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Showing 261 to 280 of 1478 Records
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2016 (3) TMI 1226
Disallowance on account the depreciation claimed on building - Held that:- During the course of assessment proceedings for the year 2007-08, the assessee admitted in his letter dated 27.11.2009 that the building in question is a residential house and one floor of which was sold during the year and the proceeds from the sale were invested in construction of other floors of the building. The Assessing Officer disallowed a sum of ₹ 1,09,873/- on account of depreciation claimed on the building in question. There is no evidence on record to show that there was a change in the user of building. It is also clear that the assessee has accepted the order passed by the Income Tax Authorities for the assessment year 2007-08. Considering the entire facts and circumstances of the present case, we do not find any merit in this ground of appeal and accordingly, the same is dismissed.
Profit on sale of immovable properties - treated as income from business and profession - estimating the profit on sale of flats @ 30% of the sales value - Held that:- A profit rate of 21% will meet the ends of justice in this case. It is relevant to observe here that the assessee failed to give his past tax history. The assessee has also not shown any profit on sale of immovable properties. It is evident from the record that the assessee is executing contract work and is also engaged in the construction of building and selling the same regularly. We may also observe there that the gross profit rate cannot be uniform in all the years and the profit rate depends on many factors. Therefore, the gross profit rate of 21% for the year under consideration should not be guiding factor in other years. Accordingly, we direct the Assessing Officer to apply a profit rate of 21% as against 30% applied by the revenue authorities. The Assessing Officer should give a relief to the assessee accordingly.
Addition under section 69C - Held that:- The entire expenditure has been routed through the books of account of the assessee and the copy of the building account and copies of the cash book on various dates, on which the expenditure was booked were placed on record as a proof of the source of expenditure in question. The Assessing Officer has accepted the books of account. It is true that the expenditure in question also appears in the Balance Sheet, relevant to assessment year under consideration. In our opinion, the entire expenditure has been booked through the books of account and, therefore, there was no question arises for assessing the same under section 69C of the Act. It appears that the addition has been made just for the sake of making addition and the same is not sustainable in law. Accordingly, we delete the addition of ₹ 5,01,860/- made under section 69C of the Act by the Assessing Officer and confirmed by the learned CIT (Appeals).
Addition u/s 68 - Held that:- There is no material on record to controvert the above contention of the learned counsel for the assessee. The Revenue has also not proved that the assessee had received more than the sale consideration mentioned in the sale deed and, therefore, on this score also, no addition can be made. Considering the facts and circumstances of the present case, we delete the addition made by the Assessing Officer and confirmed by the learned CIT (Appeals).
Addition u/s 68 - Held that:- According to the learned counsel for the assessee, this amount was available for depositing in Account No. 09250110004692 with UCO bank, Ram Bazar, Shimla in the name of assessee’s minor child Sanchit. There is no evidence on record to controvert the above contention of the learned counsel for the assessee. The amount received on the maturity of FDR was available for making deposits. This is not a case of the Revenue that the amount received on maturity of FDR was invested somewhere else. In the absence of such evidence, there is no reason to disbelieve the version of the assessee. Accordingly, we delete the addition made by the Assessing Officer and confirmed by the learned CIT (Appeals). This ground of appeal stands allowed.
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2016 (3) TMI 1225
Revision u/s 263 - premium paid by the assessee on the life insurance of its key man being the partner of the firm disallowed - Held that:- On the perusal of the cover note issued by the insurers it is very clear that the policies are Keyman insurance policies, whether these are term policies or not is not a question to be decided by any of the revenue authorities. We are in total disagreement with the CIT in holding that the premium paid by the assessee on the Keyman insurance policies are not allowable in view of the fact that the policies are not the valid policies. The policies are issued by the insurer and premiums are being paid as per the policy terms and conditions. There is no condition of the Income Tax Act which has been not complied with while making payment of these premiums. Therefore the premium paid by the assessee on the life insurance of its key man being the partner of the firm are therefore allowable expenditure.
