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Income Tax - Case Laws
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2021 (11) TMI 1120
Revision u/s 263 by CIT - deduction u/s 80P(2) - PCIT however referred to the Banking Regulation Act of 1949 and held that as per Part V of the Banking Regulation Act, a co-operative bank is different from the cooperative society and the deduction has been wrongly allowed by the Assessing officer - whether interest on FDRs placed with Jaipur Central Co-operative Bank Ltd is eligible for deduction u/s 80P(2)(d) - HELD THAT:- In case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd,[2019 (10) TMI 759 - ITAT JAIPUR] we find that the Coordinate Bench has considered the meaning of cooperative society and cooperative bank and has referred to the decision of Totagars Co- operative sale society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT]
The Coordinate Bench thereafter held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as co-operative society and interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. The ld PCIT has however not considered the aforesaid decision and gone ahead and has concluded that the deduction has been wrongly allowed by the Assessing officer without verifying the said claim of the assessee cooperative society.
We find that during the course of assessment proceedings, the Assessing officer did enquire about the claim of deduction from the assessee and in response, the assessee has submitted its response which was considered and the claim of deduction was accordingly allowed. Therefore, it is not a case of lack of enquiry on part of the Assessing officer.
Also we note that even among the different benches of the same High Court, there are divergent views on the matter and in absence of decision of the jurisdictional High Court, where there are two views in the matter of a non-jurisdictional High Court in terms of construing a taxing statue and the AO has taken one of the views in the matter which favours the assessee, the view so taken by the AO, being a plausible view taken by a quasi-judicial authority cannot be held as erroneous in nature as the same is in consonance with the legal proposition laid down by the Hon’ble Supreme Court in case of Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] In the entirety of facts and circumstances of the case and in light of aforesaid discussions, we set-aside the order passed by the ld PCIT and the order of the AO is sustained. Appeal of the assessee is allowed.
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2021 (11) TMI 1119
Disallowance of the expenses incurred under employee stock option (‘ESOP’) scheme - HELD THAT:- Hon’ble Madras High Court in the case M/s. PVP Ventures Limited T. Nagar, Chennai [2012 (7) TMI 696 - MADRAS HIGH COURT] while the order has been passed in relation to appeal against the order u/s 263, we find that the issue of the allowability of the expenditure pertaining to ESOP has been clearly dealt by the Hon’ble High Court.
In the case of CIT Vs. Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT] allowed the ESOP expenditure as expenses has revenue expenditure.
Since, it can be gauged from the above judgments that the expenditure incurred in connection with the ESOP is treated as revenue expenditure, we hereby allow the ground of appeal on this issue. Since, the grounds have been allowed on merits of the case in principle, the additional evidences filed by the assessee are not required to be considered by this Court.
Allowability R&D Expenditure - HELD THAT:- DR vehemently objected to the admission of additional evidences. On going through the evidences, we have come to a conclusion that the queries raised by the CIT(A) would be answered in proper prospective and the interest of justice would be well served by admitting the additional evidences. Since, the revenue did not have the benefit of going through the evidences, we hereby remand the matter to the file of the CIT(A) to take into consideration the evidences filed and to pass a speaking order in accordance with the provisions of the Act. Appeal of the assessee is allowed.
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2021 (11) TMI 1118
National Faceless Assessment - Non granting opportunity of hearing to the petitioner - deficit in essential procedural compliance - HELD THAT:- Issuance of first notice dated 25.09.2021 is corroborated from the assessment order itself. The first date of hearing fixed was also 27.09.2021. The request for personal hearing clearly appears to have been acknowledged by the respondent vide communication dated 27.09.2021 referred to above. Yet, the assessment order itself does not indicate, in any manner that opportunity for personal hearing was granted to the petitioner. The assessment order passed on 30.09.2021 itself corroborates the assesse's contention that the same was passed in hurry without granting opportunity of hearing to the petitioner.
