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Income Tax - Case Laws
Showing 121 to 140 of 10077 Records
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2019 (12) TMI 1316
Prima facie findings returned by the Authority for Advance Ruling in relation to the alleged tax avoidance - HELD THAT:- It is evident that the said findings are only prima facie, which means, that they are not final and binding, and that they have not been arrived at after detailed examination of the materials placed before the authority or upon consideration of the rival submissions.
It shall be open to the AO and the other statutory authorities to arrive at their own findings upon appreciation of the evidence and the materials placed on record and they should be not bound by the prima facie findings. While so observing, we also make it clear that we have not ourselves examined the merits of the said prima facie findings returned by the authority on the aspect of the tax avoidance.
Issue that remains to be determined is whether the petitioner would be entitled to the benefit of the Indian-Mauritius Double Taxation Avoidance Treaty, and consequently to refund of tax deducted and paid by the purchaser of the shares in the year 2011. He, therefore, submits that the assessment proceedings may be expedited.
Mr. Bhatia, Sr. standing counsel who appears on advance notice states that assessment gets time barred on 31st December, 2020. We hope and expect that the AO would expedite the assessment proceedings and would pass the assessment order preferably, on or before, 30.06.2020, subject to the petitioner co-operating in the assessment proceedings and not taking any adjournments.
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2019 (12) TMI 1315
Royalty - Payments received by the assessee for sale of specialized software and maintenance and support services (including upgrades) - proposed to tax the same at 10% as per clause 2 of Article 12 of the India-Finland tax treaty - HELD THAT:- End user customers by entering into a maintenance agreement could access and download the updates offered by the assessee. As the payments received by the assessee towards distribution of sub-releases and main releases were also for a right to provide a copyrighted article i.e software updates, which was akin to the amounts received for distribution of the specialized off-the-shelf software products, and not for any right to use the copyright embedded in the said copyrighted article (i.e software products), therefore, the same too in our considered view cannot be construed as “royalty‟ income, and would be the “business income‟ of the assessee. On a similar footing, we find, that as per the distributors agreements, it was the responsibility of the distributors to resolve the end user customers queries. In case, the distributors would require assistance on issues as regards functionalities, trouble shooting and verifying error situations, the assessee would provide the same.
The aforesaid queries would be resolved via e-mails or telephone calls by the employees of the assessee based in Finland. In our considered view, as the payments received by the assessee from rendering of the maintenance and support services does not fall within the scope and gamut of the definition of “royalty‟ in Article 12 of the India-Finland tax treaty, therefore, the payments received by the assessee for providing such support services cannot be held as “royalty‟ in the hands of the assessee.
Amount received by the assessee from its distributors for sale of specialized software and maintenance and support services (including upgrades) cannot be held as being in the nature of “royalty‟ as per Article 12 of the India-Finland tax treaty. Grounds of appeal allowed in terms of our aforesaid observations.
Levy of interest u/s 234A - HELD THAT:- Levy of interest u/s 234B has been challenged. As the calculation of the interest liabilities would be consequential to the determining of the tax liability of the assessee, if any, therefore, the same is being restored to the file of the A.O
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2019 (12) TMI 1312
Effect of section 92BA as omitted by Finance Act, 2017 w.e.f. 01.04.2017 - effect of repeal of a statute vis-a-vis deletion/addition of a provision in an enactment and its effect thereof - TP Adjustment - AO made a reference to TPO u/s 92CA to determine arms length price as the assessee had entered into specified domestic transaction and on the ground it was covered u/s 92BA - contention for revenue that tribunal was not justified in arriving at a conclusion that Clause (i) of section 92BA which had been omitted w.e.f. 01.04.2017 would be applicable retrospectively by presuming the retrospectivity, particularly when the statue itself explicitly stated it to be prospective in nature - HELD THAT:- On perusal of records in general and order passed by tribunal in particular it is clearly noticeable that Clause (i) of section 92BA of the Act came to be omitted w.e.f. 01.04.2019 by Finance Act, 2014. As to whether omission would save the acts is an issue which is no more res intigra in the light of authoritative pronouncement of Hon'ble Apex Court in the matter of Kolhapur Canesugar Works Ltd. v. Union of India [2000 (2) TMI 823 - SUPREME COURT] whereunder Apex Court has examined the effect of repeal of a statute vis-a-vis deletion/addition of a provision in an enactment and its effect thereof.
In the matter of General Finance Co. v. ACIT [2002 (9) TMI 3 - SUPREME COURT] which judgment has also been taken note of by the tribunal while repelling the contention raised by revenue with regard to retrospectivity of section 92BA(i) of the Act. Thus, when clause (i) of Section 92BA having been omitted by the Finance Act, 2017, with effect from 01.07.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed. Hence, decision taken by the Assessing Officer under the effect of section 92BI and reference made to the order of Transfer Pricing Officer-TPO under section 92CA could be invalid and bad in law.
