ISSUES:

Whether the adjustment made to the international transaction value and consequent addition to income was justified.Whether the product classification of the taxpayer as 'Automobile Ancillaries' versus 'Engine Part Segment' was correctly determined for transfer pricing purposes.Whether the comparables selected by the taxpayer for benchmarking manufacturing segment transactions were appropriate and should have been accepted.Whether the transfer pricing approach adopted by the taxpayer was correctly rejected.Whether the filters applied by the authorities to reject comparables based on related party transactions exceeding 15% of sales and export sales exceeding 25% were correctly applied.Whether consumption of raw material as a percentage of total expenditure is a valid filter for selection or rejection of comparables.Whether the broader business profile of the taxpayer requires selection of comparables based on a broader industrial sector classification.Whether the Function, Assets, and Risk (FAR) profiles of comparables were properly evaluated.Whether the response of the taxpayer to comparables proposed to be added was duly considered.Whether the conclusion that only one company (Subros India Ltd.) is comparable was justified.Whether the benefit of safe harbor limit of +/- 5% was correctly applied or denied.Whether the Commissioner of Income Tax (Appeals) erred in directing the Transfer Pricing Officer (TPO) to exclude comparables without proper FAR analysis.Whether the distinction between core and non-core auto components is relevant and determinative for selecting comparables in transfer pricing analysis.Whether remand to the TPO for fresh transfer pricing analysis is necessary.

RULINGS / HOLDINGS:

The adjustment of Rs.3,46,21,430 to the international transaction value was upheld subject to correct benchmarking, but the safe harbor limit of +/- 5% benefit was denied as only one comparable was accepted, consistent with the proviso to section 92C(2).The product classification of the taxpayer as manufacturing non-core auto components (air-conditioning compressors and related parts) was accepted over the classification as core engine parts, given that non-core components are not vital for vehicle operation.The comparables selected by the TPO were rejected by the Commissioner of Income Tax (Appeals) for lack of product similarity and failure of quantitative filters; however, the CIT(A) erred in excluding comparables without conducting proper FAR analysis.The transfer pricing approach adopted by the taxpayer (TNMM with Operating Profit/Sales as PLI) was acknowledged as appropriate, but benchmarking requires proper selection of comparables based on FAR and product similarity.The filters relating to related party transactions and export sales were not properly applied by the authorities, and rejection of comparables on these grounds was not justified without adequate reasoning.Consumption of raw material as a percentage of total expenditure was a valid filter for comparability, and rejection of comparables with very low raw material consumption relative to the taxpayer was justified.The broader business profile requiring selection of comparables based on a broader industrial sector was not accepted; product and functional similarity were held to be more determinative.The evaluation of FAR profiles of comparables was inadequately performed by the CIT(A), who failed to conduct a proper FAR analysis before rejecting comparables.The taxpayer's responses to the addition of certain comparables were not sufficiently considered by the CIT(A).The conclusion that only Subros India Ltd. was comparable was premature and made without proper FAR analysis of other comparables.The benefit of safe harbor limit of +/- 5% under the proviso to section 92C(2) was not applicable where only one comparable was accepted.The CIT(A) erred in directing exclusion of comparables without proper FAR analysis, violating principles of transfer pricing comparability assessment.The distinction between core and non-core auto components is a key factor in benchmarking international transactions, supported by statutory definitions under Rule 10TA and precedent, and must be considered in FAR analysis.The matter was remitted to the TPO for fresh, open-ended transfer pricing analysis incorporating proper FAR and product comparability assessments, and for application of safe harbor provisions in accordance with Rule 10TA.

RATIONALE:

The Court applied the statutory framework of transfer pricing under the Income-tax Act, particularly section 92C(2) and Rule 10TA of the Income-tax Rules, 1962, which govern the determination of arm's length price and comparability factors including FAR analysis.Precedents such as the decision in Rampgreen Solutions Pvt. Ltd. emphasize the necessity of product and functional similarity for reliable benchmarking under TNMM.The Tribunal relied on the coordinate Bench decision in Minda Acoustic Ltd. to draw a clear distinction between core and non-core auto components, interpreting Rule 10TA clauses (b) and (h) to define core auto components as vital for vehicle operation, thereby necessitating comparability within the same category.The Court found that the CIT(A) failed to conduct a meaningful FAR analysis before excluding comparables, which is a doctrinal requirement for transfer pricing comparability assessment.The denial of the safe harbor benefit was consistent with the proviso to section 92C(2), which requires multiple comparables to apply the +/- 5% range.The remand for fresh transfer pricing analysis reflects a doctrinal insistence on comprehensive and methodical application of comparability criteria, including FAR and product classification, before determining arm's length price adjustments.No dissenting or concurring opinions were noted; the judgment reflects a reaffirmation of established transfer pricing principles emphasizing rigorous FAR and product comparability analysis.

Issues Involved:
1. Disallowance of depreciation on goodwill.

Issue-wise Detailed Analysis:

Disallowance of Depreciation on Goodwill:
Background and AO's Case:
The Revenue's primary contention in this appeal was against the Commissioner of Income Tax (Appeals) [CIT(A)]'s decision to delete the disallowance of depreciation on goodwill amounting to Rs. 1,87,50,000 made by the Assessing Officer (AO). The AO disallowed the depreciation on the grounds that the goodwill was not reflected as an asset in the financial statements and tax audit report for the financial year 2006-07.

Assessee's Argument:
The assessee argued that the goodwill arose from the merger of Shristi Infrastructure Development Corporation Limited and Peerless Abasan Finance Limited, approved by the Delhi and Calcutta High Courts. The goodwill, amounting to Rs. 10 crores, was recorded in the books during the financial year 2006-07. The assessee cited Section 32(1) of the Income Tax Act, 1961, which allows depreciation on intangible assets, including goodwill. The assessee referenced the Supreme Court’s decision in Commissioner of Income Tax vs. Smifs Securities Ltd [2012] 24 taxmann.com 222 (SC), which held that depreciation is allowable on goodwill arising from mergers. The assessee also pointed out that the depreciation on goodwill was allowed in the previous assessment year 2011-12 by the CIT(A).

CIT(A)'s Decision:
The CIT(A) observed that the AO did not give due cognizance to the relevant financial statements and submissions of the assessee. The CIT(A) noted that the AO's disallowance was based solely on the absence of goodwill in the post-merger financial statements and tax audit report, without considering the audited financial statements for FY 2006-07, which clearly reflected the goodwill amount. The CIT(A) emphasized that depreciation on goodwill is allowable under Section 32(1)(ii) of the Act, supported by the Supreme Court's decision in Smifs Securities Ltd. Consequently, the CIT(A) allowed the depreciation claim on goodwill.

