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Income Tax - Case Laws
Showing 181 to 200 of 751 Records
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2018 (1) TMI 1404 - ITAT MUMBAI
Disallowance u/s 14A - determination of average value of investment to compute disallowance of expenditure u/r 8D(2)(iii) - Held that:- As in Cheminvest Ltd vs CIT (2015 (9) TMI 238 - DELHI HIGH COURT), categorically held that the average value of investment is to be worked out by taking into account the entire opening and closing investments in quoted and unquoted shares of group and other companies, but only investment in shares which have yielded tax free income. In this case, the CIT(A) has considered investments in Wadhwa Food Retail Pvt Ltd for the purpose of average value of investments even though investment in Wadhwa Food Retail Pvt Ltd is not yielded any exempt income.
For the purpose of determination of average value of investments, investments in Wadhwa Food Retail Pvt Ltd has to be excluded. Accordingly, we direct the AO to exclude investments in shares of Wadhwa Food Retail Pvt Ltd for the purpose of determination of average value of investment to compute disallowance of expenditure u/r 8D(2)(iii) of Income-tax Rules, 1962. - Appeals filed by the assessee and the revenue are partly allowed.
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2018 (1) TMI 1401 - DELHI HIGH COURT
Disallowance u/s 14A - disallowance exceeding the exempt income itself - Held that:- AO added back substantial amounts – in one case to the tune of ₹ 9.9 crores under Section 14A on the basis that huge amounts of borrowings, had been converted into equity holdings. CIT(A) and the ITAT granted relief – the latter by following the decision of this Court in CIT v. Joint Investment Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT].
In Joint Investment Pvt. Ltd. (supra), it was held that the disallowance u/s 14A should not exceed the exempt income itself. Having regard to these circumstances, especially that the ITAT followed the judgment of this Court which had settled this point of law, no question of law arises. The appeal is, therefore, dismissed.
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2018 (1) TMI 1400 - DELHI HIGH COURT
Matter be restored to the Division Bench for adjudication, in accordance with law.
The cross-appeals filed by the Revenue and the Assessee, therefore, have to be now listed before the Division Bench and decided. The petitioner herein would have to await the decision of the Division Bench, and, if required, challenge the same as per the statute.
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2018 (1) TMI 1399 - ITAT MUMBAI
MAT computation - Addition towards amortisation of subsidised cost to the book profit computed u/s 115JB - Held that:- It is an admitted fact that the assessee has prepared its accounts in accordance with Parts II and III of Schedule VI of the Companies’Act, 1956. The accounts of the assessee has been audited by the statutory auditors and also approved by the Board. Once, accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies’Act and such accounts have been approved by the Board of directors of the company, then there is no scope for the AO to make any adjustment towards book profit computed u/s 115JB. In this case, such adjustment is not in accordance with Explanation 1 to section 115JB. We further notice that the adjustments made by the AO towards amortisation of subsidised cost is not an item of positive adjustment provided under Explanation 1 to section 115JB of the Act. Therefore, we are of the considered view that the AO was incorrect in making adjustments towards book profit in respect of amortisation of subsidised cost.
See case of Apollo Tyres Ltd vs CIT (2002 (5) TMI 5 - SUPREME COURT) wherein it was observed that the AO is not permitted to make any adjustment towards book profit, once the accounts are prepared in accordance with Parts II and III of Schedule VI of the Companies’ Act, 1956.
Addition towards share capital and share premium u/s 68 - unexplained cash credit - assessee failed to justify issue of shares at a premium and no evidence / documents have been filed to prove the identity, genuineness of transactions and creditworthiness of the parties - Held that:- There is no reason for the AO to doubt the genuineness of transaction only on the basis of issue of shares at a premium when the issue of shares at a premium is not at all relevant for the purpose of addition made u/s 68 of the Act. What needs to be considered for the purpose of unexplained cash credit u/s 68 is, identity, genuineness of transaction and creditworthiness of the parties.
In this case, the assessee has proved all the 3 ingredients by filing necessary evidences and hence, there is no reason for the AO to make addition towards share premium when share premium cannot be considered as unexplained credit u/s 68 of the Act. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO.
Disallowance of expenditure for setting up of UAE branch - AO disallowed expenditure incurred for setting up of UAE branch on the ground that the assessee has not carried out any commercial activity; hence, expenditure is to be considered as preliminary and preoperative expenses u/s 35D - Held that:- We find merits in the arguments of the assessee for the reason that the assessee has incurred various expenditure including registration charges, rent of premises, travelling expenses of its personnel and other miscellaneous expenses to set up a branch office in UAE in connection with its existing business. The assessee is already in the business of sales in UAE and only for facilitation of its business has set up a branch office - expenditure incurred by the assessee is a revenue expenditure which cannot be considered as preliminary and preoperative expenses coming within the purview of section 35D of the Act. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO.