It is for this precise reason, tribunal has rightly held that order passed by the TPO and DRP is unsustainable in the eyes of law. The said finding is based on the authoritative principles enunciated by the Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd. [2000 (2) TMI 823 - SUPREME COURT]. We are of the considered view that first substantial question of law raised in the appeal by the revenue in respective appeal memorandum could not arise for consideration particularly when the said issue being no more res integra.
Disallowance u/s 14A r.w.r. 8D - Whether there was no exempted income and as such disallowance could not have been made even though said provision was rightly invoked by AO, and as such setting aside the disallowance is erroneous? - HELD THAT:- We find from the order of the Tribunal that issue relating to the deletion of disallowance made by the Assessing Officer has been remitted back to the Assessing Officer which finding is based on factual aspects which would not call for interference by us, that too, by formulating substantial question of law. The Assessing Officer has to undertake the exercise of factual determination. As such, without expressing any opinion on merits with regard to question No. 2 formulated by the revenue in the respective appeals
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2019 (12) TMI 1309
Revision u/s 263 - Assessment u/s 153A - revision proceedings in PCIT’s order under challenge on the ground that the AO has wrongly accepted the assessee’s section 54 & 54F deduction claim - HELD THAT:- PCIT’s assumption of revision jurisdiction. Hon’ble apex court’s landmark decision in Malabar Industries Co. vs. CIT [2000 (2) TMI 10 - SUPREME COURT] holds that before an assessment is sought to be revised in proceedings u/s 263 of the Act, the same has to be erroneous as well as caused prejudice to interest of the Revenue; simultaneously.
An assessment cannot be termed as erroneous causing prejudice to interest of the Revenue in case the AO adopts one of the possible view. Reverting back to impugned regular assessment, we notice that the Assessing Officer had claimed yet another regular assessment on 30.11.10 invoking section 153A/143(3) proceedings whilst assessing the total income of ₹ 18,62,400/- only. That being the case, it is sufficiently clear that the impugned second assessment dated 25.12.16 pertained to the search dated 05.08.14 only qua the alleged incriminating material found/seized.
It emerges from the case records that the assessee had claimed the impugned section 54 and 54F deduction relief at the first instance in former assessment. This issue nowhere formed subject matter of deduction in the latter assessment therefore. Since the AO could not have even taken up the assessee’s above deduction claim during latter assessment, the PCIT has erred in law and on facts in terming the same as erroneous causing prejudice to interest of the Revenue. We therefore restore the Assessing Officer’s regular assessment dated 25/30.12.16 and reverse the PCIT’s revision directions under challenge. - Decided in favour of assessee.
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2019 (12) TMI 1307
Penalty levied u/s 271A - absence of maintenance of books of accounts as prescribed u/s.44AA - Whether CIT(A) has erred in confirming the penalty levied u/s.271A by the AO without rejecting the books of accounts of the assessee u/s.145(3) ? - HELD THAT:- On perusal of the penalty order dated 30.09.2016 for the assessment year 2013-2014, the AO has mentioned that the Auditor in the Audit Report has certified in Form 3CD that the assessee maintains various books of account viz. cash book & ledger. In the assessment order also, the AO noted that the authorised representative of the assessee appeared and produced audit report, copy of acknowledgement of e-Return filed, copies of bank account details, Vakalatanama & copy of Service Tax Return.
Only dispute raised by both the authorities below that the assessee has not produced books of account, whereas the AO has himself admitted that the return of income filed was accompanied by audit report and other documents. The assessee has produced the tax audit report which has been accepted by the AO. The auditor has also certified that the various books have been maintained. The revenue has not brought any cogent material on record so as to establish that the assessee has not maintained books and such documents as required u/s.44AA of the Act or the rules made thereunder. Therefore, the penalty levied u/s.271A for both the assessment years under consideration cannot be sustained on the facts and circumstances of the present case.
On further perusal of the assessment as well as appellate order, we find that both the authorities below have only pointed out that the assessee has failed to produce books of accounts before the AO. In this regard, the assessee has explained with reasonable cause for non-production of the same before the AO stating accountant of the assessee was asked about the books of account. The accountant replied that the books of account are with the auditor, but when the assessee inquired with the auditor about the books of account, the auditor replied that it was returned back immediately after the audit was over. As the books of account are misplaced and are not traceable at present, it is difficult on the part of the assessee to produce the books of account.
For this reason also the assessee gets immunity from the provisions of Section 273B - CIT(A) was not justified in sustaining the penalty imposed by the AO under Section 271A - Decided in favour of assessee.
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2019 (12) TMI 1306
IFRS audit fees - disallowance on the ground it pertains to the period prior to the year under consideration - HELD THAT:- We find that though the audit pertains for the year ended 31/12/2007, the invoice was raised by the concerned Auditor only on 28/11/2008 as the service was rendered thereon during the year under consideration. We find that the services have been crystalised during the year under consideration and accordingly become an expenditure allowable as deduction for the year under consideration. It is not the case of the revenue that assessee had indeed claimed deduction for the very same sum in the earlier year on mercantile basis. We hold that the assessee is indeed entitled for deduction towards IFRS audit fees. - Decided in favour of assessee
Deduction towards service tax credit written of - addition on the basis that it pertains to earlier period - HELD THAT:- It is not in dispute that this service tax receivable emanates out of the input services used for the purpose of business of the assessee. Once, the service tax input credit is not eligible to be utilised against the output tax, the same requires to be written off as business expenditure, which is what is done by the assessee in the instant case. There is no dispute that the service tax input credit was not eligible to be utilised towards output service tax by the assessee. In these circumstances, the action of the assessee in writing off the input service tax credit lying in current assets loans and advances as on 01/04/2009 and consequentially claiming the same as deduction, is in accordance with law.- Decided in favour of assessee.