Whatever be the reason for opportunity of hearing being denied to the petitioner and though it may be true that there may be some technical reason for the same, nevertheless, in the context of the assessment proceedings it was imperative on part of the respondents to grant opportunity of hearing to the petitioner where facts were disputed and the petitioner had submitted a detailed reply.
Even otherwise once the petitioner had specifically asked to be granted opportunity of personal hearing by e-mail communication and once that request had been acknowledged by the respondent-authorities, there survived no reason to deny such opportunity of personal hearing to the petitioner. Accordingly, the request for filing counter affidavit has been denied. The impugned assessment order is found to be deficit in essential procedural compliance.Respondent No. 2 may now intimate to the petitioner a fresh date of personal hearing in the matter.
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2021 (11) TMI 1117
Exemption u/s 80P(2)(a)(i) - whether the appellant can be termed as a cooperative society or cooperative bank? - HELD THAT:- The undisputed position is that the appellant is registered a cooperative society under the Karnataka State Co-operative Society Act, 1959 and does not enjoy any licence from Reserve Bank of India to carry on the business of banking. It is a trite law that the assessing authority cannot go behind the registration certificate granted under the Cooperative Societies Act as held in the case of The Mavilayi Service Cooperative Bank Ltd. & ors.[2021 (1) TMI 488 - SUPREME COURT]
So long as the appellant society had not obtained any licence from Reserve Bank of India for the purpose of banking business, it cannot be termed as cooperative bank. We hold that the appellant status continued to be a cooperative society though interest income as received from its members. Thus, appellant society qualifies for exemption u/s 80P(2)(a)(i) of the Act. Thus, this issue raised by the assessee in grounds of appeal stands allowed.
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2021 (11) TMI 1116
Estimation of income - bogus purchases - HELD THAT:- It is not in dispute that assessee had made purchases from tainted dealers whose names appear in the website of sales tax department, Government of Maharashtra. It is not in dispute that the corresponding sales made by the assessee out of such disputed purchases from two parties were not doubted by the ld. AO.
It is not in dispute that assessee had submitted the details of purchases, invoice bills alongwith bank statements evidencing the fact that payments have been made to those suppliers only by account payee cheques. Since the corresponding sales made by the assessee out of the disputed purchases has not been doubted by the Revenue, we find that the ld. CIT(A) had rightly held that only the profit element needs to be brought to tax and not the entire value of the purchases. We find that this Tribunal in series of decisions, depending upon the nature of industry in which assessee’s are engaged in, had estimated the profit element to be at 12.5%. Appeal of the assessee is allowed.
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2021 (11) TMI 1115
Reopening of assessment u/s 147 - requirement for giving a speaking order - Notice at last date of expiry of the limitation for reopening of the assessment - sale of land and the claim of long term capital gain under the provisions of the Income Tax Act - allegation of non-disposal of objections against reopening of assessment - HELD THAT:- Perused the notices issued under Section 148 and the reasons given for reopening of the assessment and the subsequent communications which culminated in the issuance of the show cause notices and the disposal of the proceedings vide impugned assessment orders.
It is the case where there is slight irregularity in the proceedings carried out by the respondent in as much as the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd[2002 (11) TMI 7 - SUPREME COURT] was not followed. Though the requirement for giving a speaking order is pursuant to the aforesaid decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd reported in 259 ITR 119 (SC), is doubtful in the light of the change in the method of assessment under the e-assessment. Nevertheless, assessment ought not to have been carried out in a mechanical manner. Though the petitioners have also not replied to the show cause notices, the fact remains that the objections to reopening of the assessment was conveyed after issuing the show cause notices. The petitioners were also not given sufficient time. Thus, there is procedural irregularity while passing the impugned orders.
The impugned orders are set aside and the matters are remitted back to the respondent to pass orders afresh on merits.