Tribunal's Analysis:
The Tribunal upheld the CIT(A)'s decision, emphasizing judicial consistency. It noted that the CIT(A) had followed his order on the same issue in the preceding assessment year 2011-12. The Tribunal referenced its coordinate bench's order in ACIT vs. M/s Shristi Infrastructure Development Corporation Ltd., which upheld the CIT(A)'s action in the earlier assessment year. The Tribunal reiterated that depreciation on goodwill is allowable under Section 32(1) of the Act, supported by the Supreme Court’s decision and other judicial pronouncements. The Tribunal found no distinction in facts or law that would warrant a different conclusion.

Conclusion:
The Tribunal concluded that the CIT(A) correctly deleted the disallowance of depreciation on goodwill. The Revenue's appeal was dismissed, and the CIT(A)'s findings were upheld. The order was pronounced in the open court on 31.12.2019.

Issues Involved:
1. Treatment of loans as unexplained cash credits under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Treatment of Loans as Unexplained Cash Credits under Section 68

Background:
The Revenue appealed against the Commissioner of Income Tax (Appeals) [CIT(A)]'s order, which partially reversed the Assessing Officer (AO)'s decision to treat the assessee's loans amounting to Rs. 11,85,00,000/- as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The CIT(A) provided relief to the extent of Rs. 5,26,50,251/-, while the remaining Rs. 6,58,49,749/- was contested by the assessee in a separate appeal.

Revenue's Argument:
The Revenue contended that the AO had correctly added the assessee's total loan amount as unexplained cash credits, arguing that the loans were routed back as unaccounted income through related parties.

Assessee's Argument:
The assessee argued that the loans were genuine and provided detailed explanations and evidence to prove the identity, creditworthiness, and genuineness of the transactions with the four lending entities: M/s Diamond Carbon Pvt. Ltd., M/s Mukherjee Capital Pvt. Ltd., M/s Wimper Trading and Distributors Pvt. Ltd., and M/s Mukherjee Farms Pvt. Ltd.

CIT(A)'s Findings:
The CIT(A) partially accepted the assessee's explanations and provided relief for certain amounts based on the creditworthiness and genuineness of the transactions. The CIT(A) found that parts of the loans were sourced from business reserves and were thus explained, while other parts were deemed unexplained due to dubious share capital and share premium.

Tribunal's Analysis:
The Tribunal reviewed the evidence presented, including audited accounts, bank statements, confirmation letters, and certificates from banks regarding the maturity of deposit accounts. The Tribunal noted that the AO had accepted the interest outgoing to the four lender companies, which indicated the acceptance of the loan transactions' genuineness.

Legal Precedents Considered:
- CIT v. Smt. P. K. Noorjahan: The Supreme Court held that unsatisfactory explanations do not automatically result in deeming the amount as income.
- Nemi Chand Kothari v. CIT: The Guahati High Court emphasized that the assessee's burden under Section 68 is limited to proving the source from which he received the credit.
- CIT v. S. Kamaljeet Singh: The Allahabad High Court held that the assessee's burden is discharged by providing confirmation letters, affidavits, and other relevant documents.
- Crystal Networks (P.) Ltd. v. CIT: The Calcutta High Court ruled that the failure of creditors to appear cannot be the sole basis for making additions if material evidence supports the transactions.
- CIT v. Dataware Private Limited: The Calcutta High Court held that the AO of the assessee cannot dispute the creditworthiness of the creditor if the creditor is an income tax assessee.

Conclusion:
The Tribunal concluded that the assessee had discharged its onus to prove the identity, creditworthiness, and genuineness of the lender companies. The Tribunal found that the AO did not conduct sufficient investigations to disprove the assessee's claims and relied on inferences without substantial evidence. Consequently, the Tribunal upheld the CIT(A)'s decision to provide partial relief and directed the deletion of the remaining addition of Rs. 6,58,49,749/-.

Final Decision:
The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s findings, thereby providing full relief to the assessee.

Pronouncement:
The order was pronounced in the open court on 31.12.2019.

Issues Involved:
1. Depreciation on purchase of goodwill or other business/commercial rights under Section 32(1)(ii) of the Income-tax Act, 1961.
2. Deletion of addition while computing book profit under Section 115JB of the Act.
3. Allowance of reimbursement of expenses to Blue Star Limited.

Detailed Analysis:

Issue 1: Depreciation on Purchase of Goodwill or Other Business/Commercial Rights

Facts:
The assessee, a wholly-owned subsidiary of Blue Star Limited, acquired intangible assets including customer contracts, non-compete fees, business and technical knowhow, trademarks, and goodwill for Rs. 60 crores. The assessee claimed depreciation under Section 32 of the Income-tax Act, 1961, on these intangible assets.

Assessment Officer's (AO) View:
The AO disallowed the depreciation claim on customer contracts, arguing that the terms, conditions, and values of the contracts did not change with the change of management. The AO also noted that there was no erosion of value over time and cited a pending departmental appeal in a similar case.

CIT(A)'s Decision:
The CIT(A) allowed the depreciation claim, relying on the Tribunal’s decision in the case of Indian Capital Market Pvt. Ltd. and the Supreme Court's decision in CIT vs. Smifs Securities Ltd. The CIT(A) held that customer contracts fall under "any other business or commercial rights of similar nature" as per Explanation 3 to Section 32(1)(ii).

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by the assessee's own case in the previous year and supported by the Supreme Court and Delhi High Court decisions. The Tribunal confirmed that customer contracts acquired as part of a slump sale agreement qualify as intangible assets eligible for depreciation under Section 32(1)(ii).

Issue 2: Deletion of Addition While Computing Book Profit Under Section 115JB

Facts:
The AO noticed that the assessee claimed exclusion of amortization of intangible assets, including goodwill, while computing book profit under Section 115JB, amounting to Rs. 42,38,11,308/-. The AO disallowed the claim, stating it was not made through a revised return.

CIT(A)'s Decision:
The CIT(A) admitted the claim and ruled in favor of the assessee, stating that the financial statements were not showing a true and fair view due to specific accounting treatment following a High Court order. The CIT(A) held that the appellant is entitled to make necessary adjustments to arrive at the correct book profit under Section 115JB.

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, agreeing that the financial statements should reflect true profit as per Part II and III of Schedule VI to the Companies Act. The Tribunal confirmed that the assessee is entitled to make adjustments to the profit and loss account to compute the correct book profit under Section 115JB.

