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Income Tax - Case Laws
Showing 101 to 120 of 10077 Records
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2019 (12) TMI 1425
Revision u/s 263 - enhancing the income as originally assessed - HELD THAT:- We find no basis making enhancement. As clarified by the assessee with reference to the record of it’s bill-wise details in the books of the payer, the same is a reimbursement by the customer-payer; the words ‘S.A.’ denoting ‘Security Advance’, which is both accepted and repaid, recording it under columns ‘S.A. paid’ and ‘S.A. recovery’, i.e., on being paid and released respectively, in the bill-wise statement - Two amounts of ₹ 1.25 lac each are reflected as ‘S.A. recovery’ in the said statement, and tax deducted at source only on the balance amount/s. Further, the bill amount/s having been since paid, duly recorded in the assessee’s accounts, not accounting a part thereof by the assessee, as inferred by the Revenue, would lead to a difference in its’ accounts (with that of the payer) to that extent, i.e., ₹ 2.50 lacs, while none has been noticed or found. The said amount is thus not a trading receipt, but the receipt back of the security advance, paid earlier. The turnover would, accordingly, stand undisturbed at the amount reflected in the books, i.e., ₹ 365.44 lacs.
Allowance of interest and remuneration to the partners upon estimating the net profit of the contract business at 5% of the turnover - It is fully competent for the AO to estimate the assessee’s business income either before or after allowing the said expenditure, in which latter case the estimate would be arrived at by factoring the amount of the said expenditure and, thus, lower than the former to the said extent. The motivation for a separate allowance thereof and, therefore, the estimation of profit prior thereto, could possibly be on account of the legal position that the said expenditure, to the extent allowed in the firms’ assessment, is assessable in the hands of the individual partners. Where, therefore, not separately deducted, no amount would stand to be assessed in their hands even as, being otherwise eligible for deduction, would stand to be reckoned while estimating the firms’ income u/s. 28.
The AO had, in the instant case, estimated the ‘net’ profit at 5% (of the turnover), and allowed the said deductions thereafter. The original assessment order clearly reflects the AO to be fully conscious of the same while making the estimate, and of having applied his mind in allowing the deduction on account of interest and remuneration to the partners, i.e., as claimed, being otherwise admissible. A lower estimate by him would not by itself make his order erroneous, particularly considering that the ld. CIT had not found his order erroneous on account of a lower estimate per se, but due to his having allowed, after estimation, deduction on account of interest and remuneration to the partners. Why, he himself directs for applying a net profit rate of 5% on the ‘escaped’ turnover (of ₹ 2.50 lacs), so that he found the same as reasonable. The AO, accordingly, had no jurisdiction to revisit his said estimate in the set aside proceedings. This also answers the assessee’s additional ground, challenging the revision in estimate, in its’favour, even as the ld. CIT(A) has also held like-wise, so that there is no warrant for the said Ground; the Revenue being not in appeal.
No basis for either a review of the said estimate, revised to 8%,or for regardingit as having been made after the allowance of interest and salary to the partners, so as to preclude their allowance, as argued by the Revenue. No adjustment in respect thereof is accordingly called for.
Adjustment towards the income not separately assessed - These incomes are independent of the assessee’s contract business. We are unable to see as to how these incomes, the source whereof is a Jeep (vehicle) and surplus (for the time being) money (placed under bank deposit), would not stand to be assessed separately as ‘income from other sources’ - amount credited to the profit and loss account in their respect represents the net income, which would therefore not require any separate adjustment –the depreciation schedule not bearing ‘Jeep’ for adjustment of depreciation, a statutory allowance, exigible thereon. In fact, no contention either as regards the same being not separate or independent incomes, or the set off of any expenditure/allowance against the credits in their respect,has been raised by the assessee at any stage, including before us.
The only adjustment, therefore, that obtains consequent to the set aside by the ld. CIT is the assessment as income from other sources u/s. 56, i.e., as assessed. The assessee’s business income shall continue to be at ₹ 14,47,620/-, i.e., as original assessed. We are conscious that the allowance of deduction for remuneration to partners, allowed at ₹ 1,30,000, is to be w.r.t. ‘book profit’ (Explanation 4 to s. 40(b)(v)), so that the enhancement in income upon estimation would have no bearing on the quantum of the said deduction.
