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Income Tax - Case Laws
Showing 21 to 40 of 745 Records
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2021 (10) TMI 1388
Provision for estimated loss of contracts - ascertained liability - AO observed that the said loss on an estimate, which is bound to vary due to variation in input costs - HELD THAT:- Accounting Standards are binding on the Company in so far as the preparation of books are concerned, but, are not binding for Income Tax purposes. Further, the Assessing Officer, by following the decision in the case of EDAC Engineering Limited [2013 (11) TMI 164 - ITAT CHENNAI], disallowed the same and the same was confirmed by the ld. CIT(A). The assessee, neither before the Assessing Officer nor before the ld. CIT(A) substantiated the provision made by it is an ascertained liability. Even before us, the assessee has not been able to explain as to what was the necessity for the assessee to make such a provision.
Assessee has simply stated that the provision made by the assessee is an ascertained liability. If at all, it is an ascertained liability, it is the onus on the assessee to establish that the liability is an ascertained liability. No material was placed on record before the Tribunal. We are of the opinion that the provision made by the assessee for a loss on contract is not an ascertained liability and it is a simple provision made by the assessee which is not allowable u/s 37.
So far as case law placed by the assessee are concerned, the decision in the case of Rotork Controls India Limited. [2009 (5) TMI 16 - SUPREME COURT] has no application to the facts of the present case. In the order passed by the Tribunal for the AY 2005-06 dated 03.08.2017, the issue dealt by the ITAT relates to provision of warranty and therefore, in our opinion, the issue under consideration need not be remitted back to the Assessing Officer. In view of the above, the ground raised by the assessee is dismissed.
Provision made in respect of various expenditures - HELD THAT:- The assessee has made a provision - However, no explanation was given before the Assessing Officer. Even before the ld. CIT(A), the assessee has not given any explanation the reason for making such provisions of expenses. Even before us, the assessee has not been able to explain the reason for making such provisions. We are of the opinion that the provision created by the assessee in respect of various expenses is an unascertained liability and not allowable as an expenditure for the assessment year under consideration. Therefore, we confirm the order passed by the ld. CIT(A).
So far as alternative submission is concerned, we direct the Assessing Officer to verify as to whether the assessee has reversed the provision and the same is offered for taxation for the assessment year 2012-13 and decide the alternative plea in accordance with law. This ground is partly allowed.
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2021 (10) TMI 1385
Revision u/s 263 by CIT - investment towards purchase of property unexplained - HELD THAT:- We find that vide notice iisued specific queries were raised by the AO seeking details and source of investment in the property purchased during the year. In response, the assessee has filed replies explaining the relevant facts towards source of money utilized for purchase of her share in property.
The source of investment was corroborated by evidence. It is trite that the PCIT cannot pass revisional order to direct the AO to make some fuller and extended enquiry desired in the opinion of the revisional authority.
In such a situation, where there appears to be inadequacy to the PCIT in the manner of enquiry, he himself should embark upon some enquiries to discover the possibility of error. A roving enquiry cannot be directed summarily. The action of the PCIT is unsustainable in law without objectively showing how the order of the AO is erroneous. The revisional direction, in the instant case, is thus unsustainable in law.
We also find merit in the plea of the assessee that having regard to CBDT instruction Nos. 7/2015, 20/2015 & 5/2016 and also CBDT letter dated 30.11.2017, the AO was not entitled to go beyond the reasons for selection of matter for limited scrutiny.
As a corollary, it is not open to the PCIT to pass revisionary order and remit the matter to the AO on other aspects by rendering assessment order as erroneous and prejudicial to the interest of the Revenue. This is the view consistently taken by the co-ordinate benches in several decisions, some of which are noted earlier. The action of the PCIT u/s 263 of the Act thus cannot be approved on this parameter also. Appeal of the assessee is allowed.
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2021 (10) TMI 1384
TDS u/s 195 - commission paid outside India - disallowance made u/s 40(a)(i) - HC [2021 (4) TMI 93 - KARNATAKA HIGH COURT] held in the present case the Associated Enterprises has rendered services out of India in the form of placing orders with the manufacturers who are already outside India - commission was paid to Associate Enterprises out of India. No taxing event has taken place within the territories of India and therefore, the Tribunal was justified in allowing the appeal of the assessee - HELD THAT:- The special leave petition is dismissed.
