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Income Tax - Case Laws
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2021 (11) TMI 1192 - MADHYA PRADESH HIGH COURT
Non speaking order of ITAT - Disallowance of payment of Income Tax paid on deemed income u/s 11(3) as a deduction or application of the income of the current year - as argued ITAT has stated that they have given thoughtful consideration to the findings of CIT(A), and thereafter without recording reasons as to why the appeal is being dismissed, the ITAT jumped to the conclusion that there is no infirmity in the order impugned before it.
HELD THAT:- Only short and cryptic reason assigned is that the present case is not a case of change of accounting system, which is not sufficient to disclose the mind of the ITAT while deciding the appeal.
Reasons are the bridge between the facts, circumstances on one side and the conclusion on the other, in absence of which, a judicial order becomes a lifeless piece of paper.
As relying on KRANTI ASSOCIATES PVT. LTD. VERSUS MASOOD AHMED KHAN [2010 (9) TMI 886 - SUPREME COURT] and the principles of natural justice, this Court has no hesitation to hold that the impugned order passed by the Income Tax Appellate Tribunal, is non-speaking.
Least that is expected of an appellate judicial authority vested with such wide powers is to record reasons so that it’s mind is disclosed thereby informing the aggrieved person the exact reasons behind the conclusion and thus in the process facilitating availing of remedy before the higher forum. The impugned order passed by ITAT is set aside.
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2021 (11) TMI 1191 - ITAT JODHPUR
Revision u/s 263 by CIT - As per CIT assessee had claimed exemption of long term capital gains u/s 10(38) on sale of certain shares which according to department was a penny stock and such claim therefore accepted in the assessment without proper enquiry - as per assessee assessment proceedings in the case of the assessee was originally completed u/s 143(3)/153A and had to be confined to material found as a consequence of search, and no material was found to suggest that the long term capital gain was not genuine - HELD THAT:- Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. When AO adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the ITO is unsustainable in law.
In the present case, it cannot be said due enquiry was not made. After making enquiry the decision has been taken, which also cannot be said to be erroneous or prejudicial to the interest of revenue. Even in the order of 263, nothing material has been indicated to show that the order was erroneous. Assessment order is not required to give a detailed reason in respect of each and every item of exemption or deduction, etc and that if there was an inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders u/s 263 merely because he has a different opinion in the matter.
In Gabriel India Ltd [1993 (4) TMI 55 - BOMBAY HIGH COURT] as held that a consideration of the CIT as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the CIT acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction.
To invoke suo motu revisional powers to reopen a concluded assessment under s. 263, the CIT must give reasons; that a bare reiteration by him that the order of the ITO is erroneous in so far as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the and must irresistibly lead to the conclusion that the order of the ITO was not only erroneous but was prejudicial to the interests of the Revenue. The CIT cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded.
In the present case, complete details of purchase of shares and sale of shares is verifiable form the bank statement, and also from the borkers note. The shares are held for long period of time, and there is no material to suggest that such gain is not genuine. There is only a suspicion, and on the basis of such facts, the revisional proceedings initiated are not justified. Hence, we quash the proceedings initiated U/s 263 - Decided in favour of assessee.
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2021 (11) TMI 1190 - BOMBAY HIGH COURT
Addition on account of cash donation collected outside the books of accounts - presumption cast against the assessee u/s 292C r.w.s. 132(4A) to explain plethora of evidence seized during the search from residence of Principal Trustee of assessee society ? - HELD THAT:- Question (i) is framed as under :- Whether in the facts and the circumstances of the case, ITAT was right in deleting the addition as added by the AO relying on documents found during the search at the residence of Principal Trustee of Respondent – Society ?
Registrar (Judicial) / Registrar, High Court, Original Side, Bombay to ensure that the original record in relation to this Appeal is summoned from the Tribunal and offered for inspection of the parties. This paper book is treated sufficient for the purpose of admission of this Appeal. However, the Registry must further ensure preparation of complete paper book in accordance with the rules. The registry in the first instance must send intimation of admission of this Appeal enclosing therewith a copy of this order so as to enable the Tribunal to act accordingly.