Since the issue of allowability of premium on accrual basis has not been dealt with by the CIT in his order, we do not find any need to adjudicate the same. Otherwise also we see that in the original assessment the assessing officer has placed a specific query regarding the Keyman insurance policy premium paid by the assessee vide its note sheet entry and a detailed reply has been filed by the assessee together with the relevant evidences. Thus the assessing officer has made enquiry regarding the Keyman insurance which had been duly replied by the assessee. The AO was open to the issue of Keyman insurance and has applied his mind while allowing this expenditure to the assessee. The order passed by the CIT under section 263 of the Act is not as per law - Decided in favour of assessee.
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2016 (3) TMI 1224
Addition under section 68 - proof the creditworthiness of the creditors and genuineness of the transactions - Held that:- Restore the matter in issue to the file of the Assessing Officer with direction to the assessee to produce all the four creditors before the Assessing Officer for verification and examination and the assessee shall not seek unnecessary adjournment in the matter. The assessee is directed to prove the creditworthiness of the creditors and genuineness of the transactions and also directed to explain as to in what circumstances the commodity profits have been received by the creditors from M/s Satyam Commodities and M/s B.K. Commodities from whom the assessee was also taking commodity entries.
Assessing Officer shall give reasonable sufficient opportunity of being heard to the assessee. I make it clear that in case the assessee fails to produce any of the creditors before the Assessing Officer, the Assessing Officer is at liberty to draw any adverse inference against the assessee and shall pass assessment order in accordance with law, strictly on merits of the case, as have been discussed and considered in the assessment order. Appeal of the assessee is allowed for statistical purposes.
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2016 (3) TMI 1223
Levy of penalty under section 271(1)(c) - N.P. determination - Held that:- Whole complexion of the penalty matter has changed because of the subsequent event i.e. the order passed by the Tribunal. The Assessing Officer considered the penalty matter on the basis of part addition sustained by ld. CIT(Appeals) by applying profit rate of 55%, however, Assessing Officer made specific additions on account of disallowance of various expenses by giving specific findings of fact against the assessee. Therefore, in our view the penalty matter shall have to be re-considered in the light of findings of Assessing Officer given in the assessment order because the order of the Assessing Officer have been restored by the Tribunal and as such, the penalty matter need not to be decided on the basis of findings given by the ld. CIT(Appeals) computing the income of the assessee by applying profit rate of 55%.
Also here that since the finding of fact recorded by the Assessing Officer have not been considered in the penalty matter, therefore, the matter would also require re-consideration because the additions would be higher now on passing the final order passed by the Assessing Officer. Appeal of the assessee is allowed for statistical purposes.
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2016 (3) TMI 1222
Addition on account of difference in the figures of purchases, sales and closing stock as per books of account and those as per figures given to the bank for raising loan- Held that:- Assessing Officer has made addition on account of all the figures without considering the facts that when he has believed trading and Profit & Loss Account filed with the bank as correct as per the figures given thereon, then the profit declared therein should have been accepted by the Assessing Officer. No further calculation should be made for the purpose of making addition against the assessee. We, therefore, set aside and modify the orders of authorities below and direct the Assessing Officer to adopt net profit of ₹ 1,06,980/- as declared in the trading and Profit & Loss Account submitted to the bank instead of ₹ 75,546/- declared in the return of income. We, therefore, confirm the finding of authorities below to that extent and direct the Assessing Officer to adopt the profit of ₹ 1,06,980/- for the purpose of computing income of the assessee. - Decided partly in favour of assessee.
Addition on account of college fee payment and deposit in the bank account of Shri Navneet Singh Lamba - Held that:- No merit in this ground of appeal of the assessee. The ld. counsel for the assessee admitted that son of the assessee Shri Navneet Singh Lamba was dependant and that no evidence have been produced to explain the above additions. Since the source of fee deposited in the account of Shri Navneet Singh Lamba and source of bank deposit in the account of Shri Navneet Singh Lamba have not been explained who is admitted to be minor son of the assessee, authorities below were justified in making and confirming both the above additions in the hands of the assessee. In the absence of any explanation, no evidence or cogent material on record, we do not find any error in the orders of authorities below in making the addition - Decided against assessee
Addition on account of college fees payment of son of the assessee and addition on account of deposit in State Bank of India, Paonta Sahib - Held that:- It is admitted fact that son of the assessee was dependant upon assessee and no source. There is a deposit of the fees in the Law College in the name of son of the assessee and bank deposit with State Bank of India, Paonta Sahib. The assessee failed to explain source of these deposits therefore, authorities below were justified in making the addition in the hands of the assessee. No evidence have been produced before us to explain both these additions therefore, in the absence of any evidence on record, we confirm both the additions and dismiss this ground of appeal of the assessee.