Pending application(s), if any, stand disposed of.
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2021 (10) TMI 1382
TP Adjustment - comparable selection - HELD THAT:- We find no merit in the assessee's former twin substantive grounds since the DRP herein has directed exclusion of M/s. Infosys BPO Limited not only on the basis of turnover but due to its brand value, diversified activity as other functional dissimilarity as well. This tribunal coordinate bench decisions in assessee's cases itself for Assessment Year 2008-09 and 2009-10 have also directed M/s. Infosys BPO Limited’s exclusion in the very segment. And that the Revenue has not been able to pin point any change in the corresponding facts in all these assessment years. We therefore uphold learned DRP’s direction ordering exclusion of M/s. Infosys BPO Limited from the array of comparables.
Excluding M/s. Jeevan Scientific Technology Limited on the ground that it had failed to satisfy the turnover filter despite the fact that the said entity had derived income both from BPO operation as well as ERP segment - We find that the Revenue’s instant arguments are against the facts on record wherein it has been found that this entity had derived income of Rs.79.21 lakhs form BPO operation only and no revenue from ERP segment as against the turnover limit of Rs.1 Crore set by the TPO in his analysis. We therefore decline the Revenue instant third substantive ground as well.
Exclusion of comparables on functional dissimilarity.
Disallowance of overhead and trademark licence fees - not filed any objection corresponding details despite the DRP’s remand directions to this effect - HELD THAT:- The assessee has placed before us the corresponding invoices along with the AO’s consequential order for Assessment Year 2003-04 and 2009-10 not making any such disallowance in light of the corresponding agreement and invoices. Faced with this situation, we deem it appropriate to restore the instant issue back to the AO for his afresh factual verification as per law within three effective opportunities of hearing subject to the condition that the assessee itself shall file all the documentary evidence by electronic mode as well as registered post.
Capital expenditure on software license fees - disallowance on the ground that it the assessee had not filed any objections to this effect before the DRP - HELD THAT:- CIT-DR fails to dispute that the DRP’s detailed discussion regarding assessee's objection No.10 in para 2.10 page 14 had clearly directed the AO to grant depreciation @ 60% in view of the tribunal's findings in preceding assessment years. We therefore allow the assessee's instant substantive ground in principle and leave it open for the AO to frame consequential computation as per law.
Disallowing deduction u/s. 10A - expenditure towards software lincence fee disallowed in the assessment order relating to STPI unit of the company - HELD THAT:- The same is admitted being an alternate plea; without prejudice to the foregoing third substantive ground, and restored back to the Assessing Officer as per law in light of the relevant facts and the corresponding factual position in preceding and succeeding assessment years.
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2021 (10) TMI 1379
Deduction u/s 35D - share premium collected on the issue of Share Capital - whether to be treated as part of the ‘Capital Employed’ for allowing deduction? - HELD THAT:- The points raised herein are squarely covered by the judgment of Berger Paints India Ltd., [2017 (3) TMI 1531 - SUPREME COURT] Hence, this substantial question of law is answered against the assessee and in favour of the Revenue.
Cost of acquisition of companies be treated as asset for allowing deduction u/s 35D - HELD THAT:- This issue is squarely covered by the decision of this Court in the assessee’s own case in [2021 (10) TMI 1209 - KARNATAKA HIGH COURT] wherein as held that going by meaning assigned to the word “extension”, quite apart from the horizontal expansion in the industrial undertaking, vertical expansion also stands included within the meaning of the term “extension” of the industrial undertaking - as further stated that the assessee has incurred expenditure for the purpose of acquisition of Subex Americas Inc., and Subex UK Limited and the same was incurred for the purpose of expansion of the business. There being vast difference between “expansion” and “extension”, the arguments of the learned counsel for the assessee, placing reliance on the consolidation procedures as per the Accounting Standard [AS-21], cannot be countenanced this substantial question of law is answered against the assessee and in favour of the Revenue.
Deduction u/s 35D be disturbed in the subsequent years - HELD THAT:- Section 35D has been disturbed in the subsequent years in a manner known to law. Hence, this question is answered in favour of the Revenue and against the assessee.