Assessment of trust - Violation of Section 13(1)(d) subjected to maximum marginal rate - ITAT holding that violation of conditions under Section 13(1)(d) would not result in denial of exemption on the whole income and denial be restricted to the income in violation of provisions of Section 13(1) - HELD THAT:- We are not inclined to entertain the same inasmuch as by Finance Act, 1984 – Circular No.387 dated 06/07/1984 issued by the Income Tax Department, Government of India, at 28.6, it is mentioned “In other words, where such a trust contravenes the provisions of section 13(1) or (d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provisions”. Copy of the said circular that was tendered by the learned Senior Advocate appearing for Respondent is taken on record and marked ‘X’ for identification.
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2021 (11) TMI 1182 - ITAT DELHI
Validity of assessment - No notice u/s 143(2) as issued and served to the appellant - HELD THAT:- As return of income was filed by the assessee on 31.01.2014 declaring loss. The assessment u/s 143(3) of the Act was passed on 30.03.2015.
AO in the remand report itself before the ld. CIT (Appeals) has stated that there is no official record available with him to show issuance of notice. CIT (Appeals) based on this relying on the decisions of several High Courts as per para No. 4 quashed the order of the AO.
We concur with the order of the ld. CIT (Appeals) that where there is no issuance of notice under Section 143(2) of the Act the order passed by the ld. AO deserves to be quashed. Issuance of notice u/s 143 (2) of the act is foundation stone for the assessment order. Even before us, no proof of issuance of any notice under Section 143(2) of the Act was shown. Thus we confirm the order of the ld. CIT (Appeals) in quashing the assessment order. Decided in favour of assessee.
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2021 (11) TMI 1179 - ITAT DELHI
Computing the presumptive income for the purposes of Section 44BB - service tax includable in the gross revenue for computing profits under presumptive provisions of section 44BB or not? - HELD THAT:- It is seen that the issue of excludability of service tax in the gross receipts is squarely covered by the judgment of Mitchell Drilling International Pty Limited [2015 (10) TMI 259 - DELHI HIGH COURT] as held that service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB.
Further in the case of DIT International Taxation Vs M/s Schlumberger Asia Services Ltd [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section(2) of Section 44BB. As spelt that even otherwise, it is not every amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee under Section 44BB. It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee.
Thus service tax receipts donot form part of receipts for computation of income in the section 44BB - Decided against revenue.
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2021 (11) TMI 1178 - ITAT BANGALORE
TP Adjustment - “Provision for estimated loss on construction contracts” debited by the assessee in its profit & loss account and reversal of such provision credited to the Profit and Loss account should be treated as Non-operating in nature - HELD THAT:- We notice that the assessee is raising this plea for the first time before us. The assessee has taken the plea before us on the reasoning that the provision for estimated loss from construction contracts and reversal of said provision was treated as non-operating in nature in assessment year 2015-16 and hence the same treatment should be given in this year also.
First of all, it is not clear as to whether the treatment given by Ld DRP in AY 2015-16 has been accepted by the assessee or not, since such kind of provisions was made as per the mandate of Accounting Standards year after year. Hence it is required to be examined as to whether it is appropriate to treat the provision for expected loss as “non-operating” in nature when such provisions are created as per accounting principles and in compliance of accounting standards. Secondly, it is not clear as to whether such kind of provision made by the comparable companies was also considered as non-operating in nature in AY 2015-16 in their hands, since it is quite possible that the comparable companies would also be debiting the profit and loss account with such kind of provisions as mandated by the Accounting standards.
There should not be any dispute that identical treatment for an item of expenditure should be given both in the hands of the assessee as well as in the hands of the comparable companies. Accordingly, this claim of the assessee requires examination. In any case, this claim has been raised first time before us, meaning thereby, there was no occasion for the authorities below to examine this claim of the assessee in the year under consideration. Accordingly, we restore this claim of the assessee to the file of AO/TPO for examining it in accordance with law.