Disallowance of interest expenses - assessee has diverted interest bearing funds to give loans to group companies - Held that:- We find merits in the arguments of the assessee for the reason that the assessee has demonstrated with evidence that loans to group companies are out of its own funds and also such loans has been given in commercial interest, therefore, the AO was incorrect in disallowing proportionate interest on loans given to group companies. The assessee is holding more than 33% equity stake in the company for which loans have been given and also derived commercial benefit. Therefore, the AO was incorrect in holding that the assessee has diverted interest bearing funds to give loans to group companies. The CIT(A), after considering relevant submissions has rightly deleted addition made by the AO. We do not find any error in the order of CIT(A). Hence, we are inclined to uphold the findings of the CIT(A) and dismiss ground raised by the revenue.
Addition of outstanding sundry creditors u/s 41(1) - Held that:- AO has made addition towards sundry creditors without bringing on record any evidence to prove that there is cessation of liability in the impugned financial year and also, the assessee has derived benefit out of such cessation of liability. Therefore, we are of the considered view that the CIT(A) was right in deleting addition made by the AO towards sundry creditors u/s 41(1) - no error in the order of the CIT(A) and therefore, we are inclined to uphold the order of the CIT(A) and reject ground raised by the revenue.
Short deduction of tds u/s 194C or 194J - digital print fee is incurred for the services rendered which is professional / technical service - Held that:- we find merits in the arguments of the assessee for the reason that once there is compliance to TDS provisions, even if there is short deduction of TDS or TDS has been deducted under different sections, there is no scope for the AO to disallow expenditure u/s 40(a)(ia) of the Act as the provisions u/s 40(a)(ia) is applicable only when there is no TDS deduction. This legal proposition is supported by the decision in the case of CIT vs SK Tekriwal (2012 (12) TMI 873 - CALCUTTA HIGH COURT) wherein it was held that if there is lesser deduction of TDS due to any difference of opinion, no disallowance can be made u/s 40(a)(ia) of the Act. If there is short deduction, the revenue is free to proceed to pass an order u/s 201 of the Act, but no disallowance can be made u/s 40(a)(ia)
Addition made towards AIR mismatch - the assessee has made TDS claim of ₹ 1,258 without considering corresponding receipts in the books of account - contention of the assessee that it has furnished reconciliation of TDS difference and explained that certain parties have deducted excess TDS - Held that:- We find merits in the argument of the assessee for the reason that when the assessee has filed reconciliation statement explaining difference in TDS claim, there is no reason for the AO to resort to notional addition on the basis of TDS claim. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. We do not find any error or infirmity in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and reject ground raised by the revenue. - Assessee appeal allowed.
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2018 (1) TMI 1396 - DELHI HIGH COURT
Addition u/s 68 - assessee had claimed bogus expenses - CIT(A) deleted the additional sum after verifying the expenses and observing that the payments were made through banking channels and that the service providers, in respect to whom expenses were claimed, were income tax assessee - ITAT confirmed these findings - Held that:- Upon an overall conspectus of the circumstances, it is evident that the CIT(A) carried out a detailed analysis of the material on record, including, especially with respect to the genuineness of the transaction, whereby, the service providers were paid money towards expenses claimed in the assessee’s returns. These findings are also collaterally supported by the fact that the service providers were income tax assessee. The ITAT confirmed these findings of fact. In the opinion of the Court, no question of law arises.
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2018 (1) TMI 1394 - ITAT DELHI
TPA - comparable selection criteria - Held that:- Assessee is a company engaged in the business of providing services in the field of Information Technology and Information Technology enabled engineering services (ITES) etc., thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Deduction u/s 10A - Held that:- Although the DRP had directed the Assessing Officer to recalculate the deduction u/s 10A by not reducing insurance expenses from export turnover, the Assessing Officer, according for the assessee has not followed the direction of the DRP. We, therefore, direct the Assessing Officer to adjudicate the issue afresh as per fact and law and in the light of the direction given by the DRP. The grounds raised by the assessee are accordingly allowed for statistical purposes.
Depreciation on computer peripherals - at the 15% allowed by the Assessing Officer as against 60% claimed by the assessee - Held that:- The Hon’ble Delhi High Court in the case of CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] has held that computer accessories and peripherals such as printers, scanners and server, etc. form an integral part of computer system and hence they are entitled to depreciation at higher rate of 60%. Thus we hold that the assessee is entitled to depreciation at the rate of 60% on computer peripherals. The ground raised by the assessee is allowed.
