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Income Tax - Case Laws
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2021 (2) TMI 1377
Maintainability of revenue appeal on low tax effect - Revenue preferring appeal before the Tribunal, if the tax effect is less than Rs.50 lakhs - HELD THAT:- CBDT vide Circular dated 20th August, 2019 (F. No. 279/19-93/2018-ITJ), has clarified that it will apply to all pending appeals. Thus, in view of the aforesaid circular, the appeal of the Revenue is dismissed as non-maintainable as the tax effect involved in the appeal is below Rs.50 lakhs. However, it is made clear that the Department is at liberty to file Miscellaneous Application for recalling of the order, if the tax effect is found to be more than the prescribed limit of Rs.50,00,000/- or any of the conditions etc., as available in the amendment carried out in para 10 of Circular No. 3/2018, dated 20.08.2018, is made out. Appeal of the Revenue is dismissed.
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2021 (2) TMI 1370
Taxability of income in India - Determination of taxability of the payment received as a consideration for data transmission services - royalty receipts - PE in India or not? - whether assessable as business profits in India? - whether AO erred in holding that the payments received by the Appellant as consideration for data transmission services are in the nature of ‘Royalty’ as defined under section 9(1)(vi) of the Income Tax Act and Article 12(4) of the DTAA.
HELD THAT:- The matter is in litigation since last many years starting AY 2006-07 and upto AY 2014-15. The AO in his draft order, brought out that the department is in appeal before Hon'ble Supreme Court against the judgment of Hon'ble Delhi High Court in case of the assessee which has been admitted. It has to be borne in mind that the panel is an extension of the assessment process and the AO is now bound by the directions of DRP. Accordingly, the matter needs to be kept alive in view of its pendency before the Apex Court. The panel accordingly upholds the adjustment made by the AO in this matter. The objections are rejected.
Before us, the ld. CIT DR fairly submitted that the additions have been made as the revenue is filed appeal against the order of the Hon’ble Jurisdictional High Court and the matter is being agitated before the Hon’ble Apex Court.
From the above, it is clear that the addition made by the AO is due to the fact that the revenue is agitating the issue before the Hon’ble Apex Court. Since, the matter stands adjudicated in favour of the assessee as on today, we hold that the decision of the Hon’ble Jurisdictional High Court is applicable to the appeal before us. Appeal of assessee allowed.
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2021 (2) TMI 1366
Disallowance u/s 14A - AO recording of dissatisfaction as regards the disallowance voluntarily made by the Appellant - HELD THAT:- As decided in [2020 (1) TMI 1473 - KARNATAKA HIGH COURT] From perusal of Section 14A of the Act, it is evident that for the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation of the income which does not form part of his total income under the Act. The expenditure, the return of investment and cost of requisition are distinct concepts. Therefore the word ‘incurred’ in Section 14A of the Act have to be read in the context of the scheme of the Act and if so read, it is clear that it disallows certain expenditures incurred to earn exempt income from being deducted from other incomes which is includable in the total income for the purposes of chargeability to the tax. It is equally well settled that expenditure is a pay out.
In order to attract applicability of section 14A of the Act, there has to be a pay out and return of investment or a pay back is not such a debit item. [See: WALFORT SHARE AND STOCK BROKERS (P) LTD [2010 (7) TMI 15 - SUPREME COURT] as well as MAXOP INVESTMENTS LTD [2018 (3) TMI 805 - SUPREME COURT]. In the instant case, the assessee has admittedly not incurred any expenditure. This case pertains to income on dividend, which by no stretch of imagination can be treated to be an expenditure to attract the provisions of Section 14A.
MAT applicability - The provisions of Section 115JA do not apply to the banking companies
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2021 (2) TMI 1358
Disallowance of payment of royalty on trademarks paid to Cadbury Adams USA oversees company - HELD THAT:- As decided in assessee own case [2019 (10) TMI 994 - ITAT MUMBAI] assessee entered into Technical collaboration Agreement with CEPT to avail the benefits of Technical Know-how, trade secrets etc. for mixed fruit flavored and strawberry flavored sugar non-coated center filled bubble gums / chewing gums. Another agreement was entered into with the same entity for Trademarks and copyright licenses in respect of products Bubbaloo, Bubba the Cat & Adams. As per agreement, the assessee paid Technical royalty @4% and Trademark Royalty @1%. Applying the same reasoning, it was held that CEPT was authorized to sub-license the rights of the Trademark only and there was no reference to presume that the same included the right to sub-license the Technology and know-how related to the products, an adjustment of Rs.142.51 Lacs was proposed by Ld. TPO. The Ld. DRP, finding the adjustment quite similar to as made for royalty payment to CAUSA, endorsed Ld. TPO's action.