Addition on account of investment in FDRs by two sons of the assessee - Held that:- No merit in this ground of appeal of the assessee as it is admitted fact that assessee purchased FDRs in the names of two of his sons during assessment year under appeal. The assessee failed to explain source of the purchase of the FDRs and also failed to explain that when both of his sons were students, how they could have purchase the FDRs. In the absence of any evidence or material on record, we confirm the addition and dismiss this ground of appeal of the assessee.
Disallowance on account of various expenses - Held that:- We are of the view addition is excessive. The personal user of these expenses cannot be ruled out. However, considering the nature of business carried out by the assessee, 30% of expenses is on higher side. We, accordingly, set aside and modify the disallowance and direct the Assessing Officer to make disallowance of 10% out of these expenses. In the result, this ground of appeal of the assessee is partly allowed.
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2016 (3) TMI 1221
Addition on account of unexplained cost of construction of resort - Held that:- Nothing specific have been explained as to how Assessing Officer made the above additions against the assessee. The Assessing Officer, without any justification or cause, did not place reliance upon the report of the DVO which is binding on the Assessing Officer. Since reference is made by the Assessing Officer to the DVO, therefore, Assessing Officer was bound to adopt valuation disclosed by the DVO in his report. However, the Assessing Officer merely placed reliance upon seized document which did not disclose specifically the quantum of cost of construction invested by the assessee in the resort. Therefore, the finding of the DVO in the valuation report that most of the papers are dumb documents, is relevant and admissible. The report of the DVO clearly shows that no investments in construction have been made in assessment year 2005-06.
In assessment year 2006-07 we are of the view that since there is not much difference between the cost of construction reported by the DVO and disclosed by the assessee in the books of account of assessment year 2007-08, therefore, no addition can be made against the assessee even in the remaining assessment years 2006-08 and 2007-08. - Decided in favour of assessee
Addition on account of accretion in capital account of partners - Held that:- Since in this case the partners of the assessee firm have admitted their capital contribution in their accounts, therefore, no addition could be made in the hands of the assessee firm.We, accordingly, set aside the orders of authorities below and delete both the additions. See case of Metachem Industries [1999 (9) TMI 21 - MADHYA PRADESH High Court] - Decided in favour of assessee
Addition as income from business - Held that:- No specific arguments or material have been pointed out to show that how this addition is unjustified. The Assessing Officer noted certain functions have been organized during assessment year under appeal in the premises of the assessee and the assessee in their statement also admitted arranging such functions. The Assessing Officer found certain credit entries in the bank account of the assessee. Wherever assessee was able to explain the entries, no adverse view was taken by the Assessing Officer. However, rest of the addition of amount of ₹ 2,33,147/-, no explanation was filed before Assessing Officer. Therefore, Assessing Officer treated the same to be income of the assessee. In the absence of any evidence or material on record, we do not find any justification to interfere with the order of the authorities below. - Decided against assessee.
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2016 (3) TMI 1220
Addition of exhibition expenses - CIT(A) noted that no specific details of vouchers, which were not produced by the assessee have been mentioned. Therefore, it appears to be an addition on adhoc basis and accordingly, restricted the addition to ₹ 20,000/-- Held that:- The assessee has specifically stated before the learned CIT (Appeals) that it is not possible to get each and every voucher of expenses incurred during the course of exhibition. However, the learned CIT (Appeals) has already granted sufficient relief to the assessee. Therefore, in the absence of production of complete vouchers of expenses, the addition was rightly made of ₹ 20,000/-. This ground of appeal raised by the assessee is, therefore, dismissed.