The same, however, has been considered w.r.t. the assessee’s book profit, and found allowable at the claimed amount of ₹ 1,30,000. We decide accordingly. Assessee’s appeal is partly allowed.
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2019 (12) TMI 1424
Condonation of delay - Recovery proceedings - Service of notice or communication - assessee, filed 19 appeals belatedly, varying from 807 days delay to 1567 days of delay in filing the appeals against the orders passed by the CPC, Bangalore U/s. 200A - MD of the assessee pleaded that the impugned electronic communications were not brought to the notice of the assessee, and he himself was not conversant as well as there were problems in the family as well as in the business side at the said point of time - HELD THAT:- When the recovery notice dated 04.03.2019 was received, manually, the issues were brought to his notice and he immediately took steps to file the above appeals, which caused the delay in filing each of these appeals, which is not deliberate but bonafide and beyond his control and therefore, he sought the condonation of delay in respect of each of these appeals. It was also pleaded that though the impugned orders were passed from December 2014 to December 2016, till the recovery notice served, manually on 04.03.2019, the Revenue had not sent any other communication in respect of any of the demand raised in the impugned orders.
Therefore, it is pleaded that the reason canvassed by the assessee towards the delay in filing these appeals have sufficient and reasonable cause and hence, it was prayed to condone the delay in filing each of these appeals. We find that the reason canvassed by the assessee towards the delay in filing the impugned appeals appears reasonable and sufficient. Revenue claimed to have served the impugned orders electronically, the assessee pleads that they were not brought to its notice and the Revenue has not sent any further communication till the date of recovery notice served on 04.03.2019 manually. Assessee was unaware of such orders. When there is a change from one system, say the manual system to the other system, say the electronic system , apart from relying the rules and regulations, the Revenue as an administrator of the Act must also guide the assessee in enabling them to comply with the systemic changes in a reasonable manner. Atleast in those cases, like this case, where the demand made on the assessee is pending for long time and the assessee has not responded, the Revenue should also have used other mode of communication, mentioned in sub-section (1) to section 282 of the Act. In this case, the Revenue has not brought to our notice any such communication with the assessee. Considering the totality of the facts and circumstances, the reasons canvassed by the assessee towards the delay in filing the impugned appeals appears reasonable and sufficient.
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2019 (12) TMI 1423
Application seeking permission to raise additional ground - Revenue has preferred the present appeal to assail the order passed by ITAT on the application moved by the appellant to raise additional grounds in the pending ITA preferred by the Revenue in relation to the Assessment Year 2005-06 - HELD THAT:- The impugned order is an interlocutory order by which the ITAT has, while dealing with the application seeking permission to raise additional ground, in fact, considered and rejected the additional grounds on merits. The appeal is still pending consideration before the Tribunal.
In these circumstances, we are not inclined to interfere with the impugned order at this stage. In case the Revenue is aggrieved by the final order that the ITAT may pass in the pending appeal before the Tribunal, it shall be open to the appellant to raise challenge to the order. All pleas and contentions of the appellant, as raised in the present appeal, are preserved.
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2019 (12) TMI 1422
Effective date of Withholding tax certificate - whether be made effective from the date of issue or from the beginning of the financial year i.e. 01.04.2019 - it is pointed out that one of the certificates placed at page 61 of the record has been made effective from 13.06.2019, whereas the same had been applied for the financial year 2019-20. Counsel for the petitioner states that for other jurisdictions, necessary clarifications have been issued by the respondents themselves.
HELD THAT:- Issue notice. Mr. Bhatia accepts notice.
Mr. Bhatia wishes to seek instructions. At request, adjourned to 07.01.2020.
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2019 (12) TMI 1419
TDS u/s 194H - TDS on sales commission payments - HELD THAT:- No illegality or any irregularity in both the learned lower authorities’ action that assessee was required to deduct TDS on sales commission payments u/s 194H - assessee’s reliance on various clarifications also are devoid of merit since these nowhere deal with TDS on commission payment required under Chapter XVII of the Act.- lower authorities have rightly invoked the impugned disallowance in principle so far as assessee’s commission payments made to 31 salesmen are concerned. We make it clear that TDS deduction is a statutory duty for the payer under the provisions of the Act. We thus uphold both the learned lower authorities’ action in issue invoking the impugned disallowance.