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2021 (11) TMI 1113
Rectification u/s 254 - unexplained source of money deposited in the bank account - Sham assessee submitted wherein the confirmation with respect to M/s. Sheela Credit & Leasing Limited for payments made by the assessee was submitted, but has been ignored by the bench - HELD THAT:- No details of re-payment to M/s. Sheela Credit & Leasing Limited has been submitted. Therefore, the bench held that agreement to sell entered into by the assessee with M/s. Sheela Credit & Leasing Limited was a sham agreement and it was made just to explain the source of money deposited in the bank account of the assessee. We find that assessee has submitted letter dated 21st June, 2017 wherein assessee referred to the confirmation from that company along with the letter of confirmation dated 31st March, 2019 was also submitted.
The above letter was erroneously not considered by the co-ordinate bench. Therefore, to that extent there is an error in the order of the ITAT. The fact shows that the assessee has submitted the details of re-payment. In view of this, the claim of the assessee is found to be correct that assessee has re-paid Rs.8,40,000/- out of the total advance of Rs.15,00,000/- received by the assessee. Even as a material has not been considered by the co-ordinate bench, we hold that there is an error apparent from the record in the order of the ITAT. Thus, the order passed by the bench is recalled. The Misc. application filed by the assessee is allowed.
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2021 (11) TMI 1111
Nature of expenditure - Expenditure on construction of building - whether leasehold premises would amount to revenue expenditure contrary to the clear provisions of Explanation 1 to Section 32(1)? - HELD THAT:- As decided in case Viswams [2019 (4) TMI 1127 - MADRAS HIGH COURT]. Assesses had incurred substantial expenditure towards renovation leading to enduring benefit. They are not merely repairs. Assessee had also incurred expenditures towards improvement and construction of the building. These cannot be termed as 'repairs'. Consequently, this alternate submission is rejected by us.
The second alternate submission advanced by Mr.M.P.Senthil Kumar that the case should be remitted back to the AO is also rejected since the fact have been addressed and settled by the Authorities below and it had been concurrently found that the expenditure were capital in nature. The issue of bifurcating the said expenses as capital and revenue would therefore not arise.
We hold that the substantial questions of law have to be answered in favour of the Revenue and against the Assessee and the Appeals filed by the Revenue have to be allowed. Accordingly, the Appeals are allowed.
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2021 (11) TMI 1107
LTCG on sale of rights in land - action of the lower authorities in invoking the provisions of section 50C and in substituting some other valuation was clearly beyond the provisions of law as applicable upon the impugned transaction. Under these transactions, we hereby delete the addition made by the AO - HELD THAT:- The Order of Income Tax Appellate Tribunal (ITAT) [2017 (1) TMI 1325 - ITAT MUMBAI] is quashed and set aside.
The matter is remanded for denovo consideration on the four grounds as raised by respondent in its appeal for A.Y.- 2010-2011.
The ITAT shall give a finding on all the four grounds. ITAT shall complete the hearing and pass an order on or before 31st March 2022. Appeal disposed.
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2021 (11) TMI 1106
Addition u/s 68 - assessee company has received share premium and the shareholders were not found at their respective addresses and the assessee could not produce the directors of the investor companies - assessments u/s 143(3) of the Act of the share subscriber companies were completed - CIT-A deleted the addition - HELD THAT:- We find from the various details furnished by the assessee in the paper book that it has filed the master data of all the investor companies as downloaded from the MCA website, therefore, we find merit in the argument of the ld. Counsel that the Revenue cannot allege that the investor companies are bogus when the assessments u/s 143(3) of the Act of the subscriber companies were completed by the Income-tax Department during the same period.
The entire amount had been received by the assessee company through normal banking channel by account payee cheques or demand drafts, majority of the investment companies are assessed u/s 143(3) of the Act and nothing was brought on record by the Revenue that either these orders were subject to reopening u/s 147 or set aside u/s 263 of the IT act.
It is also to be noted that this is the first year of incorporation of the company and, therefore, it cannot be said that the assessee company has brought in its own unaccounted funds through these investor companies as bogus share capital or share premium. Further, it has been held in various decisions relied on by ld. Counsel that when identity, credit worthiness and genuineness of the transaction is not in doubt, then, addition cannot be made just because the assessee could not produce the directors of the subscriber companies or when the share applicants were not found at their addresses.
