and allow in accordance with law or in accordance with her directions, in our view, she travelled beyond the scope of the provisions u/s.251(1)(a) - respectfully following the above decision, we set aside the order of the Ld.CIT(A) and restore all the issues to the file of the Ld. CIT(A) for denovo adjudication. Since we have restored all the issues in appeal of the assessee to the file of the Ld. CIT(A) the issues raised in the grounds of appeal by the Revenue also restored to the file of the Ld. CIT(A) for denovo adjudication.
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2019 (2) TMI 1954
Reopening of assessment u/s 147 - whether no fresh material before the AO warranting reopening? - HELD THAT:- AO reopened the assessment which was processed u/s 143(1) of the Act. In the case of Rajesh Jhaveri Stock Brokers P. Ltd. [2007 (5) TMI 197 - SUPREME COURT] held that intimation u/s 143(1)(a) is not an assessment and held valid the notice issued u/s 148. In the case of Kone Elevator India P. Ltd.[2011 (3) TMI 1340 - MADRAS HIGH COURT], CIT v. Ideal Garden Complex P. Ltd. [2011 (9) TMI 731 - MADRAS HIGH COURT]it is held that in the case of return of income processed u/s 143(1), the only condition to be satisfied for reopening is taxable income has escaped assessment and the assessee’s plea that no fresh material before the AO warranting reopening, is not relevant.
Estimation of income on bogus purchases - HELD THAT:- We find that once the onus shifted to the AO, instead of verifying those details, he has jumped into an estimation which is uncalled for. Similarly, there is no merit in the order of the Ld. CIT(A) restricting the disallowance to 3% of such purchases - we set aside the order of the Ld. CIT(A) restricting the disallowance to 3% of such purchases and allow the 2nd ground of appeal.
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2019 (2) TMI 1949
Addition u/s 40A(2)(a) - HELD THAT:- Since the facts and circumstances of the instant ground are mutatis mutandis similar to those of the immediately preceding year, respectfully following the precedent, we uphold the action of the ld. CIT(A) in holding that the provisions of section 40A(2) were not attracted and it is further held that the gross profit rate of 0.63% (0.54% as declared by the assessee plus addition of 0.09%) be applied. Thus, the grounds raised by the Revenue are dismissed and those of the assessee are partly allowed.
Deemed dividend addition u/s 2(22)(e) - HELD THAT:- As similar issue came up for consideration before the Tribunal in assessee’s own case for the A.Y. 2010-11. A detailed discussion has been made in the order for such year and eventually the matter has been restored to the file of AO for a fresh a decision. Admittedly, the facts and circumstances of the ground for the instant year are similar to those of the preceding year. Respectfully following the precedent, we set-aside the impugned order on this score and remit the matter to the file of AO for deciding this issue in conformity with the directions given by the Tribunal in its order for the preceding year.
Disallowance of interest u/s.36(1)(iii) - HELD THAT:- As AR submitted that similar issue was raised in the preceding year as well and the Tribunal was pleased to decide it against the assessee. In view of the candid admission made by the ld. AR, we countenance the impugned order on this score. This ground is not allowed.
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2019 (2) TMI 1946
Unaccounted sales - Addition based on loose sheets found in search - difference in purchase of milk as per daily milk procurement sheets and as recorded in the books - HELD THAT:- The entire unaccounted sales cannot be added because there has to be some purchases and expenses related therewith. Therefore, making addition on the basis of profit margin is more logical and rationale. Moreover, though the daily milk procurement sheets were found but no document was found wherein the revenue can say that the assessee was also making undisclosed purchases. The most important fact which needs to be highlighted is that the Assessing Officer, in his whims and surmises, has considered the extrapolation for only two A. Ys whereas, if he was so confident about the seized documents and income therein, he should have extrapolated for the entire block period of six years. AO did not give any reason for this.