Quantification of the impugned disallowance - The legislature has itself amended section 40(a)(ia) by the Finance Act 2014 w.e.f. 01.04.2015 restricting the impugned disallowance from 100% of the corresponding expenses to 30% only. The Revenue’s case is that the same applies from 01.04.2015 only not having any retrospective effect in the impugned assessment year 2011-12 - No substance in Revenue’s instant argument. This tribunal’s coordinate bench’s decision in Dipak Parui [2018 (7) TMI 2066 - ITAT KOLKATA] holds the above amendment as a curative one having a retrospective effect. We therefore direct the Assessing Officer to restrict the impugned disallowance to 30% only of the assessee’s expenditure claim. Necessary computation to follow as per law. This former substantive ground is partly accepted in above terms.
Addition u/s 68 unexplained cash credits - assessee has failed to prove the impugned sum as genuine right from scrutiny to remand proceedings as well as the CIT(A)’s order - HELD THAT:- We find no reason to sustain the impugned disallowance. Page 59 in paper book suggests that the opening balance sum of ₹ 9,22,767/- involving four entries of ₹ 3,70,446/-, 98,668/-, 3,72,438/- and 81,215/- stood paid between 01.04.2011 to 23.04.2011 as per the corresponding ledger entries. Coupled with this, the concerned party(ies) have also filed necessary confirmation before the Assessing Officer at the first instance - more particularly the assessee’s repayment through banking channel, to hold that both the lower authorities have erred in treating the impugned sum as unexplained cash credits u/s 68 - Decided in favour of assessee.
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2019 (12) TMI 1418
Transfer Pricing (TP) adjustment - corporate guarantee extended by the assessee company to its Associate Enterprise (AE) - Whether it is not an international transaction, prior to the amendment to Section 92B of the Act, by the ld. CIT(A)? - HELD THAT:- As relying on M/S. TEGA INDUSTRIES LTD. [2019 (8) TMI 1450 - ITAT KOLKATA] assessee's corporate guarantee (s) in issue do not amount to international transactions u/s. 92B - corresponding transfer pricing adjustment in question stand deleted. Decided in assessee's favour.
Disallowance u/s 14A - Sufficiency of own funds - HELD THAT:- As the assessee has own surplus funds which are not interest bearing and which were sufficient to meet the cost of investments, no disallowance can be made under Rule 8D(2)(ii) of the Rules r.w.s. 14A of the Act. The ld. D/R could not controvert this factual findings. Hence we uphold the same and dismiss Ground of the revenue.
Computation of deduction u/s 80IC - HELD THAT:- CIT(A) has followed the judgment of the Hon’ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd.[2016 (3) TMI 375 - SUPREME COURT] and directed the Assessing Officer to include the subsidiary received on sales tax as profits for the purpose of computation of deduction u/s 80IC of the Act. Though, the ld. CIT D/R controverted the findings of the ld. CIT(A), we are of the considered opinion that the judgment of the Hon’ble Supreme Court referred above applies on all fours to the facts of the case and hence we uphold the findings of the ld. CIT() on this issue.
Write back of expenses, we agree with the finding of the ld. CIT(A) that the expenses in question were allowed as a deduction from profit in earlier years and when the same are written back, they should be included in the profits eligible for deduction u/s 80IC of the Act. Thus, this ground of the revenue is dismissed.
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2019 (12) TMI 1417
Disallowance u/s 14A - HELD THAT:- As perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the assessee is in appeal before us against the disallowance under Rule 8D(2)(ii) read with Section 14A - assessee submitted before us the Balance sheet of the assessee company as on 31.03.2013.
On perusal of Balance sheet, we noticed that own funds of the assessee company is ₹ 1,15,771/- lakhs, which is more than the investments in shares and securities to the tune of ₹ 18,089/- lakhs. Since Company’s net owned funds in the form of equity capital and free reserves were substantially more than the cost of share investment, yielding dividend income, no part of the interest paid is disallowable because borrowed funds were not used for acquiring shares. For that we rely on the judgment in the case of CIT vs HDFC Bank Ltd.[2016 (3) TMI 755 - BOMBAY HIGH COURT]
Therefore, the disallowance under Rule 8D(2)(ii) read with Section 14A is not attracted in assessee’s case hence we direct the Assessing Officer to delete the disallowance under Rule 8D(2)(ii) of the IT Rules. Appeal of the assessee is allowed.