Once genuineness, credit worthiness and identity of investors are established and whose assessments were completed u/s 143(3) at almost the same time, then, no addition can be made on account of unexplained share capital/premium. In this view of the matter and in view of the detailed reasoning given by the ld.CIT(A) while deleting the addition, we do not find any infirmity in his order - Decided in favour of assessee.
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2021 (11) TMI 1104
TDS u/s 194C OR 194J - short deduction of tax and for interest u/s 201(1A) imposed - payments made for supply and installation of computers, commissioning of computer laboratories and technical manpower and to Vimal Electronics for supply and installation of solar photo voltaic panels - HELD THAT:- Entire contract is for supply of computer hardware, software, connected accessories, UPS, furniture, stationary, consumables, etc., and this contract is to be carried out by the contract through its own personnel. Thus, it is a simple contract of carrying out a work. Section 194J applies to a person responsible for paying to any resident any sum by way of fees for professional/technical services. In the present case, the contractor has not made available any technical services to the assessee but has only provided the computer hardware, software, etc., and employed his own personnel for implementing the same in various schools as per the terms and conditions of the contract. Hence, section 194J is not applicable and the assessee has rightly deducted tax at source under section 194C.
We draw strength from the decision of Senior Manager (Finance), Bharat Heavy Electricals Ltd. [2016 (12) TMI 955 - PUNJAB AND HARYANA HIGH COURT] where contract was for erection, installation, commissioning, testing and trail operations of various equipment and other related machinery and that under the terms of the contract it was the duty of the contractor to provide all type of labour, supervisors, engineers, inspectors, etc., for execution of the project, the AO held that section 194J is applicable as the level of human interaction was high and sophisticated. Commissioner of Income-tax (Appeals) however held that the scope of the work given to the sub-contractor did not fall in the scope of technical services merely because technical persons were employed in execution of contract and therefore, tax is deductible only under section 194C.
No professional or technical services were rendered to the assessee rather the persons were employed by the parties for execution of the contract and thus tax is deductible under section 194C of the Act. While reaching to this conclusion, we also relied upon the decision in the case of Rajasthan Council of Elementary Education wherein on the same facts, it was held that the agreement is a contract for carrying out a work and therefore, taxes required to be deducted at source under section 194C and not under section 194J of the Act, therefore, we direct to delete the addition. Hence, grounds raised by the assessee are allowed.
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2021 (11) TMI 1103
Disallowance of depreciation on the capital assets which according to the Revenue were not existing or available for verification - HELD THAT:- The facts on record clearly establish that the assessee company came into existence upon the conversion of the State Electricity Board into five electricity distribution companies. The assets and liabilities were distributed amongst these five companies and in the process the assessee received certain assets. The cost of acquisition of the transferer company as well as the written down value were reflected in the books of accounts required to be statutorily maintained and audited. As pointed out by the counsel for the assessee, such assets would include machinery and other hardware even inspection of which would not be easy for the Assessing Officer. However only on the ground that such assets were not immediately available for physical verification the claim of depreciation could not have been disallowed. No question of law arises. This question is therefore not entertained.
Disallowance of prior period expenses - HELD THAT:- It is undisputed position that the issue is covered against the department by the judgment of this Court and against which the Revenue had abandoned the appeals before the Supreme Court. In that view of the matter, this question is not entertained without recording independent reasons.
Applicability of Section 115JB to the assessee Electricity Company - HELD THAT:- We notice that other High Courts have under similar circumstances come to the conclusion that the said provisions prior to its amendment in the year 2012, would not cover the electricity company. The Kerela High Court in case of Kerela State Electricity Board [2010 (11) TMI 127 - KERALA HIGH COURT] had taken such a view in similar circumstances. Thus question No.3 is also not entertained.