Manufacturing segment is regarding consideration of leverage of 5% - AO/TPO shall examine this claim of the assessee in accordance with law.
Manufacturing segment relates to computation of margin in the case of comparable company named M/s. Gansons Ltd - It is the contention of Ld. A.R. that the TPO has computed margin of this comparable company erroneously - HELD THAT:- Since the claim of the assessee requires examination, we restore this issue also to the file of the AO/TPO.
TP Adjustment of trading segment - TPO has adopted operating profit/operating cost as PLI in the case of trading segment - It is the contention of the assessee that the correct PLI should be taken as “Operating profit/Operating revenue” - HELD THAT: - We direct the AO/TPO to adopt “operating profit/operating revenue” as PLI and determine the ALP of trading segment accordingly.
TP adjustment made in respect of payments of Global Sales & Marketing activity fee and Management fee - assessee did not benchmark these payments made to its AE separately, since it adopted TNM method at entity level. However, the TPO bench marked the same separately and accordingly proposed TP adjustment - HELD THAT:- Following the decision rendered in the assessee’s own case in AY 2010-11[2017 (6) TMI 1392 - ITAT BANGALORE] wherein held that the assessee is having multiple and diversified international transactions involving receipt as well as payment, we are of the considered view that the payment in respect of management fees as well as Global Sale and Marketing Activity Fees shall be considered as operating cost and has to allocated in the ratio of turnover of the other international transactions and then the ALP of the other international transactions has to be determined under TNMM analysis. Hence we set aside the entire issue of determination of ALP and TP Adjustment to the record of the TPO/A.O. for carrying out fresh exercise of determination of ALP in respect of international transactions by considering the payment in respect of management fees and Global Sale and Marketing Activity Fees as part of the operating cost and allocating the same in the ratio of the turnover of the other international transactions.
Disallowance u/s 14A r.w.r. 8D - A.R. submitted that the A.O. has not recorded dis-satisfaction on the disallowance made by the assessee. Hence, the A.O. could not be resorted to provisions of Rule 8D - HELD THAT:- We noticed earlier that the assessee has made investments during the course of the year and has sold the same before the end of the year. Accordingly, the value of investments as on beginning of the year and as on end of the year were Nil. In this fact situation, the provisions of Rule 8D cannot be applied since computations prescribed in those rules are not possible in the absence of opening and closing value of investments, i.e., computational provisions of rule 8D would fail in this case.
We noticed earlier that against exempted dividend income of Rs.24,86,000/-, the assessee has disallowed a sum of Rs.48,573/- only u/s 14A of the Act. The said disallowance does not appear to be correct when compared with the peak value of investments of Rs.72.09 crores - Thus disallowance may be estimated to meet the requirements of section 14A of the Act. Accordingly, we are of the view that an estimated disallowance of 10% of the dividend income would meet the requirements of provisions of Section 14A of the Act and the same will put this issue at rest. Accordingly, we direct the A.O. to restrict the disallowance u/s 14A of the Act to 10% of exempt dividend income. He may work out the addition accordingly.
Non-granting of proper TDS credit - Since this issue requires examination at the end of the A.O., we restore to his file with the direction to allow credit for correct amount of TDS.
Deduction of education cess and secondary & higher education cess paid during the year as expenditure - A.R. took support of the decision of Sesagoa Ltd [2020 (3) TMI 347 - BOMBAY HIGH COURT] and certain other decisions to contend that the education cess does not fall under the category of Income tax and hence the same should be allowed as deduction against the profits of the assessee - HELD THAT:- Since the claim of the assessee gets support from the decision rendered by Hon’ble Bombay High Court in the case of Sesagoa Ltd. (supra) and since this issue is urged for the first time before us, we restore this issue to the file of AO for examining the claim of the assessee.