Deduction u/s 10A on the income enhanced on account of disallowances made in the assessment order. It has been held in various decisions that whenever there is enhancement of income by the Assessing Officer on account of disallowance of expenses, the profit goes up and the enhanced profit is entitled to deduction u/s 10A of the I.T. Act. Therefore, the ground raised by the assessee is allowed.
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2018 (1) TMI 1390 - KARNATAKA HIGH COURT
Interpretation of Total Turnover & Export Turnover under 10A - Held that:- Learned counsel appearing for the appellants fairly submits that the question raised in this appeal is answered against the appellants by this Court in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. The appeal is accordingly dismissed.
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2018 (1) TMI 1387 - GUJARAT HIGH COURT
Bogus purchases - Non considering the statement of Shri Mukesh M Chokshi taken on oath u/s. 132(4) - Held that:- As decided in Principal Commissioner of Income Tax5 v. Dhwani Mahendra Shah [2018 (3) TMI 1208 - GUJARAT HIGH COURT] Tribunal observed that the entire assessment was based on the statement of one Mukesh M Chokshi, a copy of which was not supplied to the assessee nor opportunity of cross-examining him was granted. Tribunal also gave independent reasons for overturning the orders of the Revenue authorities. It was noticed that the consideration for purchase of shares was paid by cheque. The shares were transferred in the names of the assessee and thereafter to the demat account of the assessee. It was from such demat account the shares were sold.
The issue is primarily based on appreciation of evidence on record. No question of law arises.
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2018 (1) TMI 1386 - DELHI HIGH COURT
Disallowance u/s 14A - Held that:- The assessee for AY 2010-11 had filed its return and thereafter revised it. AO was of the opinion that the assessee had shown dividend income to the tune of ₹ 142.5 crores which was exempt from taxation. Upon his determination, a sum of ₹ 4,90,88,000/- was added under Section 14A as the expenditure involved exempt income although the CIT(A) and the ITAT found that as a matter of fact, the exempt income of ₹ 142.5 crores had not been obtained and that it was only a proposed dividend.
Having regard to these findings, the question of application of Section 14A of the 1961 Act could not have arisen. There is no substantial question of law.
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2018 (1) TMI 1385 - BOMBAY HIGH COURT
Addition u/s 14A - calculation of disallowance figures - Tribunal did not accept the figure of disallowance worked out by the assessee - Held that:- This issue stands concluded against the Revenue and in favour of the Appellant-Assessee by decision of this Court in Principal Commissioner of Income Tax v/s. Reliance Capital Asset Management Ltd., (2017 (10) TMI 177 - BOMBAY HIGH COURT).
Decision of this Court, the question as proposed stands concluded against the Revenue. Therefore, no substantial question of law arises for our consideration.
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2018 (1) TMI 1384 - DELHI HIGH COURT
Penalty u/s 271(1)(c) - payment made under the VRS scheme could have been deducted only to the extent of 20% under Section 35DDA - Held that:- This Court notices that ITAT in its impugned order has relied upon a decision of this Court in ‘Commissioner of Income Tax Vs. Dalmia (Pvt.) Ltd.’[2009 (7) TMI 74 - DELHI HIGH COURT] wherein as concerned with a somewhat similar situation i.e. the claim made in respect of VRS benefits, and, whether claim of whole amount as a deduction, is contrary to Section 35DDA of the Act and, could result in a justifiable penalty under Section 271(1)(c) of the Act. It was ruled that such could not be the consequence and the penalty was set aside. No substantial question of law. - decided against revenue.
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2018 (1) TMI 1383 - ITAT PUNE
Transfer pricing adjustment - non reference to TPO - grievance of assessee is that in cases where the value of international transactions exceeded ₹ 5 crores, Instruction No.3 of 2003 issued by the CBDT mandates reference by AO to the Transfer Pricing Officer but in the present case AO had transgressed his jurisdiction by undertaking transfer pricing adjustment himself - Held that:- In view of the revised limits prescribed under the Action Plan for financial year 2006-07, which is drawn by CBDT itself and in view of the approach of Assessing Officer in assessment year 2009-10, we find no merit in the plea of assessee in this regard.
AO under the revised Instruction of CBDT had exercised his jurisdiction in computing arm's length price of international transactions and we find no merit in the stand of assessee in this regard. No doubt, as per Instruction No.3 of 2003, dated 20.05.2003, the limit for making reference to the TPO was where aggregate value of international transactions exceeded ₹ 5 crores. In view of revised Action Plan, the action of AO in the present case, where the value of international transactions was to the tune of ₹ 10.42 crores, in not making any reference to the TPO is correct and no fault can be found with the exercise of jurisdiction by AO, under the said facts and circumstances. It may also be put on record that revised Instructions were later issued dated 16.10.2015 being Instruction No.15 of 2015. Thus, the additional ground of appeal raised by the assessee is dismissed.