Since facts as well as reasoning of lower authorities are quite similar as in the case of royalty payment made by assessee to CAUSA, applying the same analogy, we delete the impugned addition.
Disallowance of service fees paid to Cadbury Schweppes Asia Pacific Pvt. Ltd. - HELD THAT:- We notice from the records that the identical ground has already been decided [2019 (10) TMI 994 - ITAT MUMBAI] by the Coordinate Bench of ITAT in for AY 2008-09 in assessee’s own case on merits in which ITAT has restored the matter back to the file of AO with direction to enable the revenue to take a consistent stand in the matter and also to follow the ITAT order for Assessment Year 2006-07.
Disallowance of services fees paid to Cadbury Holdings Ltd. - HELD THAT:- We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in [2019 (10) TMI 994 - ITAT MUMBAI] for AY 2008-09 in assessee’s own case on merits as held since facts as well as observations of lower authorities are parimateria the same as made by services fees paid by the assessee to CSAPL, taking similar view, we restore the matter back to the file of Ld. TPO / Ld. AO for re-adjudication on similar lines.
Adjustment on account of advertising, marketing and promotion (AMP) expenses - HELD THAT:- The identical ground has already been decided by the Coordinate Bench of ITAT in [2018 (11) TMI 1762 - ITAT MUMBAI] for AY 2006-07 in assessee’s own case on merits as delete the addition made by the Assessing Officer towards transfer pricing adjustment on account of AMP expenditure.
Disallowance of depreciation on marketing know how - HELD THAT:- We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT [2019 (10) TMI 994 - ITAT MUMBAI] in assessee’s own case allowed depreciation claim applying the ratio of decision of Hon‟ble Supreme Court rendered in M/s Smifs Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] Similar view has been taken in subsequent years. Therefore, respectfully following the consistent view of the Tribunal on this issue in assessee's own case, we allow assessee's claim of depreciation.
Disallowance u/s 14A of the Act r.w.r. 8D. - HELD THAT:- As in [2019 (10) TMI 994 - ITAT MUMBAI] for in assessee’s own case we deem it fit to restore the matter of direct / indirect expense disallowance to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee. As held earlier, no interest disallowance would be justified, keeping in view the assessee‟s financial parameters.
Disallowance of foreign exchange loss - HELD THAT:- We notice from the records that the identical ground has already been decided in the case of London Star Diamond Co. (I) Pvt. Ltd. [2013 (11) TMI 424 - ITAT MUMBAI] as held these are not premature cancellations by the assessee and therefore, in our considered view, the said loss being related to the FCs which are integral or incidental to the exports of the diamonds, should be allowed as business loss in view of the binding High Court or Tribunal decisions/judgments in the case of D Kishore kumar and Co [2005 (3) TMI 699 - ITAT MUMBAI] Badridas Gauridu Pvt Ltd [2003 (1) TMI 61 - BOMBAY HIGH COURT] Sooraj Muill Magarmull [1980 (9) TMI 69 - CALCUTTA HIGH COURT] etc. Thus, loss arising from cancellation of the matured contracts is allowed in favour of the assessee.
Disallowance on allocation of expenditure at Baddi Unit - HELD THAT:- We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in [2020 (2) TMI 1704 - ITAT MUMBAI] for AY 2007-08 in assessee’s own case settled in favour of the assessee. We notice that the Coordinate Bench has accepted the method of allocation with regard to interest, VRS decrease in stock, direct expenses, direct marketing cost and selling & distribution expenses, royalty and technical fees. The bench has remitted back to AO only the other overhead. Accordingly, we deem it fit to remit only the verification of allocation of other overhead to the file of AO. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, this ground raised by the assessee is partly allowed.