Issue 3: Allowance of Reimbursement of Expenses to Blue Star Limited

Facts:
The AO disallowed the reimbursement of expenses amounting to Rs. 1,15,98,917/- to Blue Star Limited, stating that the assessee failed to produce documentary proof such as agreements or bills.

CIT(A)'s Decision:
The CIT(A) allowed the claim, citing jurisdictional ITAT and High Court decisions that mere non-production of documentary evidence is insufficient to disallow reimbursement expenses. The CIT(A) directed the AO to delete the disallowance.

Tribunal's Decision:
The Tribunal upheld the CIT(A)'s decision, noting that the issue was covered by the Bombay High Court's decision in Vazirani Lani Developers Pvt. Ltd. The Tribunal found no infirmity in the CIT(A)'s order and confirmed the allowance of reimbursement expenses.

Conclusion:
The Tribunal dismissed the Revenue's appeals on all issues, thereby allowing the depreciation on intangible assets, deleting the addition while computing book profit under Section 115JB, and confirming the allowance of reimbursement of expenses. The judgment was pronounced in the open court on 31.12.2019.

Issues Involved:
1. Deletion of Transfer Pricing (TP) adjustment regarding corporate guarantee extended by the assessee company to its Associate Enterprise (AE).
2. Disallowance under Section 14A of the Income Tax Act.
3. Computation of deduction under Section 80IC of the Income Tax Act concerning sales tax subsidy and write-back of expenses.

Detailed Analysis:

1. Transfer Pricing (TP) Adjustment:
The primary issue revolves around whether the corporate guarantee extended by the assessee company to its AE qualifies as an international transaction under Section 92B of the Income Tax Act for the Assessment Year 2012-13. The Tribunal referenced the case of M/s. Tega Industries Ltd. vs. ACIT, where it was held that the Explanation to Section 92B introduced by the Finance Act, 2012, is clarificatory in nature and does not alter the fundamental definition of an international transaction. It was concluded that corporate guarantees provided by a parent company to its subsidiary, which do not involve any cost or bearing on the profits, incomes, losses, or assets of the parent company, fall outside the ambit of international transactions under Section 92B(1). The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's ground and confirming that the corporate guarantee in question does not amount to an international transaction.

2. Disallowance under Section 14A:
The second issue pertains to the disallowance under Section 14A of the Act. The CIT(A) ruled that investments made in foreign subsidiaries, which are capable of yielding taxable income, should not be considered for Section 14A disallowance. Furthermore, investments made for strategic business purposes in subsidiaries and group companies were also excluded from disallowance. However, this decision was found to be contrary to the Supreme Court's ruling in Maxopp Investment Ltd. v. CIT. Despite this, the Tribunal upheld the CIT(A)'s alternative argument that no disallowance under Rule 8D(2)(ii) of the Income Tax Rules can be made when the assessee's own surplus funds, which are not interest-bearing, are sufficient to cover the investments. This is in line with the legal precedents set by HDFC Bank Ltd. v. Deputy Commissioner of Income-tax and CIT vs. Rasoi Ltd. Consequently, the Tribunal dismissed the revenue's ground on this issue.

3. Computation of Deduction under Section 80IC:
The third issue concerns the computation of deduction under Section 80IC of the Act. The CIT(A) followed the Supreme Court's judgment in CIT vs. Meghalaya Steels Ltd., which mandates that sales tax subsidies should be included in the profits for the purpose of computing deductions under Section 80IC. The Tribunal upheld the CIT(A)'s decision, affirming that the judgment applies to the case at hand.

Write-back of Expenses:
Additionally, the Tribunal agreed with the CIT(A) that expenses previously allowed as deductions from profit, when written back, should be included in the profits eligible for deduction under Section 80IC. This ground of the revenue was also dismissed.

Conclusion:
The Tribunal dismissed the appeal of the revenue on all grounds, upholding the CIT(A)'s decisions on the deletion of the TP adjustment, disallowance under Section 14A, and computation of deduction under Section 80IC. The judgment emphasized adherence to legal precedents and the clarificatory nature of amendments to the Income Tax Act.

Issues Involved:
- Disallowance under Rule 8D(2)(ii) read with Section 14A of the Income Tax Act, 1961.

Detailed Analysis:

1. Issue of Disallowance under Rule 8D(2)(ii):
- The appeal filed by the assessee pertained to the assessment year 2013-14 and challenged the order passed by the Commissioner of Income Tax (Appeal)-2, Kolkata. The Assessing Officer had made disallowances under Section 14A read with Rule 8D of the Act. The grounds of appeal raised by the assessee primarily focused on the disallowance under Rule 8D(2)(ii) and the quantification of disallowance under the same rule.

2. Facts and Decision of CIT(A):
- The assessee company engaged in various business activities and filed its return of income declaring a loss. The CIT(A) allowed the appeal for statistical purposes based on the submissions made by the assessee. The CIT(A) considered that the interest expenses were directly attributable to business activities and not to investments, and hence, disallowance under Rule 8D(2)(ii) was not justified.

3. Arguments Before ITAT and Decision:
- The assessee appealed against the CIT(A)'s order, arguing that the disallowance under Rule 8D(2)(ii) was not applicable as the company's net owned funds were substantially higher than the investments in shares. The ITAT examined the balance sheet of the company and noted that the own funds exceeded the investments in shares. Relying on legal precedents, the ITAT held that since borrowed funds were not used for acquiring shares, no part of the interest paid was disallowable under Rule 8D(2)(ii).

4. Legal Precedents and Conclusion:
- The ITAT referred to judgments of the Calcutta High Court and held that the disallowance under Rule 8D(2)(ii) was not attracted in the assessee's case. Therefore, the ITAT directed the Assessing Officer to delete the disallowance under Rule 8D(2)(ii) of the IT Rules. Consequently, the appeal of the assessee was allowed, and the order was pronounced on 31.12.2019.

This detailed analysis outlines the assessment, arguments, and legal precedents considered by the ITAT in deciding the issue of disallowance under Rule 8D(2)(ii) read with Section 14A of the Income Tax Act, 1961 in the mentioned judgment.

Issues:
1. Revision of assessment under section 263 of the Income Tax Act, 1961 based on deduction claims under sections 54 and 54F.
2. Validity of the revision jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT).
3. Assessment proceedings under section 153A/143(3) concerning long term capital gains and deduction claims.