Selection of comparable - functinal profile - deselection of loss making company - Held that:- The accepted principle for benchmarking international transactions is to select the companies which are functionally comparable to the assessee and benchmark the international transactions undertaken by the assessee by comparing the margins shown by the assessee with the margins of selected external comparables.
The concern CG-VAK Software and Exports Ltd. no change in the functionality of said concern, hence the said concern passes the first threshold limit of being functionally comparable. The second aspect which had weighed with the Assessing Officer in rejecting the said concern is losses shown by the said concern. The margin shown by the said concern in the preceding year was 3.84% and during the year is 0.29% i.e. it has shown positive margin and had not shown any losses. However, while allowing economic adjustment by way of working capital adjustment, the margins of said concern became negative but the said adjustment which has been allowed, does not determine the profitability of the said concern in the open market. Accordingly, we find no merit in the approach of Assessing Officer in this regard and hold that CG-VAK Software and Exports Ltd., is not persistent loss maker and is to be included in the final list of comparables.
Coral Hub Ltd. not be considered as a comparable, as admittedly, its business model was completely different. Admittedly, its expenditure on employment cost during the relevant period was a small fraction of the proportionate cost incurred by the assessee, apparently, for the reason that most of its work was outsourced to other vendors/service providers.
Cosmic Global Ltd. is to be excluded from the final list of comparables on the ground of its outsourcing model as in different business model than the assessee in the year under consideration.
Assessee is only engaged in providing technical support services to its associated enterprises and hence, the concern Accentia Technologies Ltd. is not functionally comparable to the assessee.
Exclusion is E4e Healthcare Business Services Pvt. Ltd. on the ground that the same is not functionally comparable being engaged in providing healthcare outsourcing services.
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2018 (1) TMI 1380 - ITAT BANGALORE
Valuation of stock - advertisement Expenditure, Legal & Professional fees and Site Administrative Expenditure to be capitalized to Inventory as per AS – 2 on Inventory read with section 145A - Held that:- As find that as per Para 13 of AS – 2, administrative overheads that do not contribute to bringing the inventories to their present location and condition and selling and distribution costs are to be excluded from the cost of inventories.
As per the assessee, the amount in dispute of ₹ 15.65 Lacs & ₹ 14.80 lacs are hit by the clause (d) of Para 13 of AS – 2 and the remaining amount of ₹ 11,84,600/- is hit by the clause (c) of Para 13 of AS – 2. These contentions were raised before CIT (A) also and were noted by CIT (A) on page 5 of his order but while deciding the issue as per Para 9.3 of his order, learned CIT (A) has decided the issue without examining and deciding the applicability of clauses (c) and (d) of Para 13 of AS – 2. Hence, set aside the order of CIT (A) on this issue and restore the matter back to his file for a fresh decision. - Decided in favour of assessee for statistical purposes.
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2018 (1) TMI 1378 - ITAT KOLKATA
Business expenditure u/s 37(1) - Punitive charge for overloading a wagon - AO treated the overloading charges is nothing but a penalty as per provision of section 73 of the Indian Railway Act, 1989 - CIT(A) deleted the additions - Held that:- In the present case there is no offence whatsoever and there is no compounding fee paid and claimed as deduction. As far as the decision of the Hon’ble Supreme Court in the case of Haji Aziz and Abdul Brothers [1960 (11) TMI 15 - SUPREME COURT] is concerned it was again the case of breach of penal provisions of Customs Act for which fine was paid. Under these circumstances, the expenses were not allowed as deduction. We are of the view that in the facts and circumstances of the present case the claim of the assessee for deduction was rightly allowed by CIT(A). - Decided against the revenue.
Additions u/s 43B - contribution payable by its employees from their salaries payable, as their share of contribution to Provident Fund (PF) and Employees State Insurance (ESI) - Held that:- employees’ contribution to PF paid on or before the due date of filing the return of income u/s 139(1) of the Act should be allowed as deduction - Decided against the revenue.
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2018 (1) TMI 1376 - ITAT RAIPUR
Calculation of deduction u/s.80IA - steel division has procured the electricity at higher rate than charged by power division to steel division - Held that:- In the present case, the appellant has charged ₹ 2.97 for each unit of electricity supplied to its Ferro Division calculated at the rate on the basis of CSEB tariff applicable to such industries. The Ferro Division had purchased power from CSEB and according to the CSEB tariff, the average purchase price of power was ₹ 20.77 per unit. On the contrary, CSEB purchased power (a: ₹ 2.80 per unit. In the given facts and circumstances - what should be the market price, is a matter for adjudication. It of the considered opinion that the value of power agreed in PPA is on the basis of certain statutory provisions enacted in the Electricity Act and not based on demand and supply factors prevailing in the market.Thus price charged by Electricity Board to its consumer is the market price. In the present case the steel division has procured the electricity at higher rate than charged by power division to steel division, it is therefore, the AO is directed to allow relief to the appellant u/s. 80-IA as claimed.