Characterizing buyback of shares as distribution of dividend and levying dividend distribution tax on such buy back - HELD THAT:- We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in the case of Golden Sachs (India) Securities Pvt. Ltd. [2016 (3) TMI 118 - ITAT MUMBAI] hold that transaction in question would not fall under the category of colourable device.If an assessee enters into a deal which does not violate any provision of the Act of applicable to a particular AY - the deal cannot be termed a colourable device,if it result in non-payment or lesser payment of taxes in that year.The whole exercise should not lead to tax evasion.Non-payment of taxes by an assessee in given circumstances could be a moral or ethical issue.But,for that the assessee cannot be penalised.In light of the above discussion,we are reversing the decision of the FAA and deciding the effective ground of appeal in favour of the assessee.
Disallowance on account of Annual Information Repot - HELD THAT:- As decided in the case of Basant Kumar [2015 (11) TMI 1127 - ITAT DELHI] settled in favour of the assessee and as submitted by Ld. AR, the assessee has declared the same in the subsequent assessment year, there is no loss as such to the revenue. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, this ground raised by the assessee is allowed.
Short grant of TDS credit - HELD THAT:- We notice from the records that the Ld. AO has granted credit for TDS only to the extent of Rs. 1,69,04,517/- as Rs. 2,99,18,916/- against claimed in the return of income file. Therefore, we are directing AO to verify the claim of the assessee and accordingly allow the TDS credit based on the record submitted before him. Accordingly, this ground raised by the assessee is allowed.
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2021 (2) TMI 1352
Reopening of assessment made on protective basis and its correctness - HELD THAT:- There is a delay of 433 days in filing this Special Leave Petition and we do not find any justifiable reason to condone this huge delay.
Special Leave Petition is, accordingly, dismissed on the ground of delay.
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2021 (2) TMI 1351
Income Taxable in India - Income deemed to accrue or arise in India - foreign allowances received for services performed in the Netherlands - assessee had admittedly worked as an employee of M/s IBM India Pvt. Ltd.as deputed in lieu of service performed outside India which in turn led to the amount in issue received as foreign allowance(s) - HELD THAT:- Revenue’s case in line with lower authorities action is that sec. 5(2) comes into play the moment impugned sum has been credited or received in India and any deviation thereof shall render the statutory provisions itself as redundant.
We find no merit in Revenue’s foregoing stand. Various judicial precedents in CIT vs. Avtar Singh Wadhwan [2000 (11) TMI 116 - BOMBAY HIGH COURT]; DIT vs. Prahlad V Rao[2010 (11) TMI 803 - KARNATAKA HIGH COURT] and Utanka Roy [2016 (12) TMI 876 - CALCUTTA HIGH COURT] hold that such an income derived by a non- resident for performing service activities outside India, the accrual of income thereon happens outside India could not be brought to tax in India as per s.5(2) of the Act. We thus delete the impugned addition for this precise reason alone. Appeal of assessee allowed.
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2021 (2) TMI 1349
Cessation of liability - Additions u/s. 41(1) - waiver towards outstanding principal loan amount - waiver of outstanding principal loan amount is a capital receipt or not? - HC confirmed order of Tribunal deleting the addition made by the AO and confirmed by the CIT(A) by considering the amount as capital receipt - HELD THAT:- SLP dismissed.
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2021 (2) TMI 1342
Exemption u/s 11 - applicability of provisions of Section 2(15) - HELD THAT:- Appeal of the revenue has been dismissed by the Hon’ble Jurisdictional High Court 2016 (8) TMI 1588 - DELHI HIGH COURT] referring to the decision of the Court in the case of Delhi Music Society [2011 (12) TMI 124 - DELHI HIGH COURT] wherein it was held that the assessee is a charitable organization and the receipts of the assessee are eligible for exemption. Decided against assessee.
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2021 (2) TMI 1338
Addition u/s 68 - Denial of long term capital gain on sale of shares under section 10(38) - A.R. submits that the assessee is a regular investor and makes investments through registered brokers and thus carries out purchase and sale of equity shares on recognized stock exchange on the screen based online platform and all the conditions for claiming exemption u/s 10(38) of the Act are fully satisfied by the assessee - HELD THAT:- We are not in agreement with the conclusion drawn by the Ld. CIT(A) that the long term capital gain made by the assessee from sale of shares is a non genuine transaction and accordingly we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 68 of the Act and direct the AO to grant exemption under section 10(38) of the Act in respect of long term capital gain. The ground no. 1 to 3 are allowed.