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2019 (12) TMI 1416
Assessment u/s 153A - Deemed dividend u/s.2(22)(e) - Whether completed assessment can be interfered with by the AO u/s.153A of the Act only on the basis of some incriminating material found during the search action? - HELD THAT:- It is an undisputed position in this case that no incriminating material was found during the course of search and it is a settled law that no addition can be made while framing the assessment u/s.153A of the I.T.Act in the absence of any incriminating material found during the search. Keeping in view of the above, we find no reason to interfere into or deviate from the lawful findings so recorded by the ld.CIT(A), accordingly we upheld the same by dismissing this ground of appeal raised by the Revenue.
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2019 (12) TMI 1413
Grant of approval u/s. 80G(V)(vi) denied - evidence filed by the assessee showed that no charitable activity was carried on by the trust - application for grant of registration u/s. 12A allowed - HELD THAT:- As decided in case of Bhima Foundation [2019 (9) TMI 1465 - ITAT BANGALORE] Tribunal came to the conclusion that the assessee trust is newly set up and when the approval u/s. 80G is sought for and when the period between the formation of trust and examination of application of the assessee for grant of approval u/s. 80G of the Act was only a period of 5 months, it is not possible for such organization to demonstrate the actual carrying of its activities. The Tribunal placed reliance on the decision of DIT(E) v. Meenakshi Amma Endowment Trust, [2010 (11) TMI 853 - KARNATAKA HIGH COURT] and came to the conclusion that for want of proof of activities of a trust, when the trust was yet to commence its activities, an application for grant of registration u/s.12A cannot be rejected. The Tribunal also placed reliance on the decision of ITAT Jaipur Bench in the case of Anand Incubation Centre v. CIT(E)[2017 (11) TMI 77 - ITAT JAIPUR] wherein on identical facts, approval u/s. 80G was directed to be granted. Thus , we direct the CIT(E) to grant registration to the assessee u/s. 80G - Decided in favour of assessee.
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2019 (12) TMI 1409
Deduction u/s 10A - restricting the deduction u/s 10A only to the extent of 70% of the profits instead of allowing 100% - HELD THAT:- Assessee is not exporting the software, but engaged in the body shopping no conclusive evidence was brought on record to support the department’s contention. As per the provisions of section 10A the assessee engaged in the export of software is entitled for deduction of 100% profits derived from the export of software.
In the instant case, by providing various details, information, the assessee has proved that it was in the activity of software export and received foreign exchange on account of software export. No enquiries were made with the importing country, no evidence was brought on record from the STPI to establish that the assessee’s claim is bogus. Therefore, we have no reason to disbelieve the export of software made by the assessee. Thus we hold that the assessee made export of software and entitled for deduction u/s 10A of the Act. - Decided in favour of assessee.
Invoking the provisions of section 10A(7) and 80IA(10) - HELD THAT:- AO has not made out a case for invoking the provisions to section 10A(7) and 80IA(10) and the issue was not referred to the Transfer Pricing Officer. The Ld.CIT(A) also blindly estimated the profits without bringing any comparable case on identical facts to hold that transactions were so arranged as to produce more than the ordinary profits in the hands of assessee.
In the case decided by the coordinate bench in the case of Quick MD [2015 (9) TMI 552 - ITAT HYDERABAD] the profit was 97.40%. The Coordinate Bench decided the issue against the department on similar facts of the assessee’s case. Since the facts are similar and the AO did not make out case, the transactions are so arranged to increase the profits. Hence we are unable to sustain the order of the Ld.CIT(A) to restrict the profits to the extent of 70% instead of allowing 100% of profits for deduction u/s 10A. Accordingly, we set aside the order of the Ld.CIT(A) and direct the AO to allow the deduction of 100% profits as per law. The appeals of the revenue on this issue is dismissed and allow the appeals of the assessee.
Receipts on account of recruitment of personnel - AO has taxed the entire receipts in the hands of VLS IT Systems substantively and protectively in the hands of the assessee firm - HELD THAT:- AO placed reliance on the agreements between the VLS Inc. and VLS IT Systems for making the substantive assessment in the hands of the VLS IT systems. The department has challenged the order of the Ld.CIT(A) for the A.Y.2007-08 to 2010-11. CIT(A) confirmed the substantive assessment in the hands of VLS IT Systems and deleted the protective addition in the hands of the assessee. During the appeal hearing no material was placed before us to reverse the order of the Ld.CIT(A). We uphold the order of the Ld.CIT(A) with regard to confirming the addition in the hands of VLS IT Systems relating to the receipts of manpower selection and dismiss the appeal of the revenue.