Deduction u/s 10AA - telecommunication expense re to be excluded from export turnover in computing deduction - HELD THAT:- This question is covered by the ruling of Coordinate Bench of this Court in the case of M/s. Mindtree Ltd. [2020 (8) TMI 767 - KARNATAKA HIGH COURT] held that assessee has incurred expenditure in foreign currency from export turnover for software development. Similarly, the telecommunication charges attributable to delivery of computer software outside India could not have been excluded from the export turnover in view of Explanation 1(i) to Section 10AA of the Act. It is also noteworthy that Explanation 2 to Section 10AA provides that profits and gains derived from; on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India. - Decided in favour of assessee.
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2021 (10) TMI 1371
Assessment of Agricultural income - income received from the sale of rubber was subjected to tax under Kerala Agricultural Income Tax Act 1950 ('KAIT Act') - re-plantation expenses are considered as capital expenditure and the expenses incurred by the assessee for upkeep and maintenance of newly planted rubber trees are in the nature of revenue expenditure, for mere plantation of rubber trees, the assessees do not earn income, but the income is derived only from proper upkeep and maintenance of trees - HELD THAT:- The scope and extent of the operation of Rule 7A, which is similar to Rule 8(2), with regard to allowance for replanting expenses and deduction towards upkeep and maintenance expenses of immature plants in computation of income from rubber under the provisions of the Act and Rules need an authoritative pronouncement from this Court.
Revenue, argues that there is no need or necessity for reconsideration of Rehabilitation Plantations Ltd. case [2012 (6) TMI 570 - KERALA HIGH COURT] by the Full Bench, Accordingly to Revenue, it is for the Supreme Court, if necessary, to lay down law in this behalf. We are not persuaded with the objection stated by the Revenue. Firstly, Rehabilitation Plantations Ltd. has not taken note of the judgments referred to above in Travancore Rubber & Tea Co. Ltd. [1960 (12) TMI 15 - SUPREME COURT] and Karimtharuvi Tea Estates Ltd. [1962 (11) TMI 44 - SUPREME COURT]. Rule 7A(2) juxtaposed with Rule 8(2) and the case law on the point under KAIT Act would demonstrate that the applicable provisions of law and the precedents on the point are not adverted to by the Division Bench. The claims of assessees are rejected by referring to the view taken in Division Bench judgment.
We refer the following question for consideration by a Full Bench of this Court, subject to the orders of Hon'ble The Chief Justice:
“Whether the assessee/Plantation Companies under Rule 7A(2) of the Rules are entitled to an allowance towards replanting expenses and a further deduction towards upkeep and maintenance expenses incurred by the assessee for the immature plants till the age of maturity in the computation of income under the Act and Rules.”
In our considered view the issues are of regular occurrence for all the plantation owners and the question needs an authoritative pronouncement from a Full Bench of this Court.
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2021 (10) TMI 1369
Assessment u/s 153A - Tribunal justification in holding that Section 143(2) notice is not required to be issued in the case of an assessment under Section 153A - HELD THAT:- It the very argument of the assessee that the explanation to a statutory provision may fulfill the purpose of clearing up the ambiguity or can't add to or widen the scope of the main section, thereby the procedure in the assessment under Section 153A is as otherwise provided in this Section is not a complete legal argument, by applying explanation to Section 153A of the Act. The argument of assessee as pointed out by Mr.P.K.R Menon ignores the presence of the words “save as otherwise provided in this Section i.e., Section 153A”. The plain reading of explanation leads to the very same conclusion as reached in the reported cases in Tarsem Singla [2016 (7) TMI 703 - PUNJAB AND HARYANA HIGH COURT] and Promy Kuriakose [2016 (8) TMI 327 - KERALA HIGH COURT]. The explanation, in the final analysis of the scheme of Section 153A, does not in any manner expand the meaning, including the requirement of Section 143 (2) of the Act.
For the above reasons and discussions, the questions are answered against the assessee and in favour of the revenue.
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2021 (10) TMI 1368
Income from house property - 90 shops which are allegedly lying vacant - assessee is claiming those shops as stock in trade - Lower Authorities brought those shops under taxation under the head “income from house property” and thereby calculated the ALV and after granting 30% standard deduction worked out the ALV of those shops - HELD THAT:- As Assessee vehemently submitted that assessee is a builder and unsold shops/units are stock-in-trade and cannot be brought to tax under the head “income from house property” as held by Hon’ble Jurisdictional High Court in Neha Builders (P.) Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] and the income derived from stock would be income from “ business and profession” and not from “income from house property”.