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2021 (2) TMI 1337
Estimation of provision done for warranty - Whether, the Tribunal has committed an error of law in holding that the estimate of provision done by the assessee for warranty is scientific and satisfies the condition set out in M/s. ROTORK CONTROLS INDIA PRIVATE LIMITED [2009 (5) TMI 16 - SUPREME COURT] and by not taking into account the facts enumerated by the assessing officer in the assessment order, from which it is evident that the assessee has done excessive provisioning for warranty for reducing the tax liability? - HELD THAT:- For the reasons assigned by us in the judgment passed today in I.T.A.No.1034/2017, the first substantial question of law is answered against the revenue.
Allowance of additional provision for leave encashment and provision on warranty to the book profit for the purpose of calculating the book profit under Section 115JB - The second substantial question of law has been answered against the revenue in decision of the Supreme Court in Bharath Earth Movers vs. Commissioner of Income Tax [2000 (8) TMI 4 - SUPREME COURT] the aforesaid submission could not be disputed by learned counsel for the revenue.
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2021 (2) TMI 1335
Disallowance of expenses u/s 14A read with Rule 8D - HELD THAT:- As the submissions before the Assessing Officer was also that there was no exempt income earned during the year and no expenditure was incurred during the year towards exempt income. Thus, the CIT(A) has rightly deleted the addition in light of the decisions of case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] and CIT Vs. Holcim Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT]
CIT(A) has given a detailed finding and there is no need to interfere with the same in light of the decision of the Jurisdictional High Court. In fact, the issue is covered by the decision of the Apex Court decision in case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT]. Thus, there is no need to interfere with the findings of the CIT(A). Hence, the appeal of the Revenue is dismissed.
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2021 (2) TMI 1334
Revision u/s 263 by CIT - addition u/s 68 of share capital received along with share premium - HELD THAT:- we follow the order of the ITAT in the assessee’s own case for the Assessment Year 2013-14 [2021 (3) TMI 217 - ITAT KOLKATA], wherein, the ITAT had held his is not a case of non-applicability of mind or non-verification. The Assessing Officer has taken a possible view. When the Assessing Officer follows the direction of the ld. Pr. CIT, in his order passed u/s 263 of the Act, no revision can be done u/s 263 of the Act on the ground that the Assessing Officer has not travelled beyond these directions.
We hold that the exercise of the revisionary powers by the ld. Pr. CIT u/s 263 is bad in law. Hence, we quash the same. Decided in favour of assessee.
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2021 (2) TMI 1333
TP Adjustment - transaction of providing corporate guarantee - international transaction within the meaning of Section 92B or not? - HELD THAT:- As respectfully following our own decision in the case of EIH Ltd [2018 (1) TMI 1372 - ITAT KOLKATA] and CIT vs. Rohit Ferro Tech Ltd. [2018 (10) TMI 1845 - ITAT KOLKATA] we hold that the corporate guarantee issued by the assessee company to its fully owned subsidiary, is not an international transaction in terms of Section 92B of the Act. Consequently,The adjustment made u/s 92CA of the Act is hereby deleted and this ground of the assessee is allowed.
Deduction of education cess - HELD THAT:- Issue covered in favour of the assessee by the decision of Chambal Fertilizers and Chemicals Ltd [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] - The Hon’ble Bombay High Court in the case of Sesa Goa Ltd. vs. JCIT [2020 (3) TMI 347 - BOMBAY HIGH COURT] held that education cess cannot be disallowed by invoking Section 40(a)(ii) of the Act. Both the Hon’ble High Courts have elaborately discussed this issue, in their judgments.
Entitled to refund on dividend distribution tax (DDT) paid @ 16.22% u/s. 115-O - HELD THAT:- As relying on Devrient [India] Pvt. Ltd. [2020 (10) TMI 750 - ITAT DELHI] we restore the entire issue to the file of the Assessing Officer with a direction that the claim of the assessee may be examined de novo. The assessee is directed to furnish all the necessary details in support of its claim. This ground of the assessee is allowed for statistical purposes.
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2021 (2) TMI 1332
TP adjustment - international transaction of provision of sales and marketing support services by the Appellant to its associated enterprise (“AE”) - difference between the current assessment year and the subsequent Assessment Years in which the Revenue has accepted the profile of the assessee - HELD THAT:- It can be seen that the company profile has remained intact to that of sales and marketing support services in nature of coordination support and the assessee company is not into advertisement and marketing agency. These aspects were not properly taken cognizance by the TPO/AO and hence the matter is required to be remanded back to the file of the TPO/AO. All the other issues have to be decided once the issue of recharacterization has been determined by the TPO/AO.