Analysis:

Issue 1: Revision of assessment under section 263
The appellant's appeal for the assessment year 2010-11 was against the PCIT's order dated 16.03.2018 regarding proceedings under sections 153A/143(3) of the Income Tax Act, 1961. The PCIT set aside the assessment order passed by the Assessing Officer (AO) on the grounds that the deduction claims under sections 54 and 54F were wrongly allowed. The PCIT directed the AO to re-examine the nature of the right purchased by the assessee in a flat under construction and determine the eligibility for the deductions. The PCIT found that the deduction was allowed without sufficient examination, leading to the revision of the assessment order.

Issue 2: Validity of revision jurisdiction by PCIT
Both parties presented their arguments regarding the PCIT's assumption of revision jurisdiction. Citing the Supreme Court's decision in Malabar Industries Co. vs. CIT 243 ITR 83, it was emphasized that for an assessment to be revised under section 263, it must be erroneous and cause prejudice to the Revenue. The AO had previously assessed the income at a specific amount, and the deduction claim was not part of the subsequent assessment. Therefore, the PCIT's decision to term the assessment as erroneous was deemed incorrect, and the original assessment was restored.

Issue 3: Assessment proceedings under section 153A/143(3)
The search conducted in M/s Kushal Group led to section 153A proceedings, with the assessee filing a return stating income. The AO completed the assessment accepting the returned income. The revision proceedings were initiated based on the deduction claims under sections 54 and 54F. The Tribunal noted that the deduction claim was not part of the subsequent assessment, and the PCIT's revision directions were reversed. The appeal was allowed, and the original assessment order was upheld.

In conclusion, the Tribunal found that the PCIT erred in setting aside the assessment order based on the deduction claims under sections 54 and 54F. The original assessment was restored, emphasizing that the deduction claim was not part of the subsequent assessment and therefore did not warrant revision.

Issues:
1. Disallowance under section 14A r.w.r. 8D of Income Tax Rules.

Analysis:
The appeal was filed by the Revenue against the order of the CIT(A) relating to the assessment year 2014-15. The Revenue raised grounds challenging the CIT(A)'s decision to restrict the addition to Rs. 5,512 instead of the initial disallowance of Rs. 1,79,74,266 under section 14A r.w.r. 8D of the IT Act. The Assessing Officer had disallowed the substantial amount, but the CIT(A) determined that only 0.5% of the investment amount yielding exempt income should be considered as expenses incurred for earning such income, resulting in the reduced disallowance.

The Tribunal, comprising MS SUSHMA CHOWLA, JUDICIAL MEMBER, and SHRI R.K. PANDA, ACCOUNTANT MEMBER, after considering the arguments, upheld the CIT(A)'s decision. The Tribunal referred to the Delhi Special Bench's decision in the case of Vireet Investment Pvt. Ltd. and Anr., where it was held that only the average value of investments generating exempt income during the year should be taken into account for disallowance under section 14A. Since the assessee had received dividend income of Rs. 6,48,431 from the current investment of Rs. 11,02,496, the Tribunal agreed with the CIT(A)'s calculation of 0.5% of the investment amount as expenses incurred for earning exempt income, aligning with the Special Bench's ruling.

Therefore, the Tribunal found no fault in the CIT(A)'s order and dismissed the Revenue's appeal, affirming the restricted disallowance of Rs. 5,512. The decision was pronounced in the open court on 31.12.2019.

Issues Involved:
1. Disallowance of depreciation on residential properties.
2. Disallowance of amortization of premium paid on leasehold land.
3. Disallowance of depreciation on toll road.
4. Addition of notional interest income in respect of toll road from MPSIDC.
5. Disallowance under Section 14A read with Rule 8D in respect of interest.
6. Disallowance of interest on loan given to IL&FS Employee Welfare Trust.
7. Double addition of income.
8. Rejection of claim for deduction under Section 36(1)(vii).
9. Levy of interest under Section 234B.
10. Deletion of addition to "Income from House Property".
11. Deletion of disallowance made under Section 14A read with Rule 8D.
12. Treatment of capital expenditure on computer software development expenses as revenue expenditure.
13. Deletion of accrued income from Toll Road.
14. Deletion of club expenses.
15. Deletion of disallowance claimed under Section 36(1)(viii).
16. Verification of income accruing as per AIR-ITS details.
17. Allowance of depreciation on computer software and peripherals at 60%.

Detailed Analysis:

1. Disallowance of Depreciation on Residential Properties:
The Tribunal allowed the depreciation on residential properties, directing the Assessing Officer (AO) to verify whether the assessee claimed standard deduction under Section 24(a). If claimed, it should be disallowed to avoid double deduction.

2. Disallowance of Amortization of Premium Paid on Leasehold Land:
The Tribunal upheld the disallowance, ruling that the amortization of lease premium is capital in nature and not allowable as per the Tribunal's earlier decisions.

3. Disallowance of Depreciation on Toll Road:
The Tribunal allowed depreciation on toll roads as intangible assets under Section 32, directing the AO to re-compute it as per the Special Bench decision in Progressive Constructions Ltd. vs. ACIT.

4. Addition of Notional Interest Income in Respect of Toll Road from MPSIDC:
The issue was restored to the AO for re-examination, following the Tribunal's earlier decisions to estimate income based on the latest decision of the Appellate Tribunal or any higher authority.

5. Disallowance Under Section 14A Read with Rule 8D in Respect of Interest:
The Tribunal restored the issue to the AO to re-compute the disallowance, considering strategic investments and investments held as stock in trade, as per the Tribunal's earlier decisions and the Special Bench decision in ACIT v. Vireet Investments Private Limited.

6. Disallowance of Interest on Loan Given to IL&FS Employee Welfare Trust:
The Tribunal sustained the disallowance, as the assessee failed to prove that the loan was given for business purposes.

7. Double Addition of Income:
The Tribunal restored the issue to the AO for verification, directing to examine the books of accounts and balance sheet to ensure no double addition of income.

8. Rejection of Claim for Deduction Under Section 36(1)(vii):
The issue was restored to the CIT(A) to verify whether the assessee had withdrawn its claim. If not, the CIT(A) should decide the issue on merits.

9. Levy of Interest Under Section 234B:
This ground was deemed consequential and did not require adjudication.

10. Deletion of Addition to "Income from House Property":
The Tribunal’s decision on disallowance of depreciation on residential properties also applied to this issue.

11. Deletion of Disallowance Made Under Section 14A Read with Rule 8D:
The Tribunal restored the issue to the AO to re-compute the disallowance, similar to the decision in the assessee's appeal.

12. Treatment of Capital Expenditure on Computer Software Development Expenses as Revenue Expenditure:
The Tribunal upheld the CIT(A)'s decision, treating software development expenses as revenue expenditure based on earlier Tribunal decisions.