We find that assessee has shown business income from rent received from letting out of 231 shops and rent received therefrom is accepted as income from business and profession by Revenue. Therefore, respectfully following the decision of Hon’ble Gujarat High Court in Neha Builders (P.) Ltd., the addition on account of income from property is with regard to 90 shops which are allowing vacant being stock-intrade cannot be brought to tax. Similar view was taken by Co-ordinate Bench in Jaiprakash Khanchand Aswani [2018 (12) TMI 1963 - ITAT SURAT]
Appeal of the assessee is allowed.
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2021 (10) TMI 1367
Deduction of Education Cess - assessee debited education cess in the Profit & Loss Account which was disallowed u/s 40(a)(ii) in the computation of income - assessee claimed the deduction of the same during appellate proceedings which was rejected by Ld. CIT(A) - HELD THAT:- This issue is squarely covered in assessee’s favor by the decision of Hon’ble Bombay High Court in Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] wherein it has been held that in the Income-tax Act, 1922, Section 10(4) had banned allowance of any sum paid on account of 'any cess, rate or tax levied on the profits or gains of any business or profession'. However, in the corresponding Section 40(a)(ii) of the IT Act, 1961 the expression "cess" is quite conspicuous by its absence. In fact, legislative history bears out that this expression was in fact to be found in the Income-tax Bill, 1961 which was introduced in the Parliament. However, the Select Committee recommended the omission of expression "cess" and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) - The effect of such omission is that the provision in Section 40(a)(ii) does not include, "cess" and consequently, "cess" whenever paid in relation to business, is allowable as deductable expenditure. Therefore, respectfully following the same, we direct Ld. AO to allow the deduction of education cess paid by the assessee. This ground stand allowed.
Quantum of deduction u/s 35(2AB) - HELD THAT:- We concur with the submissions of Ld. AR that deduction has to be allowed as claimed by the assessee and certified by the Auditors since the amendment was brought in the Rule 6(7A)(b) w.e.f. 01/07/2016 only. Prior to the amendment, the prescribed authority was to submit its report in relation to the approval of in-house research & development facility in form No.3CL to the DG (IT exemptions) within 60 days of its granting approval. It was only with effect from 01/07/2016, the prescribed authority was required to quantify the expenditure incurred by the assessee on in-house research & development facility.
We find that fact as well as issue is pari-materia the same. In the absence of any contrary decision on record, respectfully following the above decisions, we would hold that the assessee would be entitled for deduction u/s 35(2AB) on actual expenditure incurred by it. The aggregate amount of expenditure stated be to be incurred by the assessee is Rs.150.19 Lacs and the assessee is eligible to claim deduction @200%. AO is directed to quantify the exact claim and allow the deduction of the same. This ground stand allowed.
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2021 (10) TMI 1362
Rectification of mistake u/s 254 - Omission on part of ITAT to decide the grounds - HELD THAT:- We notice that the Tribunal has inadvertently omitted to decide ground Nos. 2 & 3 of the assessee’s appeal for the assessment year 2012-13 and ground No.2 of the assessee appeal for assessment year 2013-14, which, is mistake apparent from record within the meaning of section 254(2) of the Act. Hence, we allow these Misc. Applications and recall the order [2021 (5) TMI 1041 - ITAT CHANDIGARH] for a limited purpose of adjudicating ground No 2&3 of the assessee’s appeal pertaining to AY 2012-13 and ground No 2 of the assessee’s appeal for the AY 2013-14 after hearing the assessee on theses afresh. Misc. Applications are allowed.
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2021 (10) TMI 1360
Deduction u/s 35(2AB) - Appellant not entitled to deduction u/s 35(2AB) to the extent the expenses eligible for deduction under the said provision pertained to a unit entitled for deduction under Section 10B - HC held insofar as it pertains to the finding that the assessee is not entitled to claim deduction under Section 35(2AB) of the Act is hereby quashed - HELD THAT:- Issue notice.
Dasti, in addition, is permitted.
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2021 (10) TMI 1358
TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee software development service segment need to be deselected from final list. Also companies having huge turnovers need to be deselected.