Therefore, we are remanding back all the issues to the file of the TPO/AO - Assessee be given opportunity of hearing by following principles of natural justice. Hence, appeal of the assessee is partly allowed for statistical purpose.
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2021 (2) TMI 1329
Disallowance u/s 14A r.w.Rule 8D - assessee during the year under consideration had earned tax free interest income from various tax free bonds - HELD THAT:- We are of the considered view that no part of the interest expenditure could have been attributed to the earning of the exempt income by the assessee during the year in question. Our aforesaid view is fortified by the judgment of CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Accordingly, in terms of our aforesaid observations, we herein vacate the disallowance made by the A.O under Sec. 14A r.w Rule 8D(2)(ii).
As regards the disallowance made by the A.O under Sec. 14A r.w. Rule 8D(2)(iii) we find substantial force in the claim of the ld. A.R that the investments which had not yielded any exempt income during the year under consideration were liable to be excluded for the purpose of computing the 'average value of investments‘ within the meaning of Rule 8D(2)(iii). Our aforesaid view is supported by the order of the ‘Special bench’ of the ITAT, Delhi in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]. As such, we herein restore the issue for the limited purpose of computing the disallowance under Sec.14A r.w Rule 8D(2)(iii) to the file of the A.O in terms of our aforesaid observations. The Ground of appeal No. 1 is partly allowed.
Disallowing expenditure w.r.t travel, hotel and food expenses incurred by the assessee company treated as an unexplained expenditure - HELD THAT:- We have given a thoughtful consideration and are of the considered view that as the aforesaid expenses were incurred by an employee of the assessee company viz. Mr. George Joseph, sales manager, by purportedly using the credit cards of the assessee company, the same, thus, could not have been summarily discarded by the lower authorities. Although, we are not oblivious of the fact that the assessee could not substantiate that the expenses in question were incurred wholly and exclusively for the purpose of its business, but then, we also cannot shut our eyes to the fact that the documentary evidence produced by the assessee before the DRP were considered by the panel with a half hearted approach.
On the one hand the panel had declined to admit the documents produced by the assessee as 'additional evidence‘, while for at the same time it had given general observations as regards the same. Be that as it may, in our considered view the matter in all fairness requires to be restored to the file of the A.O for fresh adjudication. Needless to say, the A.O shall in the course of the 'set aside‘ proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its aforesaid claim on the basis of fresh documentary evidence. The Ground of appeal No 2 is allowed for statistical purposes.
Deduction u/s 80IC - including only 75% of the income from scrap sales while quantifying its claim of deduction raised under Sec. 80IC - HELD THAT:- We are unable to persuade ourselves to subscribe to the view taken by the lower authorities, and thus, direct the A.O to include the entire amount of scrap sales in the eligible profits of the assessee for the purpose of quantifying its claim for deduction under Sec. 80IC of the Act. The Ground of appeal No. 3 is allowed.
TP Adjustment - addition towards advertisement, marketing, sales promotion expenditure ( 'AMP expenses') for the reason, that by incurring the said expenses it had benefitted its Associated Enterprise - HELD THAT:- On a perusal of the order passed by the Tribunal while disposing off the assessee‘s appeal for A.Y. 2005-06 and A.Y. 2007-08 [2018 (5) TMI 1790 - ITAT MUMBAI], respectively, we find, that the Tribunal had struck down the TP adjustment that was made w.r.t AMP expenditure - we, thus, finding no reason to take a different view and adopting a consistent approach therein respectfully follow the same herein vacate the TP adjustment made by the A.O/TPO w.r.t the AMP expenditure.
Deduction u/s 80IC w.r.t the foreign exchange gain on raw and packing material - HELD THAT:- We are of the considered view that the foreign exchange gain on raw and packing material credited by the assessee before us in its profits and loss account can safely be held to be eligible for deduction under Sec.80IC of the Act. Accordingly, we concur with the claim of the assessee that the foreign exchange gain on raw and packing material was duly eligible for deduction u/s 80IC of the Act. We, thus, direct the A.O to allow the asessee‘s claim for deduction u/s 80IC w.r.t the foreign exchange gain on raw and packing material - The Ground of appeal No. 2 is allowed in terms of our aforesaid observations.