Proportionate disallowance of advertisement, traveling, director's remuneration, printing and stationery etc. for the purpose of disallowance from Ferro Division - Held that:- The assessee has substantiated that the expenses proportionately disallowed by the A.O were attributable to Ferro Alloys Division only and not to the Power Division. The assessee further produced the copy of Ledger Account of such expenses which were already examined by the A.O. Therefore, the CIT(A) was in agreement with the assessee has been maintaining the books of accounts separately for both the divisions and thus, there was no question of making any proportionate disallowance.
Addition u/s 14A in respect of investment in shares - Held that:- Investment was not for making any profit for future benefit of the assessee company. The Assessing Officer noticed that the assessee has incurred certain expenditure towards interest and also these investments were made out of borrowed funds. Whereas, the CIT(A) found that the investment in shares is not out of its ainterest bearing funds, which is not disputed by ld D.R. and also the investments have been made with profit motive. CIT(A) found that the disallowance is not in order. We find that the CIT(A) while deleting the disallowance has relied various judicial pronouncements, which support the assessee's case.
Proportionate disallowance of interest expenses on account of interest free advance given to sister concern - Held that:- We find that the finding recorded by the CIT(A) that " the assessee had substantial interest free funds and cash profits and also the assessee has substantiated that the loan so advanced was out of commercial expediency/exigency" " has not specifically challenged by the Revenue.
Disallowance u/s.40A(3) - Held that:- CIT(A) found from the verification of list furnished by the assessee that several amounts paid were below the prescribed limit and aggregate of such payments works out to ₹ 4,61,041/-. No plausible explanation was furnished by the assessee for rest of the amount. Therefore, the CIT(A) restricted the disallowance to ₹ 4,61,041/-. On careful consideration of the findings of the CIT(A), we find no good reason to interfere. Hence, we uphold the same. This ground of appeal of the revenue is dismissed.
Disallowance u/s.37(1) - Held that:- D.R. could not controvert the above findings of ld CIT(A). Hence, we see no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed.
Calculating the deduction u/s. 80IA - the loss of an eligible industrial unit is required to be set off against profit of other eligible industrial unit - Held that:- The facts for the year under consideration being no different from those before the Hon'ble High Court in the case of Godawari Power & Ispat Ltd (2013 (10) TMI 5 - CHHATTISGARH HIGH COURT) we find no reason to differ therefrom. We find that Hon'ble High Court in its judgment, inter alia, held that the CIT(A) and Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open market namely the price charged by the Board. There is no illegality in their orders. No contrary view has been taken by any superior authority on this issue. Accordingly, the findings of the learned Commissioner of Income- tax (Appeals) stand confirmed. Ground raised by the revenue is dismissed.
Disallowance on account of CSR expenses - Held that:- In the instant case, it is submitted that CSR expenses are incurred for the welfare of local community and thereby improve corporate image of the companies incurring such expenditure. We are of the considered opinion that the CIT(A) has rightly considered the decision and deleted the addition made by the Assessing Officer.
Disallowance made by the AO on account of Pooja and festival expenses and charity & donation expenses - Held that:- As relied on the CBDTG Circular No.17(F.No.27(2)-IT/43) dated 6.5.1983 & circular No.13A/20/68-IT-II dated 3.10.1968, wherein, it was emphasized that expenses incurred on the occasion of Diwali and Muhurat are in the nature of business expenditure. Based on these circulars, the CIT(A) allowed ₹ 71,779/- and disallowed balance of ₹ 1,01,277/-.
Addition on ESI made by the AO on account of delayed payment of employees contribution to PF/ESI - deposits beyond the period prescribed in the relevant statute but before the due date of filing the return u/s.139(1) - Held that:- We find that the CIT(A) relying on the decision of the Delhi High Court in CIT Vs. AIMIL Limited [2009 (12) TMI 38 - DELHI HIGH COURT] wherein, it has been that the employees' contribution towards EPF and ESI etc. deposited after the due date but before the time allowed for filing the return u/s.139(1) will not call for any disallowance u/s.36(1)(va), has deleted the disallowance. We find that the assessee has deposited the amount before the due date u/s 139(1). Therefore, we confirm the order of the CIT(A) and dismiss the ground of appeal of the revenue.