Adhoc disallowance of 30% of total travelling and conveyance expenses - HELD THAT:- These details were subject to verification by the ld. AO in the remand proceedings and in the remand report, the ld. AO had held that some of the expenses are not fully verifiable. We find in these circumstances, some adhoc disallowance of expenses need to be made. Disallowance @30% would be on the higher side given the status of the company and the behaviour of the assessee. Hence, we hold that disallowance on an adhoc basis at 10% of total travelling and conveyance expenses would meet the ends of justice in the peculiar facts and circumstances of the instant case. Accordingly, the ground No.3 raised by the assessee is partly allowed.
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2019 (12) TMI 1304
Fees payable u/s.234E - intimation u/s.200A - HELD THAT:- If there is late filing of those TDS statements then the Revenue Authorities may charge late filing fees u/s.234E of the Act. That however, this power the Legislature was provided to the Authorities by inserting Clause (c) to Section 200A(1) of the Act w.e.f. 01.06.2015. There are plethora of cases which decided this issue that if TDS statements were filed prior to 01.06.2015 then there cannot be any levy of late fees u/s.234E. TDS statements filed after 01.06.2015 would attract the late filing fees as per Section 234E .
In these instant cases before us, in some of the cases, TDS statements were filed prior to 01.06.2015 while in some other cases, they were filed after 01.06.2015. This is the position on merits. That however, CIT(Appeal)‟s in their respective orders has not dealt with the merits of these cases and has dismissed the appeals of the assessee on the ground that there is substantial delay in filing of these appeals and also for the reason that the reasonableness attributed to that delay could not be established by the assessee therein.
We find that in the case of Anil Kumar Nehru Vs. ACIT [2019 (1) TMI 1075 - SC ORDER] as held that even if there is substantial delay in filing of appeals it can be condoned on the ground that it involves a question of law which goes into the root of the matter. In these set of appeals before us, it pertains to a legal question whether late fees would be leviable on the assessee or not depending upon the merits involved in each case.
In the interest of justice, we set aside the respective orders of the Ld. CIT(Appeal)‟s in all these cases and restore them back to their respective files to examine the matter on merits involving legal ground of Section 234E - Appeal of assessee are allowed for statistical purposes.
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2019 (12) TMI 1302
Disallowance u/s 14A r.w.r. 8D - CIT-A restricted the addition held that 0.5% of the investment treated as expenses incurred for earning exempt income - HELD THAT:- No infirmity in the order of the CIT(A). In the case of Vireet Investment Pvt. Ltd. and Anr. [2017 (6) TMI 1124 - ITAT DELHI] held that average value of investment which yielded exempt income during the year only shall be considered for the purpose of disallowance u/s 14A.
Since the CIT(A) has given a categorical finding that the assessee has received dividend income of ₹ 6,48,431/- from the current investment of ₹ 11,02,496/-, therefore, 0.5% of the above investment has to be treated as expenses incurred for earning exempt income which comes to 5,512/- and which is in accordance with the decision of the Special Bench of the Tribunal cited (supra). Accordingly, we do not find any infirmity in the order of the CIT(A) and the same is upheld. Ground raised by the Revenue is accordingly dismissed.
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2019 (12) TMI 1301
Unexplained investment from undisclosed sources - CIT-A deleted the addition - as per revenue it is device to cover up the undisclosed income by the assessee by planting a purchaser whose income is exempt under section 10(26AAA) - assessee has claimed to have sold the land through an unregistered agreement which is not possible when the purchaser belongs to Sikkim and will pay such a huge consideration without having a proper title document - HELD THAT:- It is beyond preponderance of human probability that a person from Gangtok (Sikkim) would purchase a land in Rajasthan against a consideration of ₹ 2,88,60,000/- without having a proper title deed in his favour. The alleged agreement to sell is not a document which can be verified independently and can be considered as a conclusive evidence for transaction of purchase and sale of the immovable properties.
The immovable properties cannot be transferred under such an unregistered document being agreement to sell. The details of assessee’s share in the alleged ancestral land are also not available on record. It is also not clear from the record whether the assessee was having the share in the ancestral property to the extent of 19.20 bigha. Not executing the sale deed and registration with the authorities even after the expiry of such a long time creates a genuine doubt about the transaction.