13. Deletion of Accrued Income from Toll Road:
The Tribunal restored the issue to the AO for re-examination, following the Tribunal's earlier decisions.

14. Deletion of Club Expenses:
The Tribunal directed the AO to delete the disallowance, following the Bombay High Court's decision in the assessee's own case, treating club membership fees as revenue expenditure.

15. Deletion of Disallowance Claimed Under Section 36(1)(viii):
The Tribunal upheld the CIT(A)'s decision, allowing the deduction under Section 36(1)(viii), as the assessee fulfilled the conditions of providing long-term finance for infrastructure projects.

16. Verification of Income Accruing as Per AIR-ITS Details:
The Tribunal directed the AO to issue notices under Section 133(6) to verify the transactions reported in AIR and treat the confirmed payments as income of the assessee, providing the assessee an opportunity to rebut the confirmations.

17. Allowance of Depreciation on Computer Software and Peripherals at 60%:
The Tribunal upheld the CIT(A)'s decision, allowing depreciation at 60% on computer software and peripherals, following the Special Bench decision in DCIT v. Datacraft India Ltd.

Conclusion:
The appeals were partly allowed, with several issues restored to the AO for re-examination and verification, following earlier Tribunal decisions and judicial precedents. The Tribunal upheld the CIT(A)'s decisions on several grounds, providing relief to the assessee and directing appropriate re-computation of disallowances and additions.

Issues:
1. Classification of income from sale of investments in immovable properties as business income.
2. Initiation of penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income and concealing income.

Issue 1: Classification of income from sale of investments in immovable properties as business income

The assessee, engaged in dealing in shares, securities, and jewelry, sold three flats and a parking lot during the financial year 2012-13. The Assessing Officer (AO) treated the income from these sales as business income due to the systematic and repetitive nature of the transactions. The AO noted that the flats were sold within a short span after construction was completed, leading to the conclusion of repetitive business activity. The Commissioner of Income Tax (Appeals) upheld this view, emphasizing the bulk purchase of flats and the intention for profit evident from the purchase process. However, the assessee argued that the flats were held for over 36 months, qualifying as long-term capital gains, and that no reinvestment was made after the sales. The Income Tax Appellate Tribunal (ITAT) agreed with the assessee, considering the lack of reinvestment, the long holding period, and the appearance of the assets under 'investments' in the balance sheet. Referring to legal precedents, the ITAT concluded that the transactions should be treated as capital gains, overturning the CIT(A)'s decision.

Issue 2: Initiation of penalty proceedings under section 271(1)(c)

The AO initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income and concealing income. The assessee's explanations regarding the nature of the transactions were not accepted by the AO, leading to the addition of income and subsequent penalty proceedings. However, the ITAT's decision to classify the income as capital gains instead of business income renders the penalty proceedings under section 271(1)(c) invalid. As the underlying income classification has changed, the basis for the penalty proceedings no longer holds, and the issue of penalty becomes irrelevant following the ITAT's decision on the classification of income.

In conclusion, the ITAT's judgment overturned the CIT(A)'s decision, classifying the income from the sale of flats and parking lot as capital gains rather than business income. This reclassification renders the penalty proceedings initiated by the AO under section 271(1)(c) invalid. The ITAT's detailed analysis considered the holding period, lack of reinvestment, and legal precedents to support the classification of income as capital gains, emphasizing the factual circumstances and intent behind the transactions.

Issues involved:
Transfer pricing adjustment on management fees paid to Associated Enterprises (AEs) without proper benchmarking under TNMM method.

Detailed Analysis:
1. Background: The appeal is against the order passed by the Deputy Commissioner of Income Tax regarding the assessment year 2012-13 under the Income Tax Act 1961. The assessee, a part of Brink's Global Services, paid management fees to its AEs for the first time during the relevant year.

2. TPO's Observations: The Transfer Pricing Officer (TPO) raised concerns as the assessee did not separately benchmark the management fees transaction, relying on a global report and agreement. The TPO emphasized the need for separate benchmarking for each international transaction and found the explanation provided by the assessee insufficient.

3. Adjustment by TPO: The TPO estimated the value of services rendered by the AEs based on man-hours and hourly rates, making an adjustment of INR 3,83,75,622 to the international transaction. The TPO's approach was criticized for lack of detailed evidence and justification for the estimates made.

4. DRP's Decision: The Dispute Resolution Panel upheld the TPO's adjustment, leading to the AO incorporating the adjustment in the final order.

5. Assessee's Arguments: The assessee contended that TNMM was consistently used for benchmarking transactions with AEs, providing detailed working and rationality for the management fees. The assessee argued against the unilateral pricing by the TPO under the CUP method without proper benchmarking.

6. Tribunal's Decision: The Tribunal noted the assessee's consistent use of TNMM and criticized the TPO's unilateral pricing approach. Citing precedents, the Tribunal emphasized the need for proper benchmarking and rejected the adjustment made by the AO, deleting the addition of INR 3,83,75,622.

Conclusion: The Tribunal allowed the appeal, highlighting the importance of proper benchmarking under TNMM for international transactions, and criticized the TPO's unilateral pricing approach without adequate justification. The decision emphasized adherence to statutory provisions and factual assessment in transfer pricing adjustments.

Issues Involved:
- Deduction under section 54F of the Income Tax Act, 1961.
- Reinvestment in multiple residential properties.
- Applicability of amendments to section 54F.

Detailed Analysis:

Deduction under Section 54F of the Income Tax Act, 1961:
The primary issue in this appeal is whether the assessee is entitled to claim a deduction under section 54F of the Income Tax Act, 1961, for reinvestment in multiple residential properties. The Revenue contended that the deduction should be restricted to one residential property, while the assessee argued that there was no such restriction for the assessment year 2008-09.

Reinvestment in Multiple Residential Properties:
The assessee sold immovable property and reinvested the proceeds in two residential properties. The Assessing Officer (AO) restricted the deduction under section 54F to one property, disallowing the claim for the second property. The AO's decision was based on a combined reading of sub-sections (1) and (2) of section 54F, which he interpreted as allowing deduction for only one property.

Applicability of Amendments to Section 54F:
The amendment to section 54F, which restricts the deduction to one residential property, was introduced prospectively from the assessment year 2015-16. The assessee argued that for the assessment year 2008-09, there was no such restriction, and relied on judicial precedents that supported this view.