ALP adjustment pertaining to interest on receivables - HELD THAT:- As directed the TPO to allow credit period as per agreement between assessee and its AEs - if it turned out that no such period was specified, the credit period would be 90 days only - HELD THAT:- There is hardly any dispute that the learned lower authorities have gone by SBI short term deposit rates which is in the nature of a loan or cash transaction involving domestic deposits rather than LIBOR rate in international transactions, involving the very business segment.
Coming to the Revenue’s argument that this tribunal has already directed the TPO to go by the agreement between an assessee and its AEs, we quote Technimont ICB Pvt. Ltd [2013 (9) TMI 595 - ITAT MUMBAI] and Sabic Innovative Plastic India Ltd. [2013 (9) TMI 596 - ITAT AHMEDABAD] that an AE could not be adopted as a tested party since lacking uncontrolled comparable transactions. As in CIT Vs B R Constructions [1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT] holds that a co-ordinate bench decision not taking into consideration the relevant law and facts; as the case may be, is not a binding precedent. We therefore accept the assessee’s instant ground for this precise reason alone and delete the impugned ALP adjustment.
Management and consultancy fee involving ALP adjustments - HELD THAT:- We are of the view that the learned TPO needs to re-examine the entire issue in light of the assessee’s foregoing submissions accordingly pin-pointing; prima-facie, a cost to cost reimbursement arrangement between itself, its AE and the ultimate payee M/s.KPMG qua the services in issue. We further wish to quote here the foregoing judicial procedents decision that the benefit test also not to be applied whilst determining “NIL Arm’s Length Price” on the ground that the taxpayer had not in fact derived any benefit from the international transactions in issue. The assessee shall also be at liberty to file its additional evidence; if any, in consequential proceedings as well.
Allow education cess paid as a deduction - HELD THAT:- Revenue on the other hand quotes Section 40(a)(ii) of the Act that a “cess” very much forms part of the clinching statutory expression “tax” employed therein. And that it is too late now for the assessee to make the impugned claim once the same had not been recorded in the corresponding books of account as well. We find no merit in the Revenue’s foregoing arguments in light of Sesa Goa Ltd, [2020 (3) TMI 347 - BOMBAY HIGH COURT], Chambal Fertilizers and Chemicals Ltd [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] holding the impugned cess as an allowable deduction in light of CBDT’s circular dt.18-05-1967 that education cess is not included in “tax” u/s.40(a)(ii) of the Act. We therefore direct the AO to frame consequential computation as per law.
Foreign tax payment as a deduction - allowance of foreign tax credit claim u/s.91(1) - HELD THAT:- Section 91 of the Act is a specific provision dealing with foreign tax credit to be granted in case of taxes paid in the specified countries i.e. except Pakistan which comes under the latter sub-section 2 thereof. If we go by the assessee’s analogy that foreign tax credit to the specified extent u/s.91(1) “of a sum calculated on such doubly taxed income at the Indian rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal” is allowable for the purpose of granting credit and the remaining component is to be granted deduction under Chapter-IV of the Act, the same would render the former specific provision itself as otiose going contrary to “generalia specialism non derogant” which means that a specific provision prevails over the general one. We thus adopt stricter interpretation and conclude whatever is the assessee’s unallowable foreign tax credit claim u/s.91(1) since exceeding the specified limit, would not be entitled for business expenditure u/s.37.The assessee fails in this ground.
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2021 (10) TMI 1357
Payment of excessive price for purchase of sugarcane - HELD THAT:- AO would allow deduction for the price paid under clause 3 of the Sugar Cane (Control) Order, 1966 and then determine the component of distribution of profit embedded in the price paid under clause 5A, by considering the statement of accounts, balance sheet and other relevant material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under this clause. The amount relatable to the profit component or sharing of profit/distribution of profit paid by the assessee, which would be appropriation of income, will not be allowed as deduction, while the remaining amount, being a charge against the income, will be considered as deductible expenditure. At this stage, it is made clear that the distribution of profits can only be qua the payments made to the members. In so far as the nonmembers are concerned, the case will be considered afresh by the AO by applying the provisions of section 40A(2) of the Act, as has been held by the Hon’ble Supreme Court Tasgaon Taluka S.S.K. Ltd. [2019 (3) TMI 321 - SUPREME COURT]
Needless to say, the assessee will be allowed a reasonable opportunity of hearing by the AO in such fresh determination of the issue.