The genuineness of the claim has not been established with verifiable documentary evidence. It is also a relevant fact that the alleged purchaser of the land being a Sikkimese, is exempt from Income tax as per section 10(26AAA) - possibility of using the name of such a person as a device to evade the tax cannot be ruled out. Accordingly we set aside this matter to the record of the AO for conducting a proper enquiry particularly on the point of the assessee’s share in the alleged ancestral property and whether the said property is available in the exclusive right of the assessee for transfer. The status of the land regarding the possession and the real ownership is also required to be verified. Needless to say that the assessee be given a proper opportunity of hearing before passing the fresh assessment order. - Decided in favour of revenue for statistical purposes.
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2019 (12) TMI 1299
Assessment u/s 153A - Reopening of assessment u/s 147 - unabated assessment - HELD THAT:- The concept of unabated assessment has been explained by the courts, as per which any assessment, which is not pending as on the date of search is considered as unabated assessment. In the light of above legal position, if you examine facts of the present case, it is abundantly clear that the assessment for the impugned assessment year is abated as on the date of search, because before search and seizure action conducted on 13/10/2010, the Ld. AO has reopened the assessment u/s 147 by issuing notice u/s 148 on 26/22/010.
Once, the assessment is reopened, then the AO shall have time limit for completion of assessment one year from the end of the relevant assessment year in which notice u/s 148 is issued. In this case, since notice u/s 148 was issued on 26/12/2010, the Ld. AO will have time limit for completion of reassessment up to 31/03/2011, which is much later than the date of search i.e on 13/10/2010. Consequently, the assessment for the impugned assessment year is abated and the Ld. AO shall have the power to assess or re-assess total income, including undisclosed, if any found as a result of search.
Disallowances of additional depreciation claimed on fixed assets - assessee has claimed additional depreciation u/s 32(1)(iia) @ 20% of the cost of plant and machinery which were purchased, installed and put to use in the proceeding previous year - AO has disallowed the claim of additional depreciation in the second year, on the ground that said claim is allowable in the year in which said plant and machinery was purchased/installed and put to use and also, it is one time claim - whether, an assessee can claim additional in the subsequent years in absence of any reference to a specific previous year after amendment by the Finance Act, 2005 in section 32(1)(iia) ? - HELD THAT:- On a literal reading of section 32(1)(iia), the additional depreciation is restricted to one time deduction and there is no explicit provision entitling the assesee to claim additional depreciation in subsequent year or years, when the additional depreciation was allowed in the year, when plant and machinery has been put to use. It is illogical and irrational to presume so, when the legislation intention is to allow one time additional depreciation u/s 32(1)(iia) in a previous year in which plant and machinery is installed and put to use. CIT(A) after considering relevant facts has rightly noted that there is no error in the findings recorded by the ld. AO in disallowances of additional deprecation on plant and machinery for second year - findings recorded by the CIT(A), while confirming additions made by the Ld. AO towards of additional depreciation in subsequent years is in accordance with law as enumerated under the provision of section 32(1)(iia) and hence, the findings of the ld. CIT(A) does not call for any interference from our side. Accordingly, the ground taken by the assessee is dismissed.
Disallowances of expenditure incurred in relation to exempt income u/s 14A - HELD THAT:- Although provisions of Rule 8D has no strict application for the year under consideration, but a reasonable expenditure related exempt income needs to be estimated considering the nature of investments and the amount of exempt income earned by the assessee. In this case, the assessee has earned huge amount of exempt income in the form of dividend from shares but did not disallowed any expenditure on its own. Although, the Ld. AO has determined disallowances, as per Rule 8D and which is on higher side, when compare to nature of investments and amount of exempt income earned for the year, but adhoc disallowances of ₹ 1 Lac sustained by the Ld.CIT(A) cannot be accepted. Therefore, considering the totality of facts and circumstances of this case and also taken note of the decision of the Hon’ble Bombay High Court in assessee’s own case for AY 2009-10 [2019 (3) TMI 397 - BOMBAY HIGH COURT] we are of the considered view that a reasonable amount of expenditure attributable to exempt income needs to be disallowed. Accordingly, we direct the Ld.AO to disallow 5% of total exempt income earned for the year towards expenditure incurred in relation to exempt income u/s 14A.
Characterization of income - treatment of sales tax incentives and excise duty benefits received - revenue or capital receipt - HELD THAT:- An identical issue has been considered by the co-ordinate bench of ITAT, in the case of Welspun India Ltd. Vs DCIT [2019 (2) TMI 1061 - ITAT MUMBAI] where under identical set of facts, the Tribunal held that sales tax incentives and excise duty benefit received by the assessee is in the nature of capital receipts not liable to tax.
Disallowance of depreciation on fixed assets u/s 40(a)(ia) r.w.s 37(1) under different categories on the plea that the deprecation was disallowed in the AY 2005-06 - whether the claim of the assessee with regard to depreciation on fixed assets, in respect of that expenditure for non deduction of tax at source is in accordance with law - HELD THAT:- The provisions of section 40(a)(ia) of the Act, is applicable, where any expenditure is debited into profit and loss account without deduction of tax at source, then to that extent, the expenditure on which TDS was not deducted is not allowable as deduction. Similarly, if any amount as capitalized to fixed assets and depreciation was claimed thereon, if no TDS is deducted, in respect of those capitalized fixed assets, then depreciation to that extent is not allowable. Assessee has failed to bring on record any evidence to prove that whether, the claim made, in respect of depreciation on fixed assets, in respect of those expenditure is in accordance with provision of section 40(a)(ia) of the Act. Therefore, we are of the considered view that the issue needs to go back to the file of AO for verification of facts with regard to applicability of provision of section 40(a)(ia). Hence, we set aside the issue to file of the Ld. AO and direct him to reconsider the issue in accordance with law.