Dividend distribution tax rate - to be confined to the rate as per DTAA for the dividend distributed to non-resident assessees - AR submitted that the assessee has raised the above said ground on the basis of decision rendered by Delhi bench of Tribunal and this issue has been referred to a special bench and accordingly pleaded that this claim of the assessee may be restored to the file of the A.O - HELD THAT:- Having regard to the submissions made by the Ld. AR., we restore this issue to the file of the A.O. with the direction to follow the decision that may be rendered by special bench of Tribunal on this issue in due course.
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2021 (11) TMI 1173 - ITAT DELHI
TP Adjustment - MAM selection - CUP method or TNMM - HELD THAT:- We respectfully following case of Sumitomo Corporation India (P.) Ltd. [2018 (10) TMI 1785 - ITAT DELHI] has held as under:-hold that the CUP method cannot be applied in the case of the assessee for making an adjustment to the commission income of the assessee. The co- ordinate bench has also held that TNMM is the only method, which can be applied. Accordingly, the addition made on substantive basis adopting the CUP method is deleted. Accordingly, ground of the appeal are allowed.
Benchmarking of the commission income from associated enterprises other than Japan - AO/TPO is directed to not to adopt CUP method for computation of the arm’s-length price of the indent in business from non-Japan associated enterprises. Also is directed to adopt transactional net margin method adopting the berry ratio for computing the arm’s-length price of the indent in business income from known the associated enterprises and not to consider the free on-board value of goods imported/exported while working out the arm’s-length price from either operating income or operating expenditure of the assessee.
The assessee is directed to submit fresh set of comparables. TPO is directed to examine the same, he may reject or include fresh comparables. Thus, the fresh comparability analysis is required to be conducted.
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2021 (11) TMI 1168 - ITAT MUMBAI
Revision u/s 263 - assessee’s claim of Corporate Social Responsibility (CSR) expenses and claim of such expenditure u/s. 80G - HELD THAT:- With regard to section 80G deduction we observed that the Coordinate Bench of ITAT Bangalore Bench decided the issue of deduction u/s. 80G relating to donations which is part of Corporate Social Responsibility in the case of M/s. FNF India Pvt. Ltd., v. ACIT2021 (1) TMI 205 - ITAT BANGALORE]
As Bangalore Bench has remitted the issue to the Assessing Officer to verify the additions necessary to claim the deduction u/s. 80G of the Act with a clear direction to the Assessing Officer. In the given case the Assessing Officer himself allowed the deduction u/s. 80G of the Act as claimed by the assessee and the issue itself is a debatable issue and Assessing Officer has taken one of the possible view. Therefore, Ld.Pr.CIT cannot invoke provisions of section 263 of the Act in order to bring on record his possible view.
We observe from the record that on merit assessee has a valid point to claim the deduction u/s. 80G of the Act and we observe that nowhere assessee has claimed deduction u/s. 37 of the Act. It is clear that the restriction given in section 37 of the Act is restricted to CSR expenses but similar restrictions are not given in section 80G of the Act.
Other expenses to invoke the provisions of section 263 of the Act on bad debts and fish purchases - Assessee has submitted various ledgers relating to fish purchases and supplier’s confirmations before the Assessing Officer, all these informations clearly shows that Assessing Officer has verified these expenditures before allowing the same. From the record, we observed that AO has asked for certain informations on these expenditures and assessee has also submitted the informations with supporting documents, it can be inferred that the Assessing Officer has made certain enquiries and Ld. Pr.CIT can invoke the provisions of Explanation 2 to section 263 of the Act only when there is absolutely no verification is carried out by the Assessing Officer. This is not the case in the present impugned Assessment Order. Therefore, in our considered view the order passed by the Ld. Pr.CIT is not proper and accordingly set aside.
Appeal filed by the assessee is allowed.
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2021 (11) TMI 1164 - RAJASTHAN HIGH COURT
Penalty u/s 271(1)(c) - judgment of the Tribunal would show that the penalty was deleted on the ground that quantum additions were deleted by the Tribunal and upheld by the High Court - HELD THAT:- In view of the position above, the question of penalty would not survive. As decided by Tribunal this issue is finally settled and decided in favour of the assessee by the Hon’ble High Court in assessee’s own case. Accordingly, in view of the fact that the addition itself was deleted by the Tribunal and then by the Hon’ble Jurisdictional High Court, then the penalty levied in respect of such disallowance is not sustainable - penalty levied under Section 271 (1) (c) against the disallowance of prior period expenditure is deleted.