Disallowance on account of sugar sold to members at concessional rate - In our considered opinion, it would be just and fair if the impugned order on this score is set aside and the matter is restored to the file of AO, instead of to the CIT(A), for fresh consideration as to whether the difference between the average price of sugar sold in the market and that sold to members at concessional rate is appropriation of profit or not, in the light of the directions given by the Hon’ble Supreme Court in the case of Krishna Sahakari Sakhar Karkhana Limited[2012 (11) TMI 669 - SUPREME COURT ] - Restoration to the AO is necessitated because, following the judgment of the Hon’ble Apex Court in the case of Tasgaon Taluka S.S.K. Ltd. (supra), we have remitted the issue of payment of excessive price to the file of AO, and as such, the instant issue cannot be sent to ld. CIT(A) as it would amount to simultaneously sending one part of the same assessment order to the AO and other to the CIT(A), which is not appropriate.
Disallowance on account of VSI Contribution - assessee made provision for Vasantdada Sugar Institute (VSI) contribution and claimed deduction u/s.35(1) - HELD THAT:- Ground decided in favour of the assessee.
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2021 (10) TMI 1355
Reopening of assessment u/s 147 - whether reassessment was made on mere change of opinion and the income was subjected to double taxation? - HELD THAT:- Re-assessment was made u/s 148 of the Income Tax Act upon notice being issued upon the petitioner. Although the petitioner raised various objections to the re-assessment notice, no revised return was filed by the petitioner, which according to the petitioner, was due to technical glitches. However, in course of re-assessment, no such issue was canvassed before assessing officer. Be that as it may, the assessing officer considered the objections raised by the petitioner-assessee and passed impugned assessment order. There is an alternative appellate remedy available before the CIT (Appeals).
We are of the opinion, none of the aforesaid exceptions arise in the facts of the present case. Petitioner-assessee was given repeated notices and adequate opportunity to represent his case before the assessing officer. Whether the Assessing Officer effectively dealt with the objections or not, are questions falling within the jurisdiction of the appellate authority and does not affect the inherent jurisdiction of the Tribunal. Thus, the order does not suffer either from inherent lack of jurisdiction or breach of principles of natural justice. Hence, we are not inclined to interfere with the order in exercise of writ jurisdiction.
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2021 (10) TMI 1353
Validity of assessment - Non granting sufficient time to Petitioner - violative of the principles of natural justice - HELD THAT:- As regards liberty prayed for to file a fresh Affidavit, we are not inclined to grant that liberty. This is because in our view, it would make no difference to the allegations contained in the Petition.
With the Assistance of Dr. Shivaram and Mr. Suresh Kumar, we have gone through the Petition and the documents annexed thereto. We have also considered the Assessment Order. It is true that between 20/05/2021 and 25/05/2021 there was a lockdown in Mumbai and 22/05/2021 and 23/05/2021 were holidays. Therefore, even with a superhuman effort, Petitioner would not have been able to file the huge number of documents called for in the short period granted and therefore, passing of the Assessment Order without granting sufficient time to Petitioner is certainly violative of the principles of natural justice. We are inclined to quash the Assessment Order dated 25/05/2021 which we hereby do. The matter is remanded for de novo consideration.
Dr. Shivaram states that response to the notice issued on 20/05/2021 will be filed within 2 weeks from today. Statement accepted. AO may consider the submissions made by Petitioner along with the documents and pass such order as he deems fit in accordance with law after giving a personal hearing to the Petitioner in accordance with the Rules.
We also clarify that we have not made any observation on the merits of the case. The time between 25/05/2021 till today is excluded for the purpose of calculating time limit for passing re-Assessment Order. Petition disposed with no order as to costs.
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2021 (10) TMI 1351
TP Adjustment - comparable selection - application of turnover filter - HELD THAT:- Companies functionally comparable cannot be excluded only on the basis of high turnover - Companies whose turnover in the current year is more than ₹ 200 Crores should be excluded from the list of comparable companies - RPT filter has to be applied adopting the threshold limit of 15%.Companies functionally dissimilar with that of assessee need to be deselected.
Merely pointing out that there is a substantial increase in value of intangible assets, the Assessee cannot seek to exclude company from the list of comparable companies, unless the Assessee is able to show that the presence of intangibles is owing to factors which can affect the functional comparability of company with the Assessee.