Disallowances of FCCB premium and depreciation on FCCB premium debited to pre-operative expenses - HELD THAT:- Assesse has debited provision towards FCBB premium and FCBB issue expenditure, even though the bond holders have not exercised their option. If any expenditure is debited to profit and loss account by creation of provision and such liability was not crystallized, then obviously, the same cannot be allowed as deduction, and therefore to that extent, the findings of Ld. AO is correct. However, the fact remains that assessee claims to have offered the same for taxation for AY 2014-15, when the bond holders have exercised their option. In this regard, he has filed a copy of statement of total income, where FCCB premium paid on conversion of bonds into equity shares have been disallowed in the statement of total income. But, the facts with regard to the availability of these evidences before the AO at the time of assessment proceedings are not clear - issue needs to go back to the file of the Ld. AO to ascertain the fact with regard to the claim of the assesee that said expenditure has been suffered to tax in AY 201415. Hence, we set aside the issue to the file of the Ld. AO and direct him to cause necessary enquiries and if he is found that the said amount has been offered to tax in AY 2014-15, then the additions made for the year under consideration needs to be deleted.
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2019 (12) TMI 1294
Depreciation on electric installation - @10% OR 15% - Whether electrical installation is an integral part of the plant and machinery - HELD THAT:- As relying on assessee's own case [2018 (5) TMI 1988 - ITAT SURAT] assessee is eligible for depreciation @15% instead of 10% allowed by the ld.Assessing Officer(AO), accordingly the AO is directed to allow deduction of depreciation as mentioned above - Decided in favour of assessee.
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2019 (12) TMI 1291
Exemption u/s 10(37) - qualify definition of “Compulsory acquisition” - Whether acquisition of impugned agricultural land by Surat Municipal Corporation (SMC) eligible for exemption? - AO has disallowed the claim u/s 10(37) on the ground that the assessee has sold the land voluntarily, and it is not case of compulsory acquisition of land by SMC - HELD THAT:- The Hon’ble Gujarat High Court in the case of CIT v. Amaratbhai S. Patel [2013 (5) TMI 449 - GUJARAT HIGH COURT] held that for the purpose of section 10(37) it is not required that the assessee himself should carry out the agricultural operations on the land. The appellant referred Para 8 of said order which states that “In view of the above provisions, as noted, the Revenue contended that the assessee would not be entitled to that exemption since the agricultural land was not cultivated by the assessee himself. We may recall that CIT (Appeals) was himself convinced that such exemption would be available even in case of a land situated in municipal area. But that the other conditions, namely of the cultivation of such land by the assessee would crucial.”
So far the contention of the assessee that land was agricultural land and it was case of compulsory acquisition by SMC, it is noticed that as per letter no. ACT/SR/3161 dated. 31.08.2010 it has been clearly mentioned by the SMC that nature of payment was “compulsory acquisition” (Land/ Building).It is further seen from the perusal of letter no. TBT/OUT/ 4089/ 22 dated. 23.09.2014that land in question was placed under reservation by the Government of Gujarat vide order dated Notification No. GH/V/100 of 2004/DVP/1403/3307/L dated. 02.09.2014 under the provision of section 20 of Gujarat Town Planning & Urban Development Act 1976 at the disposal of the SMC to acquire the land under section 77 of Bombay Provincial Municipal Corporation Act, 1949 for erection of Sewerage Treatment Plant. Thus, it was a case of compulsory acquisition of land for which the SMC under the instruction of Government of Gujarat for which the SMC has also given a certificate dated 12.08.2010 [letter no. ACT/SR/NO2861] wherein nature of payment to the assessee is described against compulsory acquisition of land at Dindoli.
ITAT- D- Bench, Ahmedabad in the case of ITO v. Dipak Kalidas Pauwala [2015 (8) TMI 1268 - ITAT AHMEDABAD] wherein the Tribunal has held the that said land in Dindoli ( at Block no. 305) was acquired by SMC for sewerage Treatment Plant are agricultural land which has been compulsory acquired by SMC under the provision of section 107 of GTP & UD Act, 1976 as the land needed for the purpose of Town Planning Scheme or Development Plan shall be deemed to be meaning for public purpose within the meaning of Land Acquisition Act , 1894 (I of 1894) and eligible for exemption under section 10(37) . Also confirmed by HC [2016 (4) TMI 431 - GUJARAT HIGH COURT]
Thus we hold that the land in question was compulsory acquisition by the SMC under the direction of Government of Gujarat. Hence, conditions stipulated in section 10(37) is satisfied. - Decided in favour of assessee.