Disallowance u/s 14A - Held that:- CIT(A) correctly relying on case of JCIT vs. Beckay Engineering Corporation [2010 (4) TMI 387 - CHHATTISGARH HIGH COURT] held that the AO failed to prove nexus of transfer of borrowed funds without charging interest, except saying that same is given from the cash credit account maintained by the assessee. The assessee has substantial interest free funds and cash profits and also the assessee has substantiated that the loan so advanced was out of commercial expediency/exigency and deleted the addition made by the Assessing Officer.
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2018 (1) TMI 1375 - ITAT BANGALORE
Disallowance u/s.14A - Held that:- Neither the shares were allotted during the year under consideration, nor any dividend income had accrued to the assessee against proposed allotment. In our view, there is a finding by the Kolkata Tribunal to the effect that the share application money invested by the assessee was merely in the nature of offer to buy the shares by the assessee and it cannot be aid be concluded contract entered by the assessee and the company. Therefore we find no merit in the appeal of the Revenue.
Expenditure on issuance of bonds - Held that:- In the present case, the bonds issued by the assessee were in the nature of a debt instrument and the stamp duty paid to Government of Karnataka by the assessee would be eligible as revenue expenditure as it will not enhance the capital base of the assessee. There is a distinction between the expenditure incurred for raising the loan and the instrument which had an effect of increasing the share capital. - Decided against revenue
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2018 (1) TMI 1372 - ITAT KOLKATA
Disallowance u/s 14A - disallowance of interest under Rule 8D(2)(ii) - Held that:- There cannot be any disallowance of interest under Rule 8D(2)(ii) of the Rules by applying the ratio laid down in the decision in the case of CIT vs Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] wherein it was held that the presumption would go in favour of the assessee if the interest free funds are more than the loans taken by the assessee, then it would be presumed that the investments were made out of own funds of the assessee. The said ratio would squarely apply to the facts of the instant case. Hence we hold that the disallowance made under the second limb of Rule 8D(2)(ii) of the Rules is hereby directed to be deleted.
With regard to the third limb of Rule 8D(2)(iii) we hold that the assessee has got investments in foreign companies, the dividend earned from which would be taxable income and hence should be outside the ambit of disallowance u/s 14A read with Rule 8D of the Rules. Investments made in subsidiary companies would have to be reckoned as strategic investments and hence the same should be excluded while working out the disallowance under Rule 8D(2)(iii). The investments which had yielded dividend income alone, are to be considered while working out the disallowance under Rule 8D(2)(iii) of the Rules as has been held by the decision of this tribunal in the case of REI Agro Ltd. But we find that if the disallowance made under second limb of Rule 8D(2) of the Rules is deleted, then the disallowance made by the ld AO would remain at ₹ 23,77,882/- and whereas the assessee itself had voluntarily disallowed ₹ 42,48,850/-. Hence we direct the ld AO to adopt the disallowance figure of ₹ 42,48,850/- which had already been disallowed by the assessee and hence no further disallowance in that regard is to be made.
Disallowance u/s 14A while computing the book profits u/s 115JB - Held that:- In the case of ACIT vs Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] had held that no disallowance u/s 14A of the Act could be made by resorting to computation mechanism provided in Rule 8D of the Rules. However, the ld AO would have to disallow u/s 14A of the Act having regard to the books of accounts on some rational basis as expenditure incurred for earning exempt income, in terms of clause (f) of section 115JB(2) of the Act. Hence the disallowance already made by the assessee having regard to the books of accounts of the assessee in the sum of ₹ 42,49,346/- does not require to be disturbed. Hence the addition made by the ld AO u/s 115JB of the Act had been rightly deleted by the ld CITA. Accordingly, the Ground raised by the revenue is dismissed.
Addition towards running, repairs & maintenance of aircrafts including depreciation thereon - Held that:- No addition need to be made on an estimated basis towards running and maintenance of aircrafts including depreciation thereon.
Set off of Long Term Capital Loss arising on sale of land, against the deemed short term capital gain arising out of sale of residential property (being a long term capital asset as the holding period of them exceeded 36 months) - Held that:- As reliance placed by the ld AR on the decision of Hon’ble Bombay High Court in the case of CIT vs Manali Investment reported in (2013) 219 Taxman 113 (Bom) wherein it was held that short term capital gain computed u/s 50 of the Act on long term depreciable assets can be set off against long term capital loss u/s 74 - Thus we hold that the assessee is indeed entitled to set off the brought forward long term capital loss of ₹ 9,77,54,843/- against the deemed short term capital gain of ₹ 7,18,74,000/- in the facts of the case. The ld AO is accordingly directed to give benefit of the same to the assessee based on the correctness of the claim of brought forward loss figure made by the assessee. Ground raised by the assessee are allowed for statistical purposes as directed above.