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2021 (11) TMI 1101
TP Adjustment - selection of MAM - addition to the returned income of the appellant by re-computing the arm's length price (ALP) of the international transactions under section 92 - rejection of internal TNMM applied by the assessee - HELD THAT:- DRP was not correct in considering the services/scope of work from the agreement entered into by the assessee with its AE for ‘procurement of IT Services’ and comparing the same with the back-end ITeS Services provided by the assessee to AEs. In the present case best suited method is that of internal TNMM. The financial data pertaining to internal segmentation is more reliable and accurate, as compared to financial data of external comparable companies, therefore, it will be appropriate to apply internal benchmarking analysis over external benchmarking analysis. This finds support from the “OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations” which highlight the preference of internal comparables over external comparables.
In fact, the United Nations Practical Manual on Transfer Pricing for Developing Countries, released in 2013 (UN manual) also provides that TNMM is less dependent on product comparability because net margins are less influenced by differences in products and functions, as compare to other methods like CUP. Therefore, we direct the TPO/AO to adopt internal TNMM for benchmarking provision of ITeS. Ground Nos. 4 and 5 are allowed.
Adjustment on account of notional interest on receivables - HELD THAT:- It is pertinent to note that the assessee is admitting that the business model of the assessee is such that receivables as well as payables are generally outstanding with both the AEs and non AEs for a period exceeding one month. But the contention of the Ld. AR that this is purely because of business reasons and it was not with an intention to extent indirect credit facility to the debts or obtain credit facility from creditors is not sustainable. Hence, we find that the DRP has rightly directed the TPO to compute the adjustment applying the rate of LIBOR plus 400 basis points on receivables due from its AE in US$ for the year under consideration. There is no need to interfere with the said directions. Hence, Ground No. 9 and 10 are dismissed.
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2021 (11) TMI 1100
Bogus purchases - AO on account of information received from Maharashtra Sales Tax Authorities - HELD THAT:- There is no other material with the Revenue to corroborate the information so received from the Sales Tax Department in order to make the impugned addition nor established that the so-called bogus purchase or the sum equivalent thereof was returned to the assessee in any manner. It appears from the record that no internal inquiry has been carried out by the Revenue to vouch the fact of bogus purchases.
CIT(A) has recorded that the appellant has submitted documentary evidence to establish the genuineness of purchase made from the parties, but the factum of the said billings parties being engaged in the bogus bills was not ruled out. Accordingly, after examining all the facts and circumstances and also relying upon decision on similar issue, he restricted the impugned addition and estimated the same at 10% of alleged bogus purchases - We do not find any infirmity in the approach of the ld.CIT(A) in restricting the impugned additions, and therefore, his order does not warrant our intervention in this score. We confirm the order of the CIT(A) and dismiss this ground of appeal of the Revenue.
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2021 (11) TMI 1099
Condonation of delay - delay of 750 days in filing the appeal - as submitted by appellant that initially the Department was of the view that the matter being of low tax effect, appeal cannot be preferred. But subsequently it came to light that in terms of the Circular issued by the CBDT in matters relating to Short Term Capital Gains/Long Term Capital Gains, appeals have to be filed even if the tax effect is below the threshold limit.
HELD THAT:- After hearing the learned counsel for the parties, we are of view that the reason assigned by the petitioner for not being able to file the appeal earlier is acceptable. Therefore, we exercise the discretion and condone the delay in filing the appeal. The application for condonation of delay is allowed.
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2021 (11) TMI 1098
Denial of exemption u/s 11 - Assessee earned income only by way of interest on FDRs and the expenditure incurred were related to administration expenses only - as per AO Income and expenditure account reflected no charitable activity carried out by the assessee contended that the facts reflected in the financial statements though not denied, do not reflect the complete picture and the factum of having carried out charitable activity nor can it be culled out from the said statement alone - HELD THAT:- As noted by the ITAT in its order in earlier year, as above, that the assessee had only been indulging in construction activity since its creation for a very long period of around 8-10 years, had never itself run the medical facility despite a part of it being completed in the year 2000 and had in fact earlier on decided to lease out the running of its medical facility to a private party in PPP mode, and considering the order of the ITAT in the backdrop of the aforesaid facts, holding that the assessee never intended to carry out its stated charitable activity of running the medical college and hospital, and further in view of our findings above that the assessee had virtually sold its facility by leasing it out for 99 years and having no substantial control over it, we have no hesitation in agreeing with the CIT(A) that vis a vis the medical facility being run in PPP mode the assessee cannot be said to be carrying out any charitable activity.