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2019 (12) TMI 1288
Deduction u/s.80P(2)(a)(i) - Appellate Tribunal treating the Associate members as regular members while deciding that the assessee is eligible to claim deduction u/s.80P(2)(a)(i) - HELD THAT:- Senior standing counsel would submit that the issue raised in these Appeals are already covered by the judgment passed by this Court in the Assessee’s own case in [2016 (8) TMI 1427 - MADRAS HIGH COURT]upholding the order of the income tax Appellate Tribunal. Since the issue has already been decided against the revenue, following the same, these Appeals are also dismissed.
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2019 (12) TMI 1287
Rectification of mistake - HELD THAT:- We find that a mistake has crept in cause title and hence the present corrigendum is being passed. The lead order in the bunch of appeals is in the case of Udit Jain and by mistake ITA number has been mentioned as 5386/Del/2017 as against ITA No. 5380/Del/2017.
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2019 (12) TMI 1286
Maintainability of appeal - low tax effect - Monetary limit - HELD THAT:- The tax effect is less than one crore and therefore, in the light of the Circular dated 8/8/2019 issued by the CBDT, fixing the monetary limit, the present appeal is dismissed as withdrawn. However, the question of law is left open. The appeals are not covered under the Exceptional Clause of the Circular dated 8/8/2019.
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2019 (12) TMI 1284
Exemption u/s 10(37) denied - assessee has sold the land voluntarily, and it is not case of compulsory acquisition of land by SMC - failure to qualify definition of “Compulsory acquisition” and ought to have held acquisition of impugned agricultural land by Surat Municipal Corporation (SMC) eligible for exemption under section 10(37) - HELD THAT:- As per letter no. ACT/SR/3161 dated. 31.08.2010 it has been clearly mentioned by the SMC that nature of payment was “compulsory acquisition” (Land/ Building).It is further seen from the perusal of letter no. TBT/OUT/ 4089/ 22 dated. 23.09.2014that land in question was placed under reservation by the Government of Gujarat vide order dated Notification No. GH/V/100 of 2004/DVP/1403/3307/L dated. 02.09.2014 under the provision of section 20 of Gujarat Town Planning & Urban Development Act 1976 at the disposal of the SMC to acquire the land under section 77 of Bombay Provincial Municipal Corporation Act, 1949 for erection of Sewerage Treatment Plant. Thus, it was a case of compulsory acquisition of land for which the SMC under the instruction of Government of Gujarat for which the SMC has also given a certificate dated 12.08.2010 [letter no. ACT/SR/NO2861] wherein nature of payment to the assessee is described against compulsory acquisition of land at Dindoli. The ITAT- D- Bench, Ahmedabad in the case of ITO v. Dipak Kalidas Pauwala in I.T.A.No.2685/Ahd/2011 dated. 14.08.2015 wherein the Tribunal has held the that said land in Dindoli ( at Block no. 305) was acquired by SMC for sewerage Treatment Plant are agricultural land which has been compulsory acquired by SMC under the provision of section 107 of GTP & UD Act, 1976 as the land needed for the purpose of Town Planning Scheme or Development Plan shall be deemed to be meaning for public purpose within the meaning of Land Acquisition Act , 1894 (I of 1894) and eligible for exemption under section 10(37)
Thus land in question was compulsory acquisition by the SMC under the direction of Government of Gujarat. Hence, conditions stipulated in section 10(37) is satisfied. In view of above facts and circumstances, land was compulsory acquired by SMC, hence, conditions as laid down in section 10(37) are duly satisfied. See ITO v. Dipak Kalidas [2015 (8) TMI 1268 - ITAT AHMEDABAD] which has been confirmed by the Hon`ble Jurisdictional High Court of Gujarat in T [2016 (4) TMI 431 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2019 (12) TMI 1283
Income accrued in India - PE in India - Indo-Germany Tax Treaty - Whether VGSIPL should not be the Appellant's PE merely due to the fact that it is the Appellant's group company? - as pr assessee Transaction between the Appellant and VGSIPL are on principal to principal basis and there is no agency relationship - HELD THAT:- V W Group sales is an independent and separate entity, which is engaged in selling of fully built up cars imported from the assessee, Volkswagen AG and Skoda India to dealers and distributors. Thus, VW Group cannot be regarded as a PE of assessee in India.
In the case of present assessee the care is manufactured by the Audi AG outside India and constitutes a separate and independent activity. As noted earlier the car is sold to VW Group for further sale in India and VW Group sale is not acting on behalf of Audi AG nor is Audi AG selling cars through VW Group sales. Moreover, the cars are sold on principle to principal basis. Hence, we are of the view that Assessing Officer was not justified in invoking section 9 of the Act and the Article 5 of Indo-Germany Tax Treaty for taking view that assessee has PE in India.