No substantial of question of law arises.
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2021 (11) TMI 1163 - ITAT AHMEDABAD
Validity of assessment order passed u/s 153A - addition made on “on-money” for purchase of land - HELD THAT:- As in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] in its concluding paragraph has observed that, on the date of the search, the assessments already stood completed and the returns in these years were accepted u/s 143(1) of the Act and these acceptance of returns processed u/s 143(1) of the Act was construed by the Hon’ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon’ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee.
Thus no addition is sustainable in the assessments framed under Section 153A of the Income-Tax Act, in both assessment years under consideration, in both the hands of the assessees. Therefore, we allow all these appeals and delete the additions.
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2021 (11) TMI 1160 - ITAT CHENNAI
Quantum of Investment in house Property for Computation of Exemption u/s 54F - adopting deemed sale consideration as per provisions of section 50C - As submitted when the assessee has objected for adopting deemed sale consideration, as per provisions of section 50C the AO ought to have referred matter to the Departmental Valuation Officer and further adopt value as determined by the DVO - HELD THAT:- From plain reading of sub-section (1) & (2) of section 50C, it is very clear that the AO is bound to adopt fair market value, if there is difference between agreed consideration and guideline value of the property.
Before adopting deemed consideration, it is bounden duty of the AO to refer valuation to the DVO, in case the assessee filed objection for adopting deemed consideration. In this case, there is a difference between agreed consideration as per sale deed and market value of the property as per guideline value.
Also an admitted fact that the assessee has filed her objections before the AO for adopting guideline value of the property. It is also an admitted fact that the AO had referred valuation to the DVO. But, fact remains that before the DVO determines value of the property, the AO has completed assessment by adopting deemed sale consideration as per provisions of section 50C - AO has completely erred in adopting deemed sale consideration, as per provisions of section 50C when he himself referred valuation of property to the DVO.
Computation of exemption u/s.54F - As many expenditure in construction activity is incurred on day to day basis for which the assessee’s cannot keep bills and supporting vouchers. Therefore, for this reason genuine expenditure incurred for construction of building cannot be rejected.
It is a well settled principles of law by the decision of various High Courts, including case of C.Aryama Sundaram [2018 (8) TMI 864 - MADRAS HIGH COURT] that construction may commence before date of sale of asset, but should be completed on or before period of three years from the date of sale of original asset. Therefore, we are of the considered view that the Assessing Officer has erred in not considering amount spent towards construction of building prior to the date of sale of original asset.
Adoption of deemed consideration for the purpose of exemption u/s.54 - The deeming fiction provided for computing full value of consideration as a result of transfer of property as per provisions of section 50C of the Act is only applicable for determining full value of consideration as defined u/s.48 of the Act and thus, for the purpose of computing exemption u/s.54F of the Act, deeming fiction provided u/s.50C cannot be enlarged because, one cannot expect a person to perform impossible things, as when the assessee receives a particular amount from transfer of property, he cannot be expected to reinvest amount over and above consideration received for transfer of property. AO has erred in adopting deemed consideration for the purpose of computation of exemption u/s.54F.
Thus we set aside order passed by learned CIT(A) and restore the issue to file of the Assessing Officer and direct him to recompute long term capital gain by adopting market value of the property determined by the DVO and also by considering amount invested by the assessee for construction of new house property in light of our directions.
Appeal filed by the assessee is treated as allowed for statistical purposes.