Adjustment to the income of the assessee w.r.t the provision of the research and development/testing services - Comparable selection - HELD THAT:- Exclude Alphageo (I) Ltd. from the final list of comparables as functionally not comparable.
PCG Life Sciences ltd - On a perusal of the order of the TPO and that of the DRP, we find, that neither of the said authorities had given any cogent reason for including/upholding the inclusion of the aforementioned company as a comparable in the final list of the comparables for benchmarking the international transactions of the assessee before us. Admittedly, as is discernible from the financial statements of the aforementioned company, we find that it is inter alia engaged in the business of selling chemical compounds, which as observed by us hereinabove constitutes 1/3rd of its total turnover - no segmental information w.r.t the aforementioned company was available, the same, thus, could not have been adopted as a comparable for benchmarking the international transactions of the assessee for the year under consideration - we are of a strong conviction that the lower authorities had erred in including the aforesaid company as a comparable for benchmarking the international transactions of the assessee for the year under consideration.
Clinsys Clinical Ltd - TPO/DRP had without giving any cogent reason excluded the aforesaid comparable of the assessee from the final list of comparables. We are unable to concur with such non-speaking observation of the lower authorities, and in all fairness and in the interest of justice restore the matter to the file of the A.O/TPO for deciding the aforesaid issue afresh.
Fortis Clinical Research Limited -Admittedly, it is a matter of fact borne from the record that the TPO/DRP had not given any cogent reason for excluding the aforementioned company selected by the assessee as a comparable from the final list of comparables. In our considered view, the matter in all fairness requires to be revisited by the TPO, who is thus directed to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee.
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2021 (2) TMI 1328
Correct head of income - Interest on fixed deposits - taxable under the head "Other sources" as the appellant did not commence business activity - HELD THAT:- We find no substance in the assessee’s foregoing grievance. Case records indicate hat the assessee had to commence its commercial operations for the project(s) in issue from December 31st, 2013 relevant to AY.2014-15 whereas we are in AYs.2012-13 & 2013-14 only. The clinching fact as emerges therefore is that the assessee has sought the assessment of its interest income as ‘business income’ without having commenced its corresponding actual business activity at all in these two assessment years. We therefore find no reason to interfere with detailed reasoning extracted from the CIT(A)’s order in the preceding paragraphs. We thus decline assessee’s solitary grievance.
Computation on netting basis - Assessee another plea that both the lower authorities ought to have adopted netting method by following the decision of ACG Associated Capsules Pvt. Ltd [2012 (2) TMI 101 - SUPREME COURT] than assessing the entire interest income u/s.57 of the Act - HELD THAT:- The fact remains that this issue has neither been examined in the course of assessment nor in the CIT(A)’s order. We therefore draw support from their lordships’ above decision and direct the Assessing Officer to finalise necessary computation on netting basis. No other ground has been pressed before us.
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2021 (2) TMI 1327
TP Adjustment - interest on overdue receivables at LIBOR +350 basic points - HELD THAT:- As decided in assesee own case [2018 (8) TMI 2105 - ITAT DELHI] submitted by the Ld. AR that the impact of the outstanding receivables has been factored in the working capital adjustment. This aspect also requires verification. We also note that the Ld. CIT (A) did not have the benefit of this judgment of the Hon’ble Delhi High Court when he passed the impugned order. On an overall view of the facts of the case and respectfully following the ratio of Kusum Health Care Pvt. Ltd [2017 (4) TMI 1254 - DELHI HIGH COURT] we restore this issue to the file of the AO/TPO for the purpose of re-examining and re-considering the issue.
In the circumstances, where of the considered opinion that this issue needs to be considered by the learned Assessing Officer in the light of the submissions now made by the Ld. AR in consonance with the view that is to be taken on this aspect for the earlier assessment years also.
Non-grant of depreciation on Plant & Machinery - HELD THAT:- There is no denial of the fact that there is no change in facts and circumstances as well as law on this issue from the earlier assessment years and the facts and circumstances remain the same, rule of consistency demands that similar relief as has been allowed to the assessee in A. Y. 2010-11[2018 (8) TMI 2105 - ITAT DELHI] by the Tribunal has to be followed and relief has to be granted to the assessee.