Considering the facts of the case in totality, we are of the considered opinion that the CIT(A) rightly deleted the additions made by the Assessing Officer but erred in sustaining the addition which, In our considered opinion, on facts discussed hereinabove, needs to be deleted also.
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2019 (2) TMI 1945
TP Adjustment - adjustment of the Arms Length Price "ALP" by as per the proviso to section 92C(2) - comparability Kerala state industrial Corp Ltd. - HELD THAT:- As stated on its website its team includes a core group of skilled professionals from various fields like Engineering, Management, Finance and Law. It has also to its credit a track record of attracting a commendable volume of investment to the State. The corporation has so far promoted more than 750 projects in the State and has played a vital role in the setting up of pioneering organizations such as Cochin International Airport Limited and many other companies.
It is apparent that the functional profile of this company is not comparable with the assessee. Further more in the comparable companies profile there are substantial trading activities for which no segmental account has been provided for. For these reasons we are of the opinion that the function of operating an air cargo complex and the function of carrying on a support services for baggage and passenger handling at the airport are not comparable. We direct the transfer pricing officer/officer to exclude the above comparable from the comparability analysis for determining the arm's-length price of the international transactions entered into by the assessee. - Appeal of the assessee is partly allowed.
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2019 (2) TMI 1944
No notice under section 143(12) - HELD THAT:- As evident from the above notice, it was served not on the assessee, but on one Abdul Wahid. The Department has not been able to show this notice to have been served on either the assessee, or on his agent. Therefore, the assessee is correct in contending that no notice under section 143(2) of the Act was served on him.
Thus as relying HARSINGAR GUTKHA P. LTD. [2008 (5) TMI 443 - ALLAHABAD HIGH COURT] on the entire proceedings in the present case, culminating in the impugned order, are held to be null and void and are quashed.
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2019 (2) TMI 1942
PE in India - net global profits - Attribution of profits to the PE in India in respect of hardware components of the telecom equipments and the mobile handsets as business profits under article 7 of the Indo-China DTAA - Measurement of profit - HELD THAT:- As decided in own case [2016 (6) TMI 329 - ITAT DELHI] we find that the level of operations carried out by assessee through its PE in India are considerable enough to conclude that almost entire sales functions including marketing, banking and after sales were carried out by PE in India and, therefore, keeping in view th decision of Rolls Royce [2007 (10) TMI 321 - ITAT DELHI-C] and Nortel Networks India International Inc. [2014 (6) TMI 941 - ITAT DELHI] we are of the opinion that it would meet the ends of justice if 35% of net global profits as per published accounts out of transactions of assessee with India are attributed to PE in India in respect of both hardware and software supplied by assessee to Indian customers. At this juncture we may point out that while deciding the department's appeal in subsequent part of this order, we have upheld the findings of ld. CIT(A) to tax the income from sale of software as business income and not royalty. We may point out that in AY 2009-10 the AO estimated the operating profits at 7.5% as against the weighted average of net operating profit at 2.53% as per the global accounts.
Taxability of software as royalty - HELD THAT:- As decided in own case [2016 (6) TMI 329 - ITAT DELHI] Receipts on account of supply of software were integrally connected to the supply of hardware and, therefore, AO was not right in taxing such receipts as royalty. In view of the decision of Hon'ble Delhi High Court in the case of DIT v. Nokia India [2012 (9) TMI 409 - DELHI HIGH COURT] software supplies could not be taxed even under the amended law - as per the provisions of Article 12(5) of the DTAA the supply of software being integral to the supply of hardware and the finding of existence of a PE of assessee in India, Article 12(5) of the DTAA would cease to apply and the provision of Article 7 would be applicable and, therefore, the income from software is to be taxed as business income. - Decided in favour of assessee
Levy of interest u/s 234B - Held that:- We find that the facts are almost identical to the facts as obtaining in the case of GE Packaged Power Inc. [2015 (1) TMI 1168 - DELHI HIGH COURT] which is the latest decision of Hon'ble Jurisdictional High Court on this issue and, therefore, respectfully following it we hold that assessee was not liable to pay interest u/s 234B.- Decided in favour of assessee
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2019 (2) TMI 1940
Bogus LTCG - Addition u/s 68 - rejection of claim of exemption made u/s 10(38) - HELD THAT:- As assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) evidence of sale of shares through the stock exchange, (f) copy of demat statement showing the sale of shares, (g) copy of bank statement reflecting sale receipts, (h) copy of brokers ledger, (i) copy of Contract Notes etc.