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2021 (11) TMI 1158 - BOMBAY HIGH COURT
Refund claim - adjustment of refund amount against the demand that it has against Petitioner - No intimation u/s 245 of the Act was given before making any adjustment - HELD THAT:- As per this notice dated 01/01/2021 and reminder dated 17/01/2021, it does not relate to any of the 15 refunds mentioned by Petitioner in the Petition. These notices issued by Respondent pertain to Kochi Refineries Limited before Kochi Refineries Limited was merged with Petitioner. Even the outstanding demand table annexed to the said notice dated 01/01/2021 does not pertain to any of the 15 refunds to be given to Petitioner as stated in the Petition. Therefore, our answer to Issue No.(i) is in negative, the notice as required under Section 245 of the Act has not been given.
Effect of failure to give such notice, it is settled law that non-giving of intimation in writing prior to setting off of the amount payable against the amount to be refunded is fatal. This Court, in Jet Privilege Private Limited [2021 (8) TMI 593 - BOMBAY HIGH COURT] has held that the requirement of prior intimation under Section 245 of the Act was a mandatory requirement and failure to comply with this mandatory requirement of prior intimation would make the entire adjustment as wholly illegal and therefore Respondents could not have made the adjustment as they wanted to.
Thus answering Issue Petitioner will be entitled to the refund of the entire amount together with accumulated interest, if any, in accordance with law. This refund shall be given within 6 weeks from today.
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2021 (11) TMI 1157 - KERALA HIGH COURT
Levy late filing fee u/s 234E - Fee for default in furnishing statements/ not filing the statement of tax deduction at source - Intimation u/s 200A - as argued till 01.06.2015 petitioner cannot be mulcted with any liability to pay late fee for non filing of any statement of tax deduction at source - HELD THAT:- After considering the statutory provisions and the implications of the amendment brought in to the Act, it was held that the amendment would take effect only with effect from 1st June, 2015 and is thus prospective in nature. It is submitted that the aforesaid judgment has become final and is binding upon the authorities.
The demand for the period from 2011-12 to 2015-16 is bereft of authority and cannot be legally sustainable. Thus quash notice to the extent it demands fee under section 234E for the period from 2011-12 till 01.06.2015. WP allowed.
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2021 (11) TMI 1156 - CALCUTTA HIGH COURT
Consecutive reopening assessment proceedings - second notice under the same section in respect of the same assessment year - non-application of mind - HELD THAT:- As second notice under the same section in respect of the same assessment year is totally in non-application of mind and such action on the part of the assessing officer concerned has caused harassment to the petitioner and created the scope of litigation and petitioner had to bear unnecessary cost of litigation and at the same time department has also to incur cost of unnecessary litigation from public exchequer for defending litigation arose due to non-application of mind by the assessing officer concerned.
Considering all there is no need of keeping the writ petition pending or calling for any affidavit since there is no scope to contradict the allegation of the petitioner as appears from records. The impugned notice u/s 148 of the Act is accordingly set aside. Decided in favour of assessee.
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2021 (11) TMI 1155 - ITAT BANGALORE
Disallowance of depreciation on assets under finance lease - HELD THAT:- As decided in own case [2019 (6) TMI 660 - ITAT BANGALORE] we set aside the issue to the file of the AO for fresh adjudication in accordance with law. The assessee is directed to produce copies of those agreements which the AO may call for. The AO shall examine these agreements and if the terms & conditions mentioned in these agreements are similar to the terms and conditions mentioned in the agreements considered by the Hon’ble Supreme Court in the case of ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT] and if there are no material variations in the contracts, then depreciation has to be granted to the assessee as claimed. Thus we are inclined to remit the issue to the file of Assessing Officer for fresh decision with similar directions.
Not allowing set-off of brought forward depreciation loss - HELD THAT: AO has passed the Order giving effect to the Tribunal Order for the AYs 2008-09 [2014 (12) TMI 890 - ITAT BANGALORE] wherein the AO has provided carry forward of cumulative losses. Further the same has also been utilized against the total income in the draft OGE to Tribunal order passed for the AYs 2011-12 [2019 (6) TMI 660 - ITAT BANGALORE] In view of the above, the assessee is eligible as per the Order giving effect passed for earlier years to claim the set off of brought forward depreciation loss from prior years. Accordingly the AO is directed to allow the brought forward depreciation loss.