Levy of interest under section 234B & 234C - HELD THAT:- Considering the fact that the assessee is a foreign company and tax resident of Germany. The entire income of the Audi AG is subject to tax deducted at source under section 195 of the Act. The assessee has no liability to pay advance tax and the fact that we have already hold that income earned by assessee is not taxable in India, we direct the Assessing Officer to recompute the tax/interest by following the decision of the jurisdictional High Court in case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]
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2019 (12) TMI 1282
TP Adjustment - Arms Length Price in respect of shared services at Rs.Nil. - assessee is a market research company - HELD THAT:- We find from the perusal of Clause 6 of the said agreement , it specifically excludes from within its ambit, the services which are in the nature of shareholder services or services which have been provided by the group company to another for the exclusive benefit of the other. Hence the argument of the revenue that the services rendered are in the nature of shareholder activities cannot be accepted as the same is without any basis. We find that as per Clauses 11 and 12 of the said agreement, SMSL is appointed as a pooling entity for all costs incurred by each of the group companies in rendering the shared services and thereafter to allocate the same to the various group companies based on benefits the respective companies had derived.
There is a binding agreement between parties to render services and contribute costs ; that there is a recognition by all group entities of the need for such services ; that SMSL is a special purpose vehicle existing for the sole purpose of pooling of costs ; that no costs for rendering of any shareholder/stewardship services are charged under the Shared Resources Allocation Agreement and that no costs for rendering any exclusive group company specific services are charged under the Shared Resources Allocation Agreement.
PO has accepted the segmentals so prepared. This demonstrates that the ld TPO agrees that the support and assistance under the Shared Resources Allocation Agreement are integral to rendition of the Market Research Services. Further when the TPO had accepted the receipts and payments towards the Market Research Services (rendered and received) by the assessee to be at arm's length by applying Internal TNMM, and when, the segmental margin have been arrived at after debiting the payments under Shared Resources Allocation Agreement, which segmentals have been accepted by the ld TPO for benchmarking the Market Research Services and accepting the same to be at arm's length , we find that automatically the payments under the Shared Resources Allocation Agreement also stand benchmarked. It is therefore improper of the ld TPO to then once again separately benchmark payments under Shared Resources Allocation Agreement and subject them to a CUP analysis.
We further find that the co-ordinate bench of this tribunal in assessee’s own case for the Asst Year 2008-09 , being the first year of operation of Shared Resources Allocation Agreement, had upheld the method of benchmarking adopted by the assessee. It is well settled that Internal TNMM based on segmental data would always be preferable over Extenal TNMM. On applying Internal TNMM , the margin from services rendered to international AEs is 22.04% , whereas the margin from services rendered to other international Non-AEs is 4.29%; and hence no adjustment is required to be made with respect to payments made under the Shared Resources Allocation Agreement.
We find that the ld TPO ought not to have determined the ALP of the payment made under the Shared Resources Allocation Agreement at Rs Nil.
Cost incurred on Shared Resources Allocation Agreement - It would be pertinent to note here that the payment made under Shared Resources Allocation Agreement had been duly subjected to deduction of tax at source, except an amount of ₹ 73.81 lakhs which was suo moto disallowed by the assessee for failure to deduct tax at source, and that no refunds have been claimed by the recipients thereon. Hence the actual claim by the assessee for the year under consideration is ₹ 6.77 crores only and therefore it is erroneous to make an addition of the entire amount of ₹ 7,50,68,892/-. This is only made as a passive observation by us as we direct the ld TPO to delete the entire adjustment made towards payment of cost contribution charges pursuant to Shared Resources Allocation Agreement. - Decided in favour of assessee.
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2019 (12) TMI 1281
Not carrying forward the Long Term Capital Loss - HELD THAT:- A.O. may consult the files of the previous years and if the amount is due and unclaimed, the same may be allowed - We find no infirmity in these directions of the ld. CIT(A). The Assessing Officer is directed to verify the claim of the assessee and allow the same, in accordance with law. Hence, we dismiss this ground of revenue.
Addition u/s 14A - absence of any satisfaction note recorded by the ld. A.O. - HELD THAT:- D/R, could not demonstrate that the Assessing Officer has recorded satisfaction, as required under law, prior to invoking Rule 8D of the Income Tax Rules, 1962 (‘Rules’). Thus, this issue is covered in favour of the asses=see by the order of this Bench of the Tribunal in the case of REI Agro Ltd. vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] - Decided against revenue.
Disallowance made u/s 40(a)(ia) - HELD THAT:- Revenue accepted the claim of the assessee that payment made to parties to the tune of ₹ 30,000/- were not a single transaction and hence, Section 194C of the Act, does not apply. As regards payments to Vyapar Bharati Press, he accepted the submission that TDS @ 1% was deducted on the payments and hence Section 40(a)(ia) of the Act is not applicable. In case of payments to NG Gosai Printing Pvt. Ltd., as it was purchase of goods, he held that the provisions of Section 194C of the Act, does not apply. Regarding the payment to Jivan Ratan Chatterjee Legal, he submitted that the payment of ₹ 31517/-, was towards advocate fees and service tax and as the advocate fees was less than ₹ 30,000/-, Section 194J of the Act, does not apply. Similarly, he has analysed each and every payment and came to a conclusion that provision of tax deduction at source do not apply. D/R, could not contradict these factual findings of the ld. CIT(A).