Insurance expenses - AO does not dispute the fact of assessee incurring the same and also the fact that in the earlier years it was neither disputed nor disallowed. Since the asset belongs to the assessee, the assessee was justified in claiming the insurance expenses because assets being Plant & Machinery and Moulds and risks of losses, if any, against which insurances had been taken by the assessee is to the account of assessee. We are, therefore, of the considered opinion that the amount paid towards insurance expenses were legally and properly allowable to the assessee as having been incurred wholly and exclusively for the purpose of business of the assessee. Order of the Ld. CIT(A) is, accordingly, upheld and both the grounds of appeal of the Revenue are dismissed.
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2021 (2) TMI 1326
TP Adjustment - ALP of the international transaction undertaken by the assessee with its AE - HELD THAT:- The Tribunal in assessee’s own case for assessment year 2013-2014 [2020 (4) TMI 909 - ITAT BANGALORE] had restored the entire transfer pricing issue to the AO/TPO to arrive at fresh ALP of the international transaction undertaken by the assessee with its AE.
In view of the above order of the Tribunal, the entire issue raised in this appeal are restored to the files of the AO/TPO to arrive at fresh ALP of the international transaction undertaken by the assessee with its AE.Appeals filed by the assessee is allowed for statistical purposes.
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2021 (2) TMI 1325
TP Adjustment - comparable selection - HELD THAT:- Assessee carries on IT enabled services[ITes] in the form of research activities according to the terms of its agreement with its AE which is driven by business information, market research and intellectual property research, thus companies functionally dissimilar with that of assessee need to be deselected.
Working capital adjustment - CIT-A directed AO/TPO to grant working capital adjustment based on the OECD formula and by taking the PLR as adopted by the Slate Bank of India in FY 2008-09 for working capital loans - HELD THAT:- We are of the considered opinion that no interference is required and while upholding the same, we reject the challenge of the Revenue on this aspect.
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2021 (2) TMI 1323
Reopening of assessment u/s 147 - assessment which was processed u/s 143(1) on the ground that the assessee had an exclusive agent in India in the form of M/s ZTL which is soliciting advertisement on its behalf and collecting advertisement revenue in India - contention of the AO that M/s ZTL was held to be dependent agent of the assessee and also held to be constituting a PE of the assessee in India under Article 5(4)/5(5) of the DTAA between India and UK - HELD THAT:- As mentioned earlier, in the order u/s 92CA(3) TPO was concerned with sale of TV programs and films which ZEEL has shown at Rs.83.78 crores. In the instant case, we are concerned with the gross revenue received by the appellant from advertisement from India. The above order passed by the TPO does not deal with the gross revenue received by the assessee from advertisement from India.
It is not the case of the revenue authorities that the gross revenue received by the assessee from advertisement from India is not at arm’s length remuneration. Therefore, once we hold that in the light of present legal position, existence of dependent agency permanent establishment is wholly tax neutral, the question regarding existence of DAPE is a wholly academic in question. We need not therefore deal with the question about the existence of the DAPE, as it is an academic exercise with not tax effect involved.
Section 92F(ii) of the Act defines arm’s length price as a price which is applied or proposed to be applied in the transaction between persons other than associated enterprises (‘AE’) in uncontrolled transactions.
As rightly held in E-Funds [2017 (10) TMI 1011 - SUPREME COURT] that “where transactions between assessees (two US Companies) and Indian entity where at arm’s length price, no further profits could be attributed even if they are existed a PE in India.
It is aptly held in Set Satellite (Singapore) Pte. Ltd.[2008 (8) TMI 96 - BOMBAY HIGH COURT] “if the correct arm’s length price is applied and paid, then nothing further would be left to be taxed in the hands of the foreign enterprise”.
Similarly, in Asia Today Ltd. [2021 (2) TMI 95 - ITAT MUMBAI] it is held that “in the light of Hon’ble Jurisdictional High Court’s judgment in the case of Set Satellite (supra), so far as profit attribution of a DAPE is concerned, the legal position is held as long as an agent is paid an arm’s length remuneration for the services rendered, nothing survives for taxation in the hands of the dependent agency permanent establishment. Viewed thus, the existence of a dependent agency permanent establishment is wholly tax neutral - Appeal allowed.
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