TP Adjustment - payment of fees for administrative support services - as submitted bundled approach for benchmarking should be accepted - HELD THAT:- This issue came up for consideration in assessee’s own case in AY 2015-16 [2021 (4) TMI 1361 - ITAT BANGALORE] we hold that payment of administrative and marketing support services is part of the operating cost, no separate adjustment is warranted. This ground of the assessee is partly allowed.
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2021 (11) TMI 1154 - ITAT BANGALORE
TP Adjustment - comparable selection - Assessee seeks exclusion of three comparable viz., Larsen & Toubro Infotech Ltd., Persistent Systems Ltd., and Tech Mahindra Limited - HELD THAT:- As relying on M/S. METRICSTREAM INFOTECH (INDIA) PVT. LTD. case [2019 (2) TMI 1731 - ITAT BANGALORE] we direct exclusion of the 3 comparable companies set out in Grd.No.9 (a) of the Assessee’s appeal.
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2021 (11) TMI 1151 - ITAT DELHI
TP Adjustment - Comparable selection for “Mapping Segment” - HELD THAT:- Infosys BPM Ltd. comparable doesn’t meet the FAR profile with the assessee. Hence, we direct it to be deleted from the final list of comparable.
Dun & Bradstreet Technology and Data Services Pvt. Ltd.specializes in providing Predictive Analytics, Decision Management and In formation Management platforms and services to Dun & Bradstreet and its clients globally. Value added services by the company are Predictive analytics, Risk management, Rating and scoring, Business intelligence and SME banking, thus the functional profile of the assessee matches with that of the comparable cannot be affirmed.
Nihilent Analytics Limited has developed and been awarded a patent for Change Management based on MC3 ® framework for Performance Management and Strategy Execution. Nihilent also has a patent for its predictive ‘Customer Loyalty Evaluation’.
We find that the companies primarily rendering software services and doesn’t hold any inventory. We have gone through the record before us and find that the ld. DRP has rightly allowed the inclusion of this comparable subjected to the availability of the accounts and passing of the filters. Hence, we decline to interfere with the order of the ld. DRP on this issue.
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2021 (11) TMI 1150 - ITAT BANGALORE
TP Adjustment - comparable selection - application of turnover filter - HELD THAT:- We hold that companies listed in Sl.No.(a) to (g) in paragraph 7 (i) which the assessee seeks exclusion and whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies.
Exclusion of companies as not functionally similar with that of assessee.
Significant presence of intangibles - 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 this company with the assessee.
No adjustment towards working capital given - As in case of Huawei Technologies India Pvt. Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] Tribunal held that working capital adjustment has to be given - We are therefore of the view that the issue with regard to the grant of working capital adjustment should be directed to be examined by the TPO/AO afresh in the light of the decision of the tribunal referred to above, after affording the Assessee opportunity of being heard.
Incorrect computation of margins of 2 companies viz., Kals Information Systems Pvt. Ltd., and CG Vak Software and Exports Ltd - DRP in coming to the above conclusion has rightly followed the decision of Sap Labs India Pvt.Ltd. [2010 (8) TMI 676 - ITAT, BANGALORE] wherein it has been held that foreign exchange fluctuation to the extent it relates to the business of the Assessee which is subject matter of the TP adjustment should be regarded as operating in nature. We find no grounds to take a different view and refuse to interfere with the order of the DRP.
Not granting risk adjustment - We find that the DRP has primarily rejected the plea of the Assessee in this regard on the ground that quantification of risk adjustment has not been given and in the absence of such quantification, the plea cannot be accepted. Besides the above, the DRP has also placed reliance on judicial pronouncements holding that risk adjustment cannot be allowed in the absence of proper and reliable computation of risk adjustment. We are in agreement with the conclusions of the DRP in this regard and find no grounds to interfere with its conclusions.