Addition of telephone and petrol expenses - Held that:- The addition is excessive in nature. The nature of business of the assessee is manufacturing of potato chips and assessee filed the return of income at ₹ 1,61,877/-. It is also admitted fact that the assessee has not maintained any details of these expenses. Therefore, personal usage of these items cannot be ruled out. However, considering the nature of the business of the assessee and return of income so filed, I reduce the addition to ₹ 10,000/- as against the addition of ₹ 30,000/-.
Addition on account of household expenses - Held that:- Addition is still on excessive side. Even if no details of family contribution is filed, but it admitted fact that the assessee is living in joint family and other family members would also contribute for household expenses. Considering the nature of the business of the assessee and return of income filed at very low amount, the addition is restricted to ₹ 30,000/- as against ₹ 60,000/-. This ground is, therefore, partly allowed.
Not allowing benefit of unabsorbed losses of earlier years - Held that:- The assessee claimed set off of unabsorbed losses. Something different is mentioned in the assessment order of preceding assessment year 2007-08. The carry forward of loss or depreciation is notified in assessment year 2007-08, therefore, it is to be seen whether late return for assessment year 2008-09 has any impact on carry forward of loss/depreciation. This fact has been looked into by the learned CIT (Appeals). Therefore, it also requires verification of fact whether it was brought forwarded losses or brought forward depreciation. In view of the above, I set aside the order of the learned CIT (Appeals) and restore this issue to the file of the learned CIT (Appeals) with direction to redecide this issue on merits strictly in accordance with law by verifying the factual facts from the record and shall also take into consideration the decision of the Hon'ble Punjab & Haryana High Court in the case of Haryana Hotels Ltd. (2005 (2) TMI 63 - PUNJAB AND HARYANA High Court )
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2016 (3) TMI 1219
Levy of penalty under section 271(1)(c) - assessee wrongly claimed exemption under section 11 - Held that:- Merely because the claim of the assessee for deduction under section 11 of the Act was not accepted, may not be a ground for levy of penalty. Further, the assessee wrongly claimed exemption under section 11 on the basis of a legal advice and details furnished on record. Therefore, the assessee would not have any intention to conceal particulars of income from the Revenue Department. The assessee disclosed complete facts in the return of income as well as in the computation of income for receipt of the donations and incurring expenditure. The authorities below after granting deduction of the expenses claimed, made the small addition against the assessee considering the donations and corpus donations to be income under section 2(24). The assessee, therefore, disclosed complete facts before the authorities below and, therefore, could not be said to have concealed particulars of income. The small income was assessed against the assessee because no registration was granted under section 12A of the Act.
Assessing Officer should have followed the rule of consistency and on the same set of facts should not levy penalty against the assessee in assessment years under appeals. It is well settled law that the Income Tax Authorities shall have to maintain the rule of consistency. The explanation of the assessee was bonafide that since it is a registered trust and applied for registration of trust before the Commissioner of Income Tax, Patiala, therefore, the assessee on legal advice has made the claim of exemption of income under section 11 of the Act, therefore, no penalty is leviable against the assessee. - Decided in favour of assessee.
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2016 (3) TMI 1218
Revision u/s 263 - disallowance u/s.14A computation - AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules - Held that:- While examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoking the method of disallowance of expenses as prescribed by Rule 8D(2) of the Rules. It is for this reason that the satisfaction of the AO regarding expenses incurred for earning exempt income is to be objective satisfaction. It is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. Rule 8D(2) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income. It cannot therefore be said that once the AO rejects the mode of computation of disallowance u/s.14A of the Act as made by the Assessee, he has no other option but to resort to Rule 8D of the Rules.
Besides the above, we are also of the view that the AO has adopted one of the possible course open to him in law. The CIT cannot invoke jurisdiction u/s.263 of the Act just because he does not agree with the view of the AO. As u/s.263 of the Act, the CIT cannot substitute his view with that of the AO. The order of the AO was neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction u/s.263 of the Act ought not to have been invoked - Decided in favour of assessee.