Tribunal's Findings:
The Tribunal reviewed the facts and the submissions from both parties. It noted that the assessee had deposited Rs. 1,51,00,000 in the Capital Gains Scheme and invested the remaining Rs. 18,49,40,160 in two residential properties. The Tribunal referred to the decisions in the cases of V.R. Karpagam and Gumanmal Jain, which supported the assessee's claim for deduction for multiple properties.

The Tribunal also considered the recent decision in the case of Tilokchand & Sons v. ITO, where the Hon’ble Jurisdictional High Court held that the benefit of exemption under section 54 of the Act is available for investment in more than one residential house within the stipulated time limit. The Tribunal reproduced relevant portions of this decision, emphasizing that the amendment restricting the deduction to one residential house was intended to apply prospectively from the assessment year 2015-16.

The Tribunal concluded that the Revenue's contention was devoid of merits and upheld the CIT(A)'s decision to allow the assessee's claim for deduction under section 54F for both residential properties. The appeal filed by the Revenue was dismissed.

Conclusion:
In summary, the Tribunal held that for the assessment year 2008-09, the assessee was entitled to claim a deduction under section 54F for reinvestment in multiple residential properties. The amendment restricting the deduction to one residential property was applicable prospectively from the assessment year 2015-16, and thus did not affect the assessee's claim for the relevant assessment year. The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s decision in favor of the assessee.

Issues:
1. Application of section 50C to Short Term Capital Gains.
2. Characterization of units sold as stock-in-trade or capital assets.
3. Assessment based on Stamp Valuation Authority's value.
4. Reference to Valuation Officer under section 50C(2).
5. Jurisdiction of CIT(A) to set aside assessment order.

Issue 1: Application of section 50C to Short Term Capital Gains:
The appellant, a real estate developer, declared Short Term Capital Gains (STCG) from the sale of units. The Assessing Officer (AO) applied section 50C due to a discrepancy in apparent consideration and Stamp Valuation Authority's value. The AO re-computed STCG based on the authority's valuation, following a Tribunal decision. The CIT(A) upheld this, emphasizing the asset's depreciable nature and the AO's correct application of section 50C.

Issue 2: Characterization of units sold as stock-in-trade or capital assets:
The CIT(A) noted the property's history and held that despite being leased, the asset remained depreciable. The AO's invocation of section 50C was justified as the asset did not revert to stock-in-trade. The CIT(A) found the computation method compliant with the law, considering the asset's depreciable status.

Issue 3: Assessment based on Stamp Valuation Authority's value:
The AO substituted the apparent consideration with the authority's valuation for STCG computation. The CIT(A) supported this approach, citing the AO's adherence to section 50C's valuation method. The Tribunal concurred, emphasizing the importance of complying with valuation provisions under section 50C(2).

Issue 4: Reference to Valuation Officer under section 50C(2):
The CIT(A) directed the AO to refer the asset's valuation to a Valuation Officer as per section 50C(2). The Tribunal highlighted the necessity of following this provision when the fair market value is disputed. The failure to refer to a Valuation Officer was considered a procedural lacuna, leading to the direction for a reference.

Issue 5: Jurisdiction of CIT(A) to set aside assessment order:
The CIT(A) directed the AO to refer the valuation to a Valuation Officer, a power withdrawn post-2001. The Tribunal found this action beyond the CIT(A)'s jurisdiction, annulling the order due to non-conformity with section 251 of the Act. The appeal was allowed based on this legal ground.

This detailed analysis of the judgment highlights the application of section 50C, characterization of assets, valuation methods, procedural compliance, and the CIT(A)'s jurisdictional limits, providing a comprehensive understanding of the legal complexities involved in the case.

Issues:
Delay in filing appeals against the orders passed by the CPC, Bangalore U/s. 200A for various quarters in the assessment years 2013-14, 2014-15 & 2015-16.

Analysis:
The assessee filed 19 appeals belatedly, citing reasons for the delay ranging from 807 to 1567 days. The MD explained that the delay was due to not being aware of the change to e-system of service, family and business problems, and the recovery notice manually received in March 2019. The ld.CIT(A) dismissed the appeals for lack of supporting material. The assessee sought condonation of delay and a decision on merits. The ld.AR argued that proper opportunity was not given, and the Revenue had not taken steps to collect the demand before March 2019. Relying on legal precedents, the delay was requested to be condoned for justice to be served.

The ld. DR supported the ld.CIT(A)'s decision, referring to a notification on electronic service of notices. According to the ld. DR, the date of transmission of the order to the assessee is deemed as the date of service. The ld. DR upheld the ld.CIT(A)'s orders based on this premise.

The Tribunal considered the submissions and found the reasons for delay provided by the assessee to be reasonable. The MD was unaware of the electronic communications due to various issues and took immediate steps upon manual receipt of the recovery notice. The Tribunal noted the lack of further communication from the Revenue till March 2019. Condoning the delay, the appeals were remitted back to the ld.CIT(A) for a decision on merits after providing an opportunity to the assessee.

The Tribunal emphasized that in cases of system changes, like from manual to electronic, the Revenue should guide assessees to comply effectively. As the Revenue had not used other modes of communication, the Tribunal found the reasons for delay reasonable. Consequently, the delay in filing the appeals was condoned, and the appeals were remitted back to the ld.CIT(A) for further consideration.

In conclusion, all the appeals were partly allowed for statistical purposes, with the decision pronounced on December 27, 2019, in Chennai.

Issues Involved:
1. Addition of surrendered amount during survey and income offered for tax.
2. Addition related to purchase of agricultural land.
3. Addition of cheques/cash deposited in the bank account.
4. Addition of credit entries in wife's savings bank account.

Issue 1: Addition of Surrendered Amount During Survey and Income Offered for Tax:
The appeal contested the addition of Rs. 3,78,150 due to the variance between the amount surrendered during the survey and the income declared for tax purposes. The appellant argued that the retraction of Rs. 3,78,150 was supported by a valid explanation and should not have been confirmed. The Tribunal found merit in the appellant's contentions. It directed the assessing officer to consider the amount of Rs. 1,58,600 as related to the previous financial year and to restrict the addition to Rs. 1 lakh for the joint ownership of the land, leading to a partial allowance of this ground.

Issue 2: Addition Related to Purchase of Agricultural Land:
The appellant challenged the addition of Rs. 2 lakhs related to the purchase of agricultural land, asserting that only Rs. 1 lakh should have been considered as their share according to the agreement. The Tribunal, after reviewing the agreement, agreed with the appellant's argument and directed the deletion of the addition, thereby allowing this ground of appeal.