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2021 (11) TMI 1149 - RAJASTHAN HIGH COURT
Addition u/s 56(2) (vii) (b) (ii) - DLC rate applied by the AO - plea that the lands were held as business asset was never taken before AO and that the assessee has also shown land/plots as investments and there are no developmental expenses as such debited/claimed in the year - ITAT confirming deletion of the addition by CIT(A) - HELD THAT:- As is well known Section 56 of the Act pertains to income from other sources. As provided under sub-section (1) of Section 56 income of every kind which is not excluded from the total income under the Act would be chargeable to income tax under the head ‘income from other sources’ if it is not chargeable under any of the heads specified in Section 14, items A to E. Sub-section (2) of Section 56 provides that in particular and without prejudice to the generality of the provisions of sub-section (1), the income specified in several sub-clauses contained in this section shall be chargeable to income tax as income from other sources.
Revenue did not argue that the said provisions would be applicable to a stock in trade of an assesse- if it was found that assessee was actually in the business of real estate development and the land in question formed part of the stock in trade of the assessee, Section 56(2) (vii) would have no applicability.
CIT (Appeals) as well as the Tribunal have concurrently come to a finding that the assessee had shown the said property as stock in trade in its business of real estate development and that even otherwise there was sufficient independent evidence for such purpose.
Merely because the assessee did not raise such a contention before the AO, as per settled law would not preclude the assessee from raising such contention before the Appellate Authority. As noted the assessee followed the proper procedure by filing application for taking additional evidence on record which was allowed by the Commissioner of Appeals and taken into consideration after calling the remand report from the Assessing Officer.No question of law arises. The appeal is dismissed.
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2021 (11) TMI 1148 - ITAT DELHI
TP Adjustment - Exclusion of Comparables - HELD THAT:- As the comparable “ Killick” is functionally different from the assessee, hence, we hereby direct the same may be excluded from the list of final comparables.
Inclusion of Comparables - With regard to CPRIL, we find that the company engaged in organizing conferences, tours, demonstration of products, seminars, publicity campaign through various media channel, demonstrations of client products, hotel bookings, conference literature etc.
Having gone through the functions of the assessee which have been duly mentioned in the above paras of this order, we hold that the comparable CPRIL is functionally dissimilar.
With regard to MIL, we find that the comparable Offers Consultancy in the areas asset development, community and experience management, strategic event management and communication & marketing. We find that the functions of this comparable are different from that of the assessee. Hence, we decline to interfere with the order of ld. DRP in this comparable.
Interest on Receivables - AR argued extensively as to how adjustment with regard to interest on receivables cannot be resorted to - HELD THAT:- Primarily, we find that the assessee is a debt free company and has no claim of interest payable. Hence, in the specific financial conditions of the assessee, we hold that no adjustment is required on this ground.
Incorrect Computation of Margins - HELD THAT:- TPO erred in not giving effect to the directions of ld. DRP who directed to verify and take correct margins of the comparables and adopted an inconsistent approach while computing operating margin of the comparable companies used in the determination of the ALP resulting in incorrect margins of the comparable companies. Detailed computation of margins of comparables provided to TPO pursuant to ld. DRP directions. As perused the same in the paper book at page nos. 1709 to 1747. The AO is directed to re-compute the margins.
Claim of education cess as an allowable expenditure - Interpretation of provisions of Section 40(a)(ii) - Deduction u/s 37(1) - HELD THAT:- Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income ‘Tax’ is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction.
Also gone through the various judgments of judicial authorities pan India wherein the fresh claim of the assessee is considered and the deduction u/s 37 of Education Cess has been allowed. The Hon’ ble High Court of Bombay [2020 (3) TMI 347 - BOMBAY HIGH COURT] held that the appellate authorities may confirm, reduce, enhance or annul the assessment or remand the case to the AO, because the basic purpose of a tax appeal was to ascertain the correct tax liability in accordance with the law.
Keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66- ITJ(19), the orders of Co-ordinate Benches of ITAT and judicial pronouncements of the Hon’ble High Court of Bombay and Hon’ble High Court of Rajasthan, we hereby hold that the assessee is eligible to claim the deduction of the ‘Education Cess’ as per the provisions of Section 37 - Appeal of the assessee is allowed.
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