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2016 (3) TMI 1217
Constitutional validity of the Land Acquisition (Goa Amendment) Act, 2009 challenged - repugnancy between the principal legislation (Land Acquisition Act) and the State Amendment - Held that:- Section 41(6) to (9) introduced in the Principal Act by the Goa State Amendment renders ineffective Clause 4(viii) of the Agreement executed by the parties under Section 41 of the Principal Act. With Clause 4(viii) being deleted the embargo on constructions on the acquired land is removed. It is the aforesaid Clause 4(viii) and its legal effect, in view of Section 42, that was the basis of the Court’s decision dated 20th January, 2009 holding the construction raised by the third respondent on the acquired land to be illegal and contrary to the Principal Act. Once Clause 4(viii) is removed the basis of the earlier judgment stands extinguished. In fact, it may be possible to say that if Clause 4(viii) had not existed at all, the judgment of the Court dated 20th January, 2009 would not have been forthcoming. It was therefore well within the domain of the legislature to bring about the Amendment Act with retrospective effect, the Legislative field also being in the Concurrent List, namely, Entry No. 42 of List III (Acquisition and Requisition of Property) of the Seventh Schedule to the Constitution.
Section 41 of the Principal Act and the terms of the agreement executed thereunder (even if the latter is understood to be ‘Law’ enacted by the competent legislature for the purpose of Article 254) are silent with regard to modification/variation or deletion/subtraction of the terms of the agreement. The State Amendment Act by bringing in Sub-sections (6) to (9) of Section 41 invalidates a clause of the agreement [Clause 4(viii)] by effecting a deletion thereof with retrospective effect i.e. 15.10.1964 (the date of coming into operation of the Principal Act to the State of Goa). The State Amendment, by no means, sets the law in a collision course with the Central/Principal enactment. Rather, it may seem to be making certain additional provisions to provide for something that is not barred under the Principal Act.
If the provisions of the State Amendment are to be tested on the anvil of the finding of this Court that the acquisition in the present case is under Section 40(1)(aa) of the Land Acquisition Act, the deletion of the relevant clause of the agreement as made by the said amendment may appear to be really in furtherance of the purpose of the acquisition under the Central Act. We, therefore, do not find any repugnancy between the Principal Act and the State Amendment, as urged on behalf of the petitioners in this case.
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2016 (3) TMI 1216
Addition of gross profit rate of 31% estimated by the AO - Held that:- As decided in assessee's own case for the assessment years 2008-09 and 2009-10 [2015 (12) TMI 1684 - ITAT JAIPUR] that the books of account cannot be rejected. Besides, in assessment year 2007-08, substantial gross profit addition was reduced by the ld. CIT(A) on same facts and circumstances of the case to a meager figure. The reason for fall in assessee's gross profit cannot be brushed aside. The fact is that there is a stiff competition in the global market and it is a buyer market which cannot be disputed. In view of these deliberations, we see no justification in making any gross profit addition. Thus we do not endorse the rejection of books of account and there is no justification in estimation of any gross profit addition - Decided in favour of assessee.
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2016 (3) TMI 1215
ALP adjustment in respect of the issuance of corporate guarantees - Held that:- Vide our order of even date, which is deemed to be attached and forming part of this order as well, we have deleted similar disallowance for the assessment year 2009-10. We see no reasons to take any other view of the matter for this year. Respectfully following the said order, we uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned ALP adjustment
Disallowance under section 14A - Held that:- When there is no income in the hands of the assessee, which is exempt from tax, there cannot be any occasion to make disallowance under section 14A. This was so held by Hon’ble Delhi High Court in the case of CIT vs. Winsome Textile Industries Ltd (2009 (8) TMI 220 - PUNJAB AND HARYANA HIGH COURT ) - Thus addition deleted. - Decided in favour of assessee
Deduction u/s. 80IB(8A) allowed.
Disallowance of expenses on MS Office licence - Held that:- The amount paid is only an annual licence fees for use of software, the expenses so incurred is required to be treated as revenue expenditure. No material has been brought on record to demolish, or even dispute, this finding of fact. In view of these discussions, and bearing in mind entirety of the case, we approve the order of the CIT(A) on this point as well.