ALP determination - as per assessee international transaction in question would be at Arm's length when benchmarked with its transaction with unrelated parties on the basis of the internal TNMM - HELD THAT:- We find that this issue has been raised by the Assessee for the first time before the Tribunal. The Revenue authorities did not have any occasion to examine this issue and therefore we deem it fit and proper to remand this issue to the AO/TPO for consideration afresh and in the light of the relevant applicable statutory provisions.
Determination of ALP by construing the delayed realization of receivable by the Assessee from its AE as a separate international transaction and determining ALP of such delayed receivables - HELD THAT:- Non-charging or under- charging of interest on the excess period of credit allowed to the AE, for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined. In view of the above observations. the reliance placed by the ld. counsel for the assessee on earlier decisions cannot be accepted. Similarly, Considering the above discussion, it is held that deferred trade receivable constitutes international transaction.
Having concluded that deferred trade receivables constitute international transaction, we come to the computation of the ALP of the international transaction of 'debt arising during the course of business.' This has two ingredients, viz., the amount on which interest should be charged and the arm's length rate at which the interest should be charged.
We are of the view that the issue with regard to determination of ALP in respect of the international transaction of giving extended credit period for receivables should be directed to be examined afresh by the AO/TPO on the guidelines laid down in the decision referred to in the earlier paragraph, after affording Assessee opportunity of being heard. As held in the aforesaid decision the prime lending rate should not be considered and this reasoning will apply to adopting short term deposit interest rate offered by State Bank of India (SBI) also. The rate of interest would be on the basis of the currency in which the loan is to be repaid. We hold and direct accordingly. All issues on determination of ALP of the transaction are kept open.
Appeal by the Assessee is partly allowed.
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2021 (10) TMI 1349
TP Adjustment - assessee’s contention that even if the comparable Uncontrolled Price Method is applied for determining the arm's length price then the comparability analysis should consider an adjustment of at least 50% vis–a–vis brokerage charged to independent clients - HELD THAT:- As the issue for our adjudication has been decided by the Co–ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2002–03 wherein the issue has been decided against the Revenue and in favour of the assessee.
Comparability analysis on the basis of overseas and domestic independent clients - The issue for our adjudication has been decided by the Co–ordinate Bench of the Tribunal, Mumbai Bench, in assessee’s own case for the assessment year 2002–03, wherein the issue has been decided against the Revenue and in favour of the assessee.
Disallowance of remuneration under section 40A(2) - HELD THAT:- As decided in own case payment made to employee is within the limits prescribed by Companies Act and satisfies the test of reasonableness. We have noted that the AO, while making the disallowance disregarded the approval granted by central government under the statutory provisions of Companies Act. The AO made addition / disallowance without considering the qualification, experience and reasonableness with regard to his past and position in the field of capital market.
Disallowance of notional interest on deposits u/s 40A(2) - HELD THAT:- As in assessee’s own case for the assessment year 2002–03, in assessee’s own case for the assessment year wherein the issue has been decided against the Revenue held held that where assessee paid lease rent to a group company in respect of wind farm taken on lease, since lease rent was fixed in accordance with formula provided by Indian Renewable Energy Development, a Government of India Company, impugned disallowance made by Assessing Officer under section 40A(2)(b) was to be set aside.
Disallowance pertaining to adjustment under the head payment of overseas support fees - HELD THAT:- Issue decided in favour of assessee as relying on own case.
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2021 (10) TMI 1343
Disallowance u/s 36(1)(viii) - interest on housing loans - HELD THAT:- As decided in own case [2021 (8) TMI 1321 - ITAT DELHI] assessee stated that 62.75% in on account of interest on long term housing loan and worked out applying that percentage on the total business income calculated pertaining to long term housing loan and computed deduction @20% of Rs. 10.99 crores as deduction
AO changed the above ratio from 62.75 % to 55.89% as he considered the total receipt of business for the purpose of working out proportion. In the present case the methodology adopted by the assessee is consistently followed for last eight years. Same was accepted by the revenue without any objection. The only issue is with respect to how the profit of the business for the purpose of long term housing finance shall be worked out. The only issue is that assessee is computed with respect to the total income with respect to the interest income whereas the Id AO has applied the above ratio to the total receipt. When the method has been consistently accepted for the above year we do not find any reason to defer from that. In view of this we do not find any infirmity in allowing the assessee claim of deduction u/s 36(1 )(viii) of the Act applying the ratio of 62.75%. - Decided in favour of assessee.