Addition made on account of sale of rights in property and carry forward of loss to future years - HELD THAT:- The assessee has sold the rights in property in the Assessment Year 2013-14 and 2014-15. The assessee declared the same as income from capital gain in its return of income for these Assessment Years. Assessing Officer has accepted this claim of the assessee and assessed the income under the head capital gains. During the current Assessment Year 2015-16, the Assessing Officer treated the income from sale of right in property as income from business. The assessee disputed the same before the ld. CIT(A). Its case is that the income in question is assessable under the head capital gains and not under the head income from business of profession. He relies on the decision of the Hon’ble Supreme Court in the case of Radhasoami Satsang vs. CIT [1991 (11) TMI 2 - SUPREME COURT] for the proposition that consistency should be followed by the Assessing Officer when the facts permeating over the years are the same. - Decided against revenue
Allowance of deduction of CSR expenses - HELD THAT:- Revenue does not dispute the finding of the ld. CIT(A) that the expenditure is in question is allowable u/s 80G of the Act. The ld. CIT(A) has not held that the expenditure is allowable u/s 36 /37 of the Act. It is not the case of the ld. CIT(A) that Explanation 2 to Section 37 of the Act, does not come into play. He was of the view that deduction in question is allowable under chapter VIA and not under chapter IV. As this finding has not been challenged, in this ground, we dismiss the same.
Allowance of deduction of education cess u/s 37(1) - HELD THAT:- As decided in ITC LTD. VERSUS ACIT, RANGE-8, KOLKAKTA [2019 (4) TMI 1574 - ITAT KOLKATA] section 40a(ii) applies only on taxes such than earn cess(es). We therefore reject the Revenue’s contentions supporting the impugned disallowance. The assessee's instant substantive ground is accepted. The Assessing Officer is direction to verify all the relevant facts and allow the impugned cess (es) as deduction u/ s 37.
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2019 (12) TMI 1280
TP Adjustment - consideration of SEZ Unit setting up expenses and Ireland branch expenses as operating in nature while computing the margin of the assessee and consideration of unrealized foreign exchange gain/loss while computing the margin of the assessee - HELD THAT:- The issue with regard to foreign fluctuation expenses, the Chennai Bench in the case of Infac India Pvt. Ltd. vs. DCIT [2018 (10) TMI 1814 - ITAT CHENNAI] , we direct the Assessing Officer to exclude the loss on account of foreign fluctuation from the operating expenses for computing the PLI (Profit Level Indicator). This ground of appeal of the assessee is allowed.
Companies not passing the forex filter and the employee cost filter need to be deselected as comparable.
Assessee is engaged in product engineering services thus companies functionally dissimilar with that of assessee need to be deselected from final list.
TPO had applied related party filter of greater than 25%
Disallowance of working capital adjustment - 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. Thus, this ground of appeal of the assessee is partly allowed.
Erroneous imputation of interest on recovery of expenses - HELD THAT:- As relying on M/S. ALLIANZ CORNHILL INFORMATION SERVICES PRIVATE LIMITED VERSUS THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE 2 (1) TRIVANDRUM [2018 (6) TMI 279 - ITAT COCHIN] we direct the Assessing Officer to adopt interest at the rate of 8.15% p.a. while computing the ALP. This ground of the assessee is partly allowed.
Disallowance of finance lease payments u/s. 37 - HELD THAT:- Assessee is entitled for financial lease charges as revenue expenditure only if it has not claimed depreciation on the leased asset. The assessee had not explained whether it claimed depreciation on the leased asset or not. In other words, the assessee is entitled to financial lease charges only in the event if it does not claim depreciation on such leased asset since depreciation on such leased asset is to be claimed by the lessor only. The assessee is not the owner of the leased assets. Once the assessee proves that it has not claimed depreciation on the assets taken on lease, the assessee is entitled for lease rentals paid by the assessee as a revenue expenditure. With this observation, we remit this issue to the file of the Assessing Officer to examine the assessee’s Profit and Loss account and balance sheet with reference to the agreements entered into by the assessee with the lessor. This ground of appeal of the assessee is partly allowed for statistical purposes.
Disallowance of interest expenses on account of interest free loans advanced to related parties - HELD THAT:- Since this ground of appeal of the assessee is allowed since the assessee was having sufficient funds in the form of reserves for granting loans to its sister concerns.
Disallowance of additional expenditure incurred owing to the misconduct of the employees u/s. 37 - HELD THAT:- The assessee has neither produced any documents before the Assessing Officer nor produced before the DRP nor even before us. The nature of the expenditure has not been substantiated by the assessee. Hence, we do not find any infirmity in the order of the CIT(A) and confirm the ground. Thus, this ground of appeal of the assessee is dismissed.
Non consideration of inadvertent disallowance of the same expense twice - HELD THAT:- This issue is remitted to the file of the Assessing Officer to ascertain the correct position of the disallowance. Thus, this ground of appeal of the assessee is partly allowed for statistical purposes.
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