Issue 3: Addition of Cheques/Cash Deposited in the Bank Account:
The appeal contested the addition of Rs. 13,27,300 representing cheques/cash deposited in the appellant's bank account. The Tribunal examined the evidence provided by the appellant, distinguishing between cheque and cash deposits. It directed the assessing officer to delete the addition related to cheque deposits but sustained the addition of Rs. 2,10,000 due to lack of confirmation from debtors, resulting in a partial allowance of this ground.

Issue 4: Addition of Credit Entries in Wife's Savings Bank Account:
The appellant disputed the addition of Rs. 6,21,591 concerning credit entries in the wife's savings bank account, arguing that the amount was properly reflected in her books and should not have been added. The Tribunal, after reviewing the evidence and submissions, directed the assessing officer to delete this addition, thereby allowing this ground of appeal.

In conclusion, the Tribunal partially allowed the appellant's appeal, providing detailed analysis and directions on each issue raised, leading to modifications in the additions made by the authorities in the assessment for the year 2004-05.

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS amounting to Rs. 10,12,921.
2. Adhoc disallowances amounting to Rs. 1,27,905 out of Rs. 2,25,811 for conveyance, printing, stationery, and office expenses.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:
The primary issue pertains to the disallowance of Rs. 10,12,921 under Section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of TDS. The assessee argued that the deductee had disclosed the amount in their return of income, and hence, no disallowance should be made. The assessee cited the case of Rajiv Kumar Agrawal Vs. Addl. Commissioner of Income Tax (2014) and the judgment of the Hon'ble Delhi High Court in CIT Vs. Rajinder Kumar (362 ITR 241) to support their contention. The Tribunal noted that the objective of Section 40(a)(ia) is to ensure TDS compliance to prevent revenue loss. However, it should be interpreted in a "fair, just and equitable manner." The Tribunal emphasized that if the income embedded in the payments has been taxed, the disallowance should not be punitive but compensatory. The Tribunal also cited the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (293 ITR 226), which supports the view that no demand should be enforced if the deductee has paid the due taxes. Therefore, the Tribunal directed the A.O. to delete the addition, following the principle that the second proviso to Section 40(a)(ia) is curative and retrospective.

2. Adhoc Disallowances for Conveyance, Printing, Stationery, and Office Expenses:
The second issue involves adhoc disallowances amounting to Rs. 1,27,905 out of Rs. 2,25,811 for various office expenses. The assessee contended that the A.O. made a lumpsum addition without specifying which vouchers were not produced. The A.O. did not point out any specific defects in the vouchers. The Tribunal noted that the assessee was required to substantiate the claimed expenses with supporting evidence. The Ld. CIT(A) had already reduced the disallowance, taking a reasonable view. The Tribunal found no merit in the assessee's contention and upheld the disallowance, stating that non-furnishing of evidence would result in the disallowance of the expenditure. Consequently, this ground of the assessee’s appeal was dismissed.

Conclusion:
The appeal was partly allowed. The Tribunal directed the deletion of the addition under Section 40(a)(ia) for non-deduction of TDS, following the judgments of higher courts and the curative nature of the second proviso to Section 40(a)(ia). However, the adhoc disallowances for office expenses were upheld due to the lack of substantiating evidence. The order was pronounced in the open court on 26.12.2019.

Issues Involved:
1. Deduction under Section 80P of the Income Tax Act.
2. Addition of Rs. 3,95,032/- by the Assessing Officer.
3. Disallowance of Daily Deposit Agents’ Commission expenses of Rs. 95,032/-.

Detailed Analysis:

1. Deduction under Section 80P of the Income Tax Act:
The assessee contended that the CIT(A) erred in not allowing the deduction under Section 80P despite it being claimed in the return of income. The Tribunal considered the decision of the coordinate bench in the case of ACIT Circle-4 Vs. Buldana Urban Co-operative Credit Society Ltd., which established that a co-operative society engaged in providing credit facilities to its members is eligible for deduction under Section 80P(2)(a)(i). The Tribunal noted that the CIT(A) had denied the deduction on the grounds that the expenses claimed were not allowable. However, the Tribunal emphasized that Section 80P(2) allows deductions for profits and gains attributable to the activities prescribed in the section, including providing credit facilities to members. The Tribunal concluded that the disallowances made for bad debts and commission payments should qualify for deduction under Section 80P, as they are attributable to the profits and gains of the assessee society. Therefore, the Tribunal directed the Assessing Officer to grant the deduction under Section 80P.

2. Addition of Rs. 3,95,032/- by the Assessing Officer:
The assessee challenged the addition of Rs. 3,95,032/- made by the Assessing Officer, arguing that the income initially believed to have escaped assessment was not found to have escaped assessment, and thus, a fresh notice under Section 148 was necessary for assessing other income. The Tribunal noted that the case was reopened based on AIR information regarding cash deposits and that the Assessing Officer had made various additions, including Rs. 50,000 under Section 43B, Rs. 95,032 as commission paid, and Rs. 3 lakhs for disallowance of provision for bad debt. Since the Tribunal allowed the deduction under Section 80P, the issue of sustaining the addition became academic and did not require separate adjudication.

3. Disallowance of Daily Deposit Agents’ Commission expenses of Rs. 95,032/-:
The assessee contended that the CIT(A) erred in confirming the disallowance of Rs. 95,032/- as Daily Deposit Agents’ Commission expenses. The Tribunal considered this issue in light of the decision to allow the deduction under Section 80P. The Tribunal noted that the commission expenses, being business expenditures deducted from the profit and loss account, are attributable to the profits and gains of the assessee society. Therefore, these expenses should also qualify for the deduction under Section 80P. Consequently, the Tribunal directed the Assessing Officer to allow the deduction for these expenses as well.

Conclusion:
The Tribunal partly allowed the appeal, directing the Assessing Officer to grant the deduction under Section 80P for the disallowed expenses and additions, thereby rendering the other grounds of the appeal academic. The order was pronounced in the open court on 26.12.2019.

Issues Involved:
1. Sustaining the disallowance of prior period expenses of Rs. 3,00,000.
2. Sustaining the disallowance of Rs. 1,36,795 out of electricity expenses.
3. Sustaining the disallowance of Rs. 3,07,636 out of rates and taxes expenses.
4. Sustaining the disallowance of travelling expenses of Rs. 9,77,444.

Issue-wise Detailed Analysis:

1. Sustaining the Disallowance of Prior Period Expenses of Rs. 3,00,000:
The assessee argued that the expenditure was incurred in respect of furnishing and furniture under perquisites as salary to its Directors, and the approval for this expenditure was received in the next financial year, thus crystallizing the expense in the year under appeal. However, the tribunal agreed with the CIT(A)'s finding that the expenditure was incurred in the earlier period and merely approving it in a subsequent board meeting does not change its nature as a prior period expense. The tribunal upheld the disallowance of Rs. 3,00,000, directing the A.O. to allow the expenditure in the year it was incurred if permissible by law.