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2021 (10) TMI 1339
TP Adjustment - comparable selection - HELD THAT:- Infosys Ltd. - As the assessee had sought for exclusion of only Infosys Limited based on the turnover filter. We find that the turnover of Infosys Limited is Rs.43,300 crore, which is thousand times more than the turnover of the assessee-company. Therefore Infosys Limited cannot be compared to the assessee, in view of the judicial pronouncements cited supra. Hence, we direct the AO / TPO to exclude Infosys Limited from the list of comparables.
For eight other comparables, we find that the assessee before the Income Tax Authorities has not sought for exclusion of the same on turnover filter. Therefore, the eight companies sought to be excluded on turnover filter are restored to the files of the AO / TPO. The AO / TPO is directed to verify the turnover of these eight companies and exclude the same from the list of comparables if the turnover of each company had exceeded Rs.200 crore for the relevant assessment year.
Infobeans Technologies Limited - In the instant case, the assessee is a captive service provider to its AEs and the concerned assessment year is 2015-2016. The Tribunal in the case of Zynga Game Network India Private Limited (2021 (4) TMI 208 - ITAT BANGALORE] was considering a case of an assessee, who is also a capital service provider to its AEs and was concerned with identical assessment year, namely, A.Y. 2015-2016. Therefore, following the order of the Tribunal in the case of Zynga Game Network India Private Limited (supra), we direct the AO / TPO to exclude Infobeans Technologies Limited from the list of comparables. It is ordered accordingly.
Inteq Software Private Limited - On perusal of the abridged balance sheet of Inteq Software Private Limited, it is clear Inteq Software Private Limited is involved in multifarious services such as application services, software testing, data warehousing, EDI, BPO, staffing etc. However, we noticed from the AO / TPO and the DRP’s order, it is stated that Inteq Software Private Limited is only involved in software development services and the entire turnover is from such service. It is not clear how DRP had arrived at such a conclusion. The profit and loss account of Inteq Software Private Limited is not on record. Therefore, we are not in a position to verify the veracity of the findings of the AO / TPO and the DRP, which is contrary to the narration in the balance sheet of Inteq Software Private Limited. Therefore, we deem it appropriate to restore this issue to the files of AO / TPO. The AO / TPO is directed to afford a reasonable opportunity of hearing to the assessee and decide whether Inteq Software Private Limited is to be included in the comparable list of companies.
Aspire Systems (India) Private Limited - On perusal of the balance sheet of Aspire Systems (India) Private Limited, it is seen that the said company is an outsourced technology service company. It is also stated in the balance sheet that there is income from power generation. Since the profit and loss account of the assessee company is not enclosed, we are not in a position to examine the DRP’s statement that Aspire Systems (India) Private Limited is a pure software development service provider. Therefore, in the facts of the instant case, we deem it appropriate to restore the issue to the files of the AO / TPO. The AO / TPO is directed to afford a reasonable opportunity of hearing to the assessee and take a decision whether Aspire Systems (India) Private Limited can be a comparable.
Kals Information Systems Limited, E-Zest Solutions Limited, and CGVAK Software & Exports Limited - As it is clear that the above three companies were accepted as comparable, however, in the final list of comparables, the same was omitted to be included. Hence, we direct the AO / TPO to include the same in the final list of comparables for determination of arm’s length price of the international transaction.
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2021 (10) TMI 1337
Direct Tax Vivad Se Vishwas Act, 2020 - appeal by the Revenue is directed against order passed by learned Commissioner of Income Tax (Appeals) for assessment year 2012-13 - assessee seeks permission to treat the appeal as deemed to be withdrawn under the provisions of Direct Tax Vivad Se Vishwas Act, 2020 - HELD THAT:- As the Form No. 3 has been issued in the case of the assessee, the appeal of the Revenue is deemed to be withdrawn. Hence, the appeal is dismissed as withdrawn. However, if the tax arrears in dispute is not ultimately paid, the Revenue shall be at liberty to file application for recall of the order and the Tribunal shall consider such application appropriately as per law.
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