TDS u/s 195 - payments under various heads in foreign currency on which due deduction of tax at source was not made - Held that:- CIT-A had granted relief to the assessee by placing reliance on ‘make available’ clause prevailing in various tax treaties , but the same is not done by the ld AO and ld DRP in the instant case. We find that the assessee had filed various documents with detailed factual and legal submissions with supporting evidences before the ld AO , which had not been appreciated by the ld AO and ld DRP in the proper perspective. Hence we deem it fit and appropriate, to remand this entire issue to the file of the ld AO , for denovo adjudication of this issue afresh in accordance with law. The assessee is also directed to co-operate with the ld AO by producing the necessary evidences in support of its contentions.
Validity of levy of interest u/ 115P - delayed payment of dividend distribution tax - Held that:- The assessee stated that the dividend distribution tax had been duly paid within the time prescribed. However , he fairly agreed for this matter to be verified by the ld AO. The Ld DR also agreed for the same. Accordingly, we deem it fit and appropriate to remand this issue to the file of the ld AO with a direction to verify the date of remittance of dividend distribution tax with supporting evidence and then decide whether to levy interest u/s 115P of the Act in accordance with law. Accordingly, the Ground No. 8 raised by the assessee is allowed for statistical purposes.
TDS u/s 194J OR 194H - Held that:- The assessee company paid this commission to the directors as per their terms of employment for the work done in their capacity as whole –time directors, this commission should have been treated as an incentive in addition to salary, bonus and other perquisities. Therefore, in our considered opinion, CIT-A is justified in recording the same as not coming within the purview of commission or brokerage as defined in s.194H nor a fee for professional or technical services as defined in s.194J. Therefore, we find no infirmity in the orders of the learned CIT(A) on this issue. Therefore, this ground of the Revenue is dismissed.
Addition regarding Principal Repayment of Finance Fee - Held that:- AO proposed to disallow the same on the contention that under finance lease, the lessee is the owner of the leased assets and principal repayment component of lease rental represents payment for purchase of leased assets and thus should be treated as capital expenditure. The ld DRP after considering the facts in detail and applying the ratio laid down by the Hon’ble Supreme Court in the case of ICDS Ltd vs CIT [2013 (1) TMI 344 - SUPREME COURT] allowed the issue in favour of the assessee.
TPA - addition of corporate guarantee - Held that:- Provision of corporate guarantee is in the nature of shareholder activity and hence, no TP adjustment on account of corporate guarantee is required. In the said case, this tribunal had held that “the assessee’s expectation from provision of guarantee was not that of a guarantor i.e. to earn a guarantee fee, rather, the expectation was of a shareholder to protect its investment interest, to help it achieve the assessee’s business objective”. Thus, we agree with the contention of the assessee that the objective of the assessee for providing guarantee was not to earn guarantee fee but to earn returns in the form of appreciation in investment value and receive dividends and, therefore, no TP adjustment ought to have been made in the facts and circumstances of the case.
The price for corporate guarantee should be that which would have been paid and accepted by independent enterprises in comparable circumstances. In that case transfer pricing adjustments are required. In that case, it has to be determined what will be the ALP of corporate guarantee commission paid by associate enterprise to the parent company providing corporate guarantee.
Non charging of interest on loan to its AE - addition as international transaction - Held that:- LIBOR and basis points should be the criteria for meeting the cost of interest on the international transaction in respect of interest to be charged on the loan advanced to AE. For this purpose the credit rating of the assessee as well as the credit rating of the AE should be taken into account. Accordingly we deem it fit to remand the issue to the TPO to determine the basis points on the basis of the aforesaid parameters and such other relevant parameter in accordance to law. Therefore, we remand this issue for this limited purpose back to the TPO / AO and to determine the issue as directed by us.
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2018 (1) TMI 1370 - ITAT DELHI
TPO - MAM - Comparable selection - Held that:- The taxpayer provided software development services, competency centre services and IT Support Services to its AE, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Determining the ALP foreign exchange loss / gain arising from the transaction of revenue nature are required to be considered as part of operating profit/cost of the assessee as well as that of the comparables. The ld.TPO while computing the OP/OC of the comparables treated the amount of foreign exchange gain/loss as non-operating item whereas in case of the taxpayer foreign exchange gain and loss has been treated as operating item. However, both the taxpayer as well as comparable companies is required to be on the same page for treating foreign exchange loss/gain arising from transactions of revenue nature as an operating item. So, the TPO is directed to compute the ALP accordingly. So, this ground is allowed for statistical purposes.