2. Sustaining the Disallowance of Rs. 1,36,795 out of Electricity Expenses:
The assessee contended that the electricity expenses were incurred during the vacancy period before the property was occupied by the tenant and should be allowed as business expenses. However, the tribunal noted that the property was rented out from October 2012 and the rent was credited in the profit & loss account. Since the assessee could not furnish evidence of the property being vacant in December 2012, the tribunal upheld the disallowance of Rs. 1,36,795, agreeing that the expenditure was not used wholly and exclusively for business purposes.

3. Sustaining the Disallowance of Rs. 3,07,636 out of Rates and Taxes Expenses:
The assessee claimed that the amount of Rs. 2,90,285 pertained to lease rent and maintenance charges paid to MPAKVN on the premises let out to Netlink Software Pvt. Ltd. However, the tribunal upheld the CIT(A)'s observation that since the assessee had already claimed a 30% deduction under section 24(a) of the Act for rental income, the additional expenses related to the property could not be treated as business expenses. The tribunal dismissed the ground, maintaining the disallowance of Rs. 3,07,636.

4. Sustaining the Disallowance of Travelling Expenses of Rs. 9,77,444:
The assessee argued that the travelling expenses were incurred for business purposes, specifically for attending meetings in Japan with the major shareholder, Fujitsu. The tribunal noted that the CIT(A) disallowed the expenses due to the lack of evidence such as agenda papers, minutes of meetings, and details of participants. However, considering the totality of facts, the tribunal set aside the impugned order and remanded the issue back to the A.O. for verification of the purpose and minutes of the meeting. The assessee was directed to furnish the necessary evidence to substantiate the business purpose of the travel expenses. If the evidence is satisfactory, the A.O. would delete the addition.

Conclusion:
The appeal filed by the assessee was partly allowed for statistical purposes, with specific directions for the A.O. to verify and potentially allow certain expenses based on further evidence. The tribunal upheld the disallowance of prior period expenses, electricity expenses, and rates and taxes expenses, while remanding the issue of travelling expenses for further verification. The order was pronounced in the open court on 26.12.2019.

Issues Involved:
1. Whether the payment of Rs. 12.70 million by the applicant to VIVO is considered to be received or deemed to be received in India.
2. Whether the payment would be considered to accrue or arise in India as business income, royalties, or fees for technical services.
3. Taxability of the amount under the India-Brazil Tax Treaty as business profits, royalties, or fees for technical services.

Detailed Analysis:

1. Received or Deemed to be Received in India:
The applicant argued that the premium paid to VIVO does not fall under the purview of income received or deemed to be received in India as the payment was made outside India, and VIVO does not carry on any business activities in India. The Authority for Advance Rulings (AAR) concluded that no income has accrued or arisen in India for VIVO, thus section 5 of the Income-tax Act is not applicable here.

2. Accrual or Arising in India:
The applicant contended that payments to VIVO should not be considered to accrue or arise in India as VIVO does not have a business connection or permanent establishment in India. The Department argued that the payment is chargeable under section 5(2)(b) and section 9(1)(vi) of the Income-tax Act, 1961, as it pertains to royalties for imparting information concerning technical, commercial, industrial, or scientific knowledge, experience, or skill.

AAR's Decision:
- The AAR held that the payment of Rs. 12.70 million is covered under Explanation 2(iv) and Explanation 5 of section 9(1)(vi) of the Income-tax Act, 1961, as it involves imparting commercial knowledge and experience.
- The payment is considered royalty and is not covered under the exclusion clauses of section 9(1)(vi)(b) since the business activities and income-earning activities are located in India.
- The source of the income is in India, as all value-added activities related to the ring back tone services are carried out in India.

3. Taxability under India-Brazil Tax Treaty:
The applicant argued that the payment does not fall under the definition of royalties or fees for technical services under the India-Brazil tax treaty and should not be taxable in India. The Department contended that the payment qualifies as royalties under Article 12 of the India-Brazil Tax Treaty.

AAR's Decision:
- The AAR concluded that the payment falls under Article 12(3) of the India-Brazil Tax Treaty as it pertains to consideration for information concerning industrial, commercial, or scientific experience.
- The payment is taxable in India under the provisions of the India-Brazil tax treaty as royalties.

Conclusion:
(a) and (b) The payment of Rs. 12.70 million by the applicant to VIVO for the exclusive right to offer ring back tone services to VIVO's customers in Brazil is income deemed to accrue or arise in India in terms of section 9(1)(vi)(b) as royalties.
(c) The amount payable by the applicant is taxable in India under the provisions of the India-Brazil tax treaty as royalties.

Issues:
1. Disallowance of deduction claimed by the assessee u/s 80P of I. T. Act.
2. Allowability of deduction u/s 80P in respect of Bank interest.
3. Non-deduction of TDS from interest paid to members.

Issue 1: Disallowance of deduction u/s 80P:
The appeal challenged the CIT (A) order disallowing the deduction claimed by the assessee u/s 80P of I. T. Act. The AR of the assessee argued that the restriction on associate members was not applicable in the relevant year, and cited conflicting judgments of the Karnataka High Court and the Apex Court. The ITAT found the CIT (A) unjustified in denying the deduction for interest earned from associate members, holding that regular and associate members should be treated equally for deduction u/s 80P. The ITAT directed the AO to allow deduction u/s 80P for interest income from both regular and associate members.

Issue 2: Allowability of deduction u/s 80P in respect of Bank interest:
The second aspect involved the assessee's claim for deduction u/s 80P in respect of Bank Interest, disallowed by the AO and CIT (A) based on a judgment of the Apex Court. The ITAT referred to a Karnataka High Court judgment where the applicability of the Apex Court's decision depended on whether the funds used to earn bank interest were out of liability or own funds. The ITAT set aside the CIT (A) order and directed a fresh examination of the facts in light of both judgments to determine the applicability in the present case.

Issue 3: Non-deduction of TDS from interest paid to members:
Regarding Ground No. 4 raised by the assessee on non-deduction of TDS from interest paid to members, the ITAT noted no addition or disallowance in the assessment order. Consequently, the ITAT held that no adjudication was necessary, deeming it of academic interest only.

In conclusion, the ITAT allowed the appeal of the assessee for statistical purposes, setting aside the CIT (A) order on the deduction issues and directing a fresh examination of the facts concerning bank interest.