Other contention of assessee that it had amended its objects in 2009 and included therein funding of various medical projects in Government Medical College and Hospitals in Punjab and to which effect it had contributed over the years substantial sum of money, the Ld. DR has pointed out the fallacy in this argument of assessee by drawing our attention to the Memorandum of Understanding the assessee society had entered into with Baba Farid University, filed alongwith submissions of the assessee dated 9/7/2019, where the assessee has contended to have utilized its funds for medical upgradation in the hospital run by it.
DR has pointed out that it was not simplicitor funding of projects in the hospital as claimed by the assessee, but in fact in the nature of investment in the hospital. The Memorandum of Understanding, he pointed out, required revenue sharing between the assessee and Baba Farid University in the ratio 60:40 or 80:20 of the net receipts earned from the project.
As perused the documents and find the contention of the Ld.DR with regards to Revenue sharing arrangement entered into with respect to the amount invested in Baba Farid University of Health and Sciences, to be correct. Even otherwise the Ld.Counsel for the assessee was unable to contradict the same. It is clear, therefore, there is not merit in the claim of the assessee that it was indulging in charitable activities by way of funding medical projects in Government hospitals as it was nothing but a commercial transaction by the assessee society.
Thus we hold, agreeing with the Revenue, that the assessee society was not indulging in carrying out any charitable activities worth its name during the year but on the contrary was only earning income by non charitable activities, earning from investments made by it in FDR’s or other medical institutes. The assessee, we hold, has therefore been rightly held to be not entitled to exemption u/s 11 of the Act. The order of the Ld.CIT(A) is, therefore, upheld. The grounds of appeal raised by the assessee are dismissed.
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2021 (11) TMI 1096
Non remittance of TDS deducted by the employer from its employees to the Income Tax Department within the time prescribed - HELD THAT:- This Court following the dictum rendered in Madhumillan Syntex Ltd., Vs. Union of India[2007 (3) TMI 670 - SUPREME COURT] dismissed the petitions with liberty to the petitioners to seek for dispensation of their personal appearance on except the essential hearing dates.
This Court is of the view that the same order to be passed in the present case as well. This Petition is dismissed with liberty to the petitioners to approach the trial Court to dispense with their personal appearance as and when required. Consequently, connected Miscellaneous Petition is closed.
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2021 (11) TMI 1094
Disallowance u/s.14A r.w.r. 8D - Necessity of recording satisfaction - HELD THAT:- Since the facts and circumstances on this issue for the year under consideration are similar to those of earlier years [2019 (12) TMI 627 - ITAT PUNE], respectfully following the precedent and specifically noting that the AO did record satisfaction in the assessment order, as further elaborated by the ld. CIT(A) in the impugned order, we hold that due satisfaction was recorded. Insofar as the calculation of disallowance at 0.5% under Rule 8D(2)(iii) is concerned, it is seen that the assessee itself computed such amount during the course of assessment proceedings and placed the same before the AO. To sum up, the ground raised by the assessee is dismissed.