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2019 (12) TMI 1371
TDS u/s 194C - Disallowance u/s.40(a)(ia) - payments made for disbursement of labour charges to labour sardars - As per assessee there was no contract between the assessee and the labour sardars, without which there cannot be any application of tds obligations - HELD THAT:- As decided in M/s Kwality Construction [2016 (11) TMI 667 - ITAT KOLKATA] Tribunal relying on its various identical decisions, has upheld the action of CIT(A) in deleting the addition made u/s.40(a)(ia) of the Act holding that labour sardars are not labour suppliers and are facilitators for payments -there is nothing on record to suggest that the payment to labourers were paid to the contractors. On the contrary, assessee has made payment to labourers directly and in support of its claim, Ld. AR of assessee has produced the muster roll. In this regard, Ld. DR failed to bring any defect / information from the muster roll which suggested that the labour charges paid by assessee are subject to TDS. - Decided in favour of assessee.
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2019 (12) TMI 1359
Rectification of assessment - tribunal while adjudicating the appeal filed by the assessee has failed to consider grounds which challenges initiation of reassessment proceedings u/s 147 on the erroneous presumption that the assessee has not pressed grounds relating to initiation of reassessment proceedings u/s 147 - HELD THAT:- Fact remains that it is a settled position of law, once there is a specific ground in an appeal, the same needs to be adjudicated irrespective of the fact that whether, said ground is pressed or not . Therefore, we are of the considered view that insofar as, grounds No.1 to 3 of assessee appeal regarding initiation reassessment proceedings u/s. 147. There is an error in the order of the Tribunal in not adjudicating specific ground taken by the assesee, which constitute mistake apparent on record, which can be rectified u/s 254(2) .
Disallowance of interest and commission paid on loans - no specific adjudication on those grounds in the order of the Tribunal - HELD THAT:- AsseSsee has taken specific grounds challenging additions made by the Ld. AO towards disallowance of consequent interest paid on unsecured loans u/s 68 and related commission expenditure incurred in relation to said unsecured loans, but the Tribunal has by inadvertent mistake omitted to consider and adjudicates those grounds. Further, the issue of addition towards unsecured loans, consequnet interest paid on said loan and related commission and brokerage expenses are interrelated and interconnected, because the findings of one ground may have bearing on the other ground and hence all grounds needs to be considered together. If, one ground is considered and other ground is not adjudicated, then certainly it constitutes a mistake on face of the order - non consideration of specific ground taken by the assessee constitutes a mistake apparent on record, which can be rectified u/s 254(2) - MP of assessee allowed.
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2019 (12) TMI 1339
Validity of reopening of assessment - reopening on the basis of audit objections raised by the Department audit officer - non Independent application of mind - no interest was charged on debit balance of the partner's (Shri Apurva Jagdish Nanavati) capital account - CIT-A quashed reopening notice - HELD THAT:- CIT(A) has passed a very reasoned and detailed order wherein it has been stated that AO himself has not accepted the audit objection and thus on the basis of same reason the AO could not have reason to believe that income has escaped assessment. CIT(A) has held that AO has acted at the behest of the audit party without applying his own mind and thus quashed the assessment on the technical and legal issue.
In the case of ICICI Home Finance Co. Ltd. vs. ACIT [2012 (8) TMI 312 - BOMBAY HIGH COURT] has held that there was no application of mind by the AO as the reasons recorded by the AO were identical to objections of the audit party and existing material was already on record and accordingly notice under section 148 was held to be without jurisdiction. Supreme Court in the case of Pr. CIT vs. S. Chand & Co. Ltd. [2018 (11) TMI 1067 - SC ORDER] has held that reassessment proceedings based on the audit objection can not be sustained - Decided in favour of assessee.
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2019 (12) TMI 1338
Revision u/s 263 - assessment framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of revenue - Exemption u/s 11 denied - HELD THAT:- Admittedly, the assessment order framed under section 143(3) of the Act dated 16 March 2015 has been set aside to the file of the AO for re-adjudication as per the provisions of law as submitted by the learned AR for the assessee
As held Tribunal has committed a grave error in holding the activities of the assessee in the nature of trade, commerce or business and consequently holding that the proviso to section 2(15) of the Act shall be applicable and therefore, the assessee is not entitled to exemption under section 11 - proviso to section 2(15) of the Act shall not be applicable so far as the assessee-AUDA is concerned and as the activities of the assessee can be said to be providing general public utility services, the assessee is entitle to exemption under section 11 of the Act. Both the questions are therefore, answered in favour of the assessee and against the Revenue.