The proposition of law laid down in various cited case laws by the Jurisdictional High Court as well as by the ITAT Kolkata on these issues are in favour of the assessee.
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2019 (2) TMI 1934
Depreciation on “license to collect toll" considering it as an intangible asset in terms of section 32(1)(ii) - AO disallowed assessee‟s claim holding that no intangible asset has been acquired by the assessee - HELD THAT:- The issue raised in present appeal was considered by the Co-ordinate Bench of the Tribunal in the case of M/s. Ashoka Infrastructure Limited Vs. ACIT[2013 (8) TMI 588 - ITAT PUNE].wherein held that “right to collect toll‟ is an intangible asset and the assessee is entitled to claim depreciation on same. We find that consistent view has been taken by the Tribunal in various other cases where depreciation has been claimed on “right to collect toll‟, considering it to be an intangible asset.
Tribunal in the case of ACIT Vs. M/s. Progressive Construction Limited [2017 (3) TMI 1167 - ITAT HYDERABAD] has held that National Highway constructed on BOT basis gives rise to an intangible asset in the form of right to collect toll charges u/s. 32(1)(ii) and the assessee is eligible to claim depreciation on such asset. Thus, in view of the above decisions of the Tribunal we find no infirmity in the impugned order. Accordingly, the same is upheld and the appeal of Revenue is dismissed being devoid of any merit.
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2019 (2) TMI 1933
Miscellaneous application by Revenue recalling order passed by the Tribunal - HELD THAT:- Perusing the material on record and the order passed by Tribunal we observe that ground No.4 & 5 were not adjudicated by the tribunal while passing the order and to that extent order of the Tribunal needs to be recalled. Accordingly, the order of the Tribunal is recalled to the extent of ground No.4 & 5 to be heard and decided afresh.
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2019 (2) TMI 1932
Addition u/s 40A(2)(b) - HELD THAT:- We find it is a case of addition both on account of ad-hocism and on account of lack of comparable cases. Neither the Assessing Officer nor the CIT(A) gathered any comparable cases from the open market with similar line of business activity before holding the payments are excessive or unreasonable. In our considered opinion, such ad-hocism is unacceptable and unsustainable. Therefore, in our opinion, grounds raised by the assessee should be allowed in full for want of Assessing Officer failures to discharge the onus. It is a settled legal proposition in matters of principles of provisions to section 40A(2)(b) Assessing Officer is under obligation to prove that the claims made by the assessee are unacceptable. This is a case where the assessee demonstrated the primary onus by furnishing the basic facts.
Disallowance u/s 14A read with Rule 8D(2)(ii) - AO noted that the assessee earned exempt income by way of dividend and PPF interest - CIT(A) directed the Assessing Officer to delete the disallowances and rework the same - HELD THAT:- We find the CIT(A) merely directed to the Assessing Officer to delete the addition and rework the disallowance. In our view, the said direction is fair and reasonable and it does not call for any interference. It is not brought to our notice on the outcome of such direction before the Assessing Officer. Therefore, the Assessing Officer is directed to take a view in this matter at the earliest after considering the existing law on this issue. We do not find any reason why the Assessing Officer should make any disallowance under clause (ii) of Rule 8D(2) of the Rules when the assessee is having adequate interest-free own funds like profits of the year and capital account balances etc. Accordingly, the ground no.4 raised by the assessee is allowed for statistical purposes.
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