Nature of receipt - capital or revenue receipt - taxability of receipt by the assessee under Package Scheme of Incentives (PSI) 2001 as revenue receipt chargeable to tax - HELD THAT:- The Hon’ble Bombay High court in Pr. CIT Vs. M/s. Welspun Steel Ltd. [2019 (3) TMI 397 - BOMBAY HIGH COURT] has taken similar view in deciding question no. (b) raised before it and held that the Tribunal was justified in holding that subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost. The assessee in that case also got subsidy for industrial development. Similar view has also been taken in M/s. Alkoplus Producers Pvt. Ltd. and Another [2019 (4) TMI 558 - ITAT PUNE] - It is overt that subsidy, in the prevailing circumstances, does not qualify for reduction from the cost of assets in pursuance of Explanation 10 to section 43(1) of the Act. We, therefore, overturn the alternative view also as canvassed in the impugned order on this score. This ground is allowed.
Allowability of Aircraft expenses - CIT(A) upheld the disallowance at 25% of the gross amount of expenses - HELD THAT:- While sustaining the disallowance, the ld. CIT(A) took gross figures of aircraft expenses. The assessee has placed on record a calculation showing that out of total expenses of Rs.560.06 lakh the assessee recovered a sum of Rs.344.80 lakh from outside parties etc., leading the net amount of expenses at Rs.215.26 lakh. The disallowance is, therefore, directed to be restricted to 15% of the net expenses after verification of the calculation shown by the assessee - Decided partly in favour of assessee.
Disallowance of Provision made for warranty - CIT(A) allowed part relief by restricting the disallowance - HELD THAT:- similar issue arose for consideration before the Tribunal in the earlier years. A copy of the Tribunal order for the assessment year 2011-12 2019 (12) TMI 627 - ITAT PUNE] has been placed on record, which shows that the assessee’s claim has been accepted in entirety for the amount of provision created by it. Respectfully following the precedent, we allow the assessee’s ground and dismiss that of the Revenue.
Disallowance of weighted deduction claimed u/s.35(2AB) - assessee claimed the weighted deduction - Department of Scientific and Industrial Research (DSIR), New Delhi approving authority, reduced the amount of eligible deduction - HELD THAT:- Amount of weighted deduction should be allowed in entirety irrespective of the fact that it was not approved by the DSIR, subject to verification of the claim by the AO in terms of the afore referred judgment of SUN PHARMACEUTICAL INDUSTRIES LTD. [2017 (8) TMI 933 - GUJARAT HIGH COURT].
Depreciation at 60% on Printers, UPS and other allied items - HELD THAT:- It is seen that similar issue came up for consideration before the Tribunal for the assessment year 2011-12 [2019 (12) TMI 627 - ITAT PUNE]. Relevant discussion has been made at page 54 of the paper book in which the opinion of the ld. CIT(A), in increasing the rate of depreciation, has been upheld. Respectfully following the same, we dismiss this ground.
Addition u/s.40A(2) on account of commission paid to Directors - AO treated the payment to Directors as excessive to this extent as per the mandate of section 40A(2), which was deleted in the first appeal - HELD THAT:- As seen that similar issue came up for consideration before the Tribunal in the assessee’s own case for the assessment year 2011-12. Respectfully following the precedent, we uphold the impugned order on this score.
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2021 (11) TMI 1093
Faceless assessment - validity of Order u/s 144 r.w.s. 254 and 144B - allegation of violation of principles of natural justice by way of not affording effective opportunity of hearing to the petitioner and not allowing him to file relevant documents in spite of repeated requests - HELD THAT:- Inability on the part of the petitioner to file relevant documents due to technical glitches in the portal system of the Income Tax Department over which he has got no control and to establish these facts of facing of technical glitches petitioner has annexed series of documents annexed to the writ petition from time to time and correspondences made to the department bringing it to the notice of the department of its grievance.
Respondent is not in a position to contradict these allegations which are matters of records and part of the writ petition as annexures.
Considering the submissions of the parties no purpose will be served by keeping the writ petition pending and interest of justice will be served if the impugned assessment order dated 26th September, 2021 is set aside with the direction upon the respondent assessing officer to pass a fresh assessment order after affording effective opportunity of hearing to the petitioner and by observing principles of natural justice preferably within two months from date.