Impugned order passed by the Tribunal in respective appeals for differ assessment year are hereby quashed and set aside. Accordingly, all these appeals are allowed and answered both the questions in favour of assessee and against the Revenue.
The issue involved in the order of learned CIT under section 263 of the Act is dependent on the assessment order to be framed by the AO in accordance to the direction provided by the ITAT as discussed above. Therefore, we hold that the impugned order under section 263 of the Act does not require any separate adjudication at this stage. Accordingly, we conclude that the order framed under section 263 of the Act is infructuous.
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2019 (12) TMI 1336
Validity of power of revision exercised by PCIT u/s 263 - assessment was completed by the AO under limited scrutiny assessment - Large other expenses claimed in the Profit and Loss account and Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business of profession - HELD THAT:- AO not following procedure prescribed in Sub Clause (d) of Clause of 3 of said CBDT instruction would render the assessment order erroneous and prejudicial to the interests of the Revenue, thereby confirming the jurisdiction on ld. PCIT u/s.263.
As regards to the decision of Co-ordinate Bench of the Tribunal in the case of Smt. Padmavathi [2019 (12) TMI 399 - ITAT CHENNAI] to which one of us i.e. the Accountant Member is the author of the order. In the said decision the Tribunal had rendered decision overlooking exceptional clause carved out in Sub Clause (d) of Clause 3 of CBDT Instruction No.20/2015, dated 29.12.2015.
Decision is per incuriam. It is needless to say that an order which is per incuriam has no precedential value. In the circumstances, we are of the considered opinion that ld. PCIT was justified in exercising the jurisdiction vested with him u/s.263 - Appeal filed by the assessee stands dismissed.
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2019 (12) TMI 1334
Lower tax deduction at source - HELD THAT:- Petitioner/assessee in its original application at 1% has been allowed for the balance part of the financial year 2019-20.
Assessee has also been granted permission to adjust excess amount of TDS deducted between 21st July, 2019 to the date of the said order for future payments in terms of the directions of this Court. This order dated 4th December, 2019 satisfies the concerns of the petitioner.
As submitted that there are certain aspects which would need to be examined at the stage of carrying out the assessment for the assessment year 2020-21. In this regard, he has tendered in Court an additional submission. We have no doubt that the respondents will examine the said aspects as and when the occasion arises.
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2019 (12) TMI 1333
TDS u/s 194H - disallowing expenditure in the nature of discount u/s 40(a)(ia) - Assessee argued that expenditure was in the nature of discount given to distributors, working on a principal to principal basis, for early/advance payment and not in the nature of commission for provision of any service and therefore did not warrant tax deduction u/s 194H - HELD THAT:- As decided in own case [2018 (6) TMI 547 - ITAT MUMBAI] TDS provisions are applicable u/s 194H in case it is held that the nature of the transaction entered into between the assessee and the distributor is that of commission but in case if it is decided that the nature of transaction is not commission but discount given on sales it cannot be regarded to be commission which is hit by the provisions of Section 194H.
We, therefore, in the interest of justice and fair play to both the parties set aside this issue and restore it to the file of the AO with the direction that the AO shall re-decide this issue afresh in accordance with law after going though the agreement which the assessee has entered into with the distributor as well as the sample subscription application form, whether the amount represents the expenditure incurred by the assessee towards commission.- Appeal allowed by assessee.
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2019 (12) TMI 1330
Addition u/s 40A - Expenditure in cash - HELD THAT:- Section 40A(3) contemplates that where assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on bank account excess ₹ 20,000/- then no deduction shall be allowed in respect of such payment.
Rule 6DD of Income Tax Rules, 1962 provide an exemption from applicability of this clause, and the ld.CIT(A) has followed rule 6DD which has been explained by the Board in its Circular No.220. This explanation has been submitted by the assessee in its written submissions reproduced by the ld.CIT(A) on page no.7. CIT(A) is of the opinion that the case of the assessee falls within the exception because it has made this payment on account of business exigency and it was not practical to make the payment through account payee cheque. - Decided in favour of assessee.