Denial of working capital with adjustment - Held that:- It is a settled principle of law that for reasonably accurate adjustments tested party as well as comparables should be on the same page. However, so far as issue of working capital adjustment is concerned that the ld. TPO disallowed the same for lack of sufficient data as the audited accounts of the taxpayer do not show that it has received any advance from its AE. So, we are of the considered view that in the absence of any reliable data, working capital adjustment cannot be granted. So, the assessee is directed to provide complete computation to avail of the facility of working capital adjustment and thereafter TPO is directed to decide this issue afresh.
Similarly, so far as question of denial of risk adjustment to the taxpayer by the ld. TPO/DRP is concerned, the same has also been denied on the ground that the taxpayer has failed to provide any back up calculation for claim of risk adjustment. So, in the given circumstances, we are of the considered view that ld. TPO is to re-examine the issue on providing back up calculation by the taxpayer for the claim of risk adjustment.
Addition on account of income from maintenance, enhancement and support services (advance billing / deferred revenue) - Held that:- Amount treated as deferred revenue is not brought to be taxed in the year under consideration but to be taxed in the year when such services are rendered or recognized a income of the taxpayer. Grounds as determined in favour of the taxpayer.
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2018 (1) TMI 1369 - ITAT AHMEDABAD
Disallowance u/s 14A r.w. Rule 8D - Held that:- Both the lower authorities follow their respective findings right from assessment year 2008-09 to 2011-12 in order to compute the impugned disallowance under the newly introduced computation provision i.e. Rule 8D of the Income Tax Rules. Case records reveal that the assessee’s appeals against the said corresponding disallowance stand accepted on 08.04.2016 and 14.09.2017. It has come on record that the said co-ordinate benches have deleted identical disallowances in earlier assessment years. We therefore follow consistency to delete the impugned disallowance for want of an appropriate satisfaction u/s.14A(2) of the Act. The assessee’s former substantive ground succeeds.
Addition u/s 40(A)(2)(b) - Held that:- There is hardly any denial of the fact that the CIT(A) has followed his predecessors’ orders for assessment years 2008-09 to 2011-12. We notice in this factual backdrop that the above co-ordinate bench’s order has reversed the CIT(A)’s findings under challenge therein in partly affirming Assessing Officer’s identical action; although involving different amounts paid as remuneration to assessee’s Directors and other specified parties. Learned Departmental Representative is fair enough in not drawing any distinction on facts as well as law. We thus accept assessee’s latter substantive ground as well as its main appeal.
Closing stock addition as made by the Assessing Officer u/s.145A - Held that:- There is no dispute that the CIT(A) has followed his preceding assessment year’s findings to delete the impugned addition. We find that the above latter co-ordinate bench in its order dated 14.09.2017 has upheld the same in preceding assessment year 2011-12. We therefore adopt judicial consistency qua the instant issue to uphold the CIT(A)’s findings under challenge deleting the impugned closing stock addition. - Decided against revenue
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2018 (1) TMI 1367 - ITAT DELHI
Addition on account of under-reported income - Held that:- AO has considered only receipt of ₹ 11,89,074/- in Profit & Loss Account whereas as per Profit & Loss Account filed by the assessee it shows that the assessee has shown receipt of ₹ 14,37,002/-. It is not understood as from where he brought the receipt of ₹ 11,89,074/-. Even the ld. DR could not explain from where the Assessing Officer has picked the figure. I find the ld. CIT(A) without applying his mind as mechanically upheld the order of the Assessing Officer.Thus restore the issue to the file of the Assessing Officer for fresh adjudication.
Disallowance of bad debts due to non-furnishing of any explanation or details in this regard - Held that:- CIT(A) has not adjudicated the issue. Since the assessee has debited an amount of ₹ 77,774/- in the Profit & Loss Account, he is entitled to such bad debt in view of the decision of the Hon’ble Supreme Court in the case of TRF Ltd.[2010 (2) TMI 211 - SUPREME COURT ]. Therefore, this ground by the assessee is allowed.
Disallowance of telephone expenses - Assessing Officer has made disallowance of ₹ 38,534/- being 1/5th of the telephone expenses being probable personal use which has been restricted by the ld. CIT(A) to 50% of such expenses - Held that:- Considering the facts that certain free calls are allowed by the Telephone Department, lump sum disallowance of ₹ 10,000/- under the facts and circumstances of the case will meet the ends of justice. I hold and direct accordingly. The issue relating to the telephone expenses is accordingly partly allowed.
Levy of interest u/s 234B and 234D is concerned, the same is mandatory and consequential in nature. However, direct the Assessing Officer to verify the computation and rectify the arithmetical in accuracy, if any. This ground raised by the assessee is dismissed.
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