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2021 (11) TMI 1090
TP Adjustment - comparable selection - Functional dissimilarity - HELD THAT:- LARSEN & TOUBRO INFOTECH LTD. (L&T) - In view of the facts inter alia that L&T is into various segments having no segmental financials, having huge brand value and intangibles is not a suitable comparable vis-à-vis taxpayer which was working as a captive entity and that contention raised by the DR that under TNMM minor dissimilarities do not affect the overall comparability is not sustainable because though it is a taxpayer’s own comparable but there being no estoppel against statute and that taxpayer can rectify its mistake at any stage of the proceedings.
Secondly, it is not a case of minor dissimilarities rather it is a case of functional dissimilarity and non-availability of segmental financials to provide the clear picture qua profit earned by the company from provisions of SDS. L&T is a big brand having ownership of huge intangibles which ought to provide competitive advantage to the taxpayer in the form of premium pricing and huge volume of business ultimately leading to the higher profitability. So, we are of the considered view that L&T is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded.
Tata Elexi - We are of the considered view that on account of functional dissimilarity and having ownership of internally generated intangibles in the form of technical know-how for rendering services to its customers make Tata Elexi not a suitable comparable vis-à-vis the taxpayer who is a routine software development service provider working on cost plus markup model having no intangibles of its own, hence we direct to exclude Tata Elexi from the final set of comparables.
Cybercom Datamatics leads to the conclusion that it is into diversified services and is also a product company providing software development to its associated enterprises and also selling developed software product whereas the taxpayer is a routine software development services provider working on a cost plus mark-up model and as such its margin cannot be compared with Cybercom Datamatics, hence Cybercom Datamatics is ordered to be deleted as a comparable.
Cigniti has been excluded in a number of cases by the coordinate Bench of the Tribunal vis-à-vis the routine software development service provider on account of functional dissimilarity as it provides specialized services in the field of software testing, hence we find Cigniti not a suitable comparable vis-à-vis the taxpayer. Accordingly, it is ordered to be excluded.
Kelton is not a suitable comparable vis-à-vis the taxpayer being into diversified nature of services having no financial segmental to arrive at the proper margin, also being into development of various products and mobile apps and having own intangibles and softwares giving it edge over other players in the field as against the taxpayer who is a routine software development services provider working on cost plus mark-up, hence ordered to be excluded.
Thirdware is functionally dissimilar vis-à-vis the taxpayer as it has been deriving income from sale of licence and software services export from SEZ unit and revenue from subscription and training etc. and it is also into sale of licence and its segmental financials are not available.
Infobeansis providing wide range of services under four verticals i.e. services, automation, enterprise and industries and under the automation services verticals, the company is providing advanced robotic process automation services. Since Infobeans is into diversified activities it cannot be a suitable comparable vis-à-vis the taxpayer which is a routine software development services provider.
Inteq is not a suitable comparable vis-à-vis the taxpayer which is a routine software development service provider working on cost-plus mark up model, hence ordered to be excluded from the final set of comparables.
Adjustment on account of outstanding receivables - Delay in receipt of the receivables qua transactions undertaken with unrelated parties - TPO recharacterized the delay in receipt of receivables as unsecured loans advanced to the AE and attributed a notional interest @ 4.485% being Libor + 400 BPS on the period of delay exceeding 30 days - HELD THAT:- Since the taxpayer has not incurred any interest cost nor has availed of any loan from AE or unrelated third parties, as is evident from audited financials at pages57 & 66 of the paper book, proposed adjustment on account of delay in receipt of receivables by the TPO/DRP is not sustainable, hence ordered to be deleted. Consequently, grounds determined in favour of the taxpayer.
Non granting credit of Tax Deducted at source (TDS) in respect of amalgamating companies - HELD THAT:- When TDS has been deducted AO has no option but to grant the credit thereof to the taxpayer. So, we direct the AO to give credit of TDS deducted in respect of amalgamating companies, namely, IP Unity Communications Ltd. and GL Software Ltd. after due verification. Consequently, ground determined in favour of the taxpayer in accordance with law.
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