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2019 (12) TMI 1324
Levy of late fee u/s.234E - intimation u/s 200A - Late filing of TDS returns / statement - Whether there is no power granted by the Statute at the relevant point of time to the Assessing Officer (AO) u/s.200A? - case pertaining to the quarter for the AY.2013-14 - HELD THAT:- The said issue is covered in favour of assessee by the decision of the Co-ordinate Bench of ITAT, Pune Tribunal in the case of C&M Farming Ltd. [2019 (11) TMI 1407 - ITAT PUNE] as relying on Medical Superintendent Rural Hospital, DOBI BK [2018 (10) TMI 1587 - ITAT PUNE] held that charging of late fee u/s 234E is not maintainable even if the assessee files TDS returns belatedly and the AO issues intimation u/s 200A of the Act after 01.06.2015 charging late filing fee u/s 234E.
Since the facts before us are identical to one as decided by the Co-ordinate Bench of the Tribunal, respectfully following the same, we are of the opinion that the demand of late fee is not maintainable even if the returns of the TDS were filed after 01-06-2015, the order charging late filing fee was passed after 01-06-2015. Hence, we set aside the order of Ld.CIT(A) and allow the Grounds raised by assessee.
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2019 (12) TMI 1318
TP Adjustment - prior period income of the company in the software development and ITeS segment for determination of ALP - HELD THAT:- There is no dispute that the amount is the prior period income relevant to the assessment year 2009-10. All the expenses relating to this income had already been accounted for in the earlier assessment year 2009-10. Being so, this amount cannot be considered as operational income of the current assessment year 2010-11. Being so, the DRP is justified in observing that the TP study was undertaken of a particular year, in order to compare Arm’s Length Margin based on independent comparables considering the fact that the operating cost of the income pertaining to prior period was debited in the preceding year and the prior period income cannot be treated as part of the operating revenue of subsequent year. Hence, this ground of appeal of the assessee is rejected.
Determination of arm’s length by the TPO in relation to the software development services segment - Comparable selection - HELD THAT:- Larsen &Toubro Infotech Ltd. is functionally different from the assessee company and also there is significant onsite services. It was observed that there is no segmental data available coupled with L & T Infotech Ltd. is having huge brand value. Hence, it cannot be compared with the assessee company.
iGATE Global Solutions Ltd exclusion - Against this comparable, the assessee has not raised any objection before the DRP. Hence, this issue does not arise out of the direction of the DRP. Accordingly, this ground of appeal of the assessee is rejected.
Aftec Limited exclusion - As this issue does not arise from the direction of the DRP or the order of the TPO. Against this comparable, the assessee has not raised any objection before the DRP. Hence, this issue does not arise out of the direction of the DRP. Accordingly, this ground of appeal of the assessee is rejected.
Determination of ALP in relation to the ITeS segment - Inclusion of comparable - HELD THAT:- Informed Technologies India Ltd. is not functionally comparable with the assessee company which is engaged in KPO services. As seen from paper book pg. no.1085, the employee cost ratio was low at 29.93% of total operating income as compared to 59% and onsite expenses was at 13.21% of operating cost. By placing reliance on the on the decision of the Tribunal in the case of Aptara Technologies Pvt. Ltd. [2016 (5) TMI 1404 - ITAT PUNE] we direct the A.O./TPO to exclude this company from the list of comparables.
BNR Udyog Ltd is engaged in medical transcription, construction and financial activities as against the assessee’s activity which is software development and information technology enabled services. Being so, it is not functionally comparable with the assessee’s company. The turnover of BNR Udyog Ltd. was only INR 1.45 crores which is less than 10 times of the assessee’s turnover of INR 29.78 crores. Further, related parties transactions carried on by BNR Udyog Ltd. is very significant. We are inclined to direct the Assessing Officer to exclude this company from the list of comparables.
Accentia Technologies Ltd.company is engaged in medical transcription, medical coding and billing and receivable management services as against the assessee’s business of software development and providing information enabled services. No segmental data is available and the company has considerable intangible assets coupled with onsite activity which is 13.79% of the total operating cost. Further, the company had undergone business restructuring during the F.Y. 2009-10 and amalgamation with Asscent Infoserve Private Limited and figures for FY 2009-10 are inclusive of figures of amalgating company - we direct the Assessing Officer/TPO to exclude this company from the list of comparables.
Disallowance of deduction u/s. 10B - alternative claim u/s. 10A - HELD THAT:- As decided in he case of CIT vs. Flytxt Technology (P) Ltd. [2017 (10) TMI 872 - KERALA HIGH COURT] Tribunal is only required to consider the questions of law arising from the facts which are on record, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Even if the contention raised by the learned Senior Counsel for the revenue that the power conferred on the appellants under Section 263 only authorised him to examine whether the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the revenue, that restriction of power cannot affect the powers of the Tribunal which is bound to exercise under Section 254 of the Act. No reason to think that the Tribunal has committed an illegality by directing the Assessing Officer to decide the matter afresh duly adverting to the claim of the assessee for the benefit of Section 10A. - Decided in favour of the assessee.
Treatment of foreign exchange fluctuation gain or loss - As submitted that foreign exchange gain or loss must be considered as operating - HELD THAT:- As relying on M/S INFAC INDIA PRIVATE LIMITED [2018 (10) TMI 1814 - ITAT CHENNAI] we direct the Assessing Officer to exclude the gain or loss on account of foreign fluctuation from the operating expenses for computing the profit and loss. This ground of appeal of the assessee is partly allowed.
Allowance of working capital adjustment - DR submitted that working capital adjustment should not have been allowed for the reason that the assessee has negative working capital - HELD THAT:- As decided in Zafin Software Centre of Excellence Pvt. Ltd[2018 (5) TMI 1776 - ITAT COCHIN] the capital employed by the assessee, including the working capital, and that of comparable companies needs to be taken into consideration. Without comparing the working capital employed by the comparable companies and that of the assessee, this Tribunal is of the considered opinion that there cannot be any transfer pricing adjustment.
In view of the above order of the Tribunal, we are inclined to direct the Assessing Officer to consider the working capital adjustment as computed by him while determining the ALP of international transactions of the assessee with its AEs.
Comparable selection - DRP had directed to exclude certain companies in the IT segment as they have substantial onsite revenues BUT had not fixed an upper filter for onsite revenue - HELD THAT:- We find force in the argument of the Ld. DR that the DRP ought to have fixed the upper filter for onsite revenue so as to exclude certain companies in ITeS segment. In our opinion, it is appropriate to fix the upper filter of 75% for onsite revenue so as to exclude certain companies
Since we have observed that upper filter for onsite revenue must be applied at 75%, the Assessing Officer is directed to examine the financials of each company with regard to upper filter for onsite revenue and exclude the same if the upper filter of onsite revenue is more than 75%. With this observation, we remit this issue with reference to the four comparables, i.e., Mindtree Ltd., Zylog System Ltd., Akshay Software Technologies Ltd. and LGS Global Ltd. to the file of the Assessing Officer for fresh consideration. This ground of appeal of the Revenue is partly allowed for statistical purposes.
FCS Software Solutions Ltd. - No infirmity in the order of the DRP in holding that this company cannot be retained as comparable since the company was engaged in 3 segments, i.e., IT Consulting, Education and infrastructure, IT Consultancy Division provided application maintenance for which no segmental information was available. It also engaged in R&D and had significant intangibles. Further, the company had undergone restructuring during the year. By placing reliance on the decision of Barclays Technology Centre India Pvt. Ltd. [2017 (9) TMI 1831 - ITAT PUNE] we direct the Assessing Officer/TPO to exclude this company from the list of comparables.
Sasken Communications Technologies Ltd. company cannot be retained as comparable since it was engaged in software products and the company had inventories amounting to ₹ 1.66 crores which indicated that the company is not a purely software development company. Further, the company had undergone restructuring during the year and it was engaged in R&D and technology absorption and had significant intangibles. Thus we direct the Assessing Officer/TPO to exclude this company from the list of comparables.
Eclerx Services Ltd s engaged in IT enabled services which is nothing but KPO services. Being so, it is not functionally comparable with the assessee company when compared to the services rendered by the assessee company. Even otherwise it fails on account of turnover filter and on account of related party transactions which is at 14.77% and incurred onsite expenses of 16.60%. Being so, the DRP is justified in excluding this company from the list of comparables. Accordingly, we direct the Assessing Officer/TPO to exclude this company from the list of comparables. This ground of appeal of the revenue is dismissed.
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