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2016 (3) TMI 1214
Interest on delayed refund - denial on the ground that the refund claim on 14.7.2009 arises as a consequence of CESTAT order No. 333/2009 dated 5.3.2009 and as such in terms of Section 11B of the Central Excise Act, the relevant date for submission of refund claim shall be the date of order of CESTAT i.e. 5.3.2009 - Held that: - the Hon’ble Supreme Court in the case of Ranbaxy Laboratories Ltd [2011 (10) TMI 16 - Supreme Court of India] has categorically held that the appellant is entitled to interest after the expiry of three months from the date of filing the refund application till the refund is finally sanctioned - appeal allowed - decided in favor of appellant.
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2016 (3) TMI 1213
Validity of preventive detention order in respect of the husband of the appellant who was already in jail - Held that: - reliance placed in the case of Rekha Versus State of T. Nadu TR. SEC. TO Govt. & Anr [2011 (5) SCC 244], where it was held that only in those cases where there is a real possibility of release of a person on bail who is already in custody, action can be taken for detention of such a person by passing orders of preventive detention under COFEPOSA Act. Otherwise, there is no occasion and justification to pass such an order - the detention order cannot be sustained - appeal allowed - decided in favor of petitioner.
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2016 (3) TMI 1212
Reopening of assessments - whether since action under Section 158BC (a) is already taken in pursuance to search and seizure operations, no parallel proceedings can be started under Section 147 in relation to the same issue? - Held that:- The validity of the said search proceedings and the consequential notices issued to the Petitioners was the subject matter of WP which was dismissed by this Court [2006 (12) TMI 77 - HIGH COURT, DELHI] and against the said order, SLP was filed by the Petitioners [2016 (4) TMI 1133 - SUPREME COURT], in which notice was issued by the Supreme Court and it was directed that the audit under Section 142 (2A) of the Act may go on, but no final assessment order shall be passed. It is stated that Civil Appeal arising out of the aforementioned SLP is likely to be heard finally in the near future.
In the present petition, while issuing ‘Rule DB’ on 16th July 2002, further proceedings under Section 147 of the Act against the Petitioners was stayed.Since the outcome of the above appeal in the Supreme Court will have a bearing on the aforementioned ground urged in the present petition, it is considered appropriate to await the decision of the Supreme Court.
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2016 (3) TMI 1211
Addition u/s 14A - Held that:- The first argument of AR do not carry any force as the figures in the balance sheet suggest that the assessee had no surplus funds to make investment in mutual funds. The second argument of the learned AR that at the time of making investment there were little borrowings also do not hold ground as money has no colour and in a running business it rotates and balance in each account changes from day to day and furthermore the fact remains that it is a case of use of mixed funds for making investments therefore, disallowance u/s 14A was warranted. However the last argument of learned AR that the disallowance be restricted to the amount of dividend is acceptable as the Coordinate Bench in the case of M/s Daga Global Chemicals Pvt. Ltd. [2015 (1) TMI 1204 - ITAT MUMBAI] has held that the disallowance u/s 14 r. w Rule 8D cannot be exceed the exempt income. Thus we restrict the disallowance u/s 14A to ₹ 60016 only. - Decided partly in favour of assessee.
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2016 (3) TMI 1210
TPA - comparables selected by the TPO for determination of Arm's Length Price - Held that:- Referring to software development services undertaken by assessee companies dissimilar with that of assessee need to be deselected from final list of comparables.
Benefit of tolerance range of +/- 5% as per the proviso to Section 92C(2) of the Act. If the difference of the price of the international transactions and average price of the comparables is within the tolerance range then the benefit of proviso to Section 92C(2) of the Act is available to the assessee. Accordingly, we direct the A.O./TPO that while computing the ALP after excluding certain comparables as directed by us, the benefit of the proviso to Section 92C(2) of the Act has to be considered.
Exclusion of expenditure incurred by the assessee in foreign currency from export turnover - Held that:- Following the case of CIT v M/s Tata Elxsi Ltd. & Others [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we direct the Assessing Officer to exclude the expenditure in the foreign currency from total turnover as well.
Disallowance of computer software expenses by treating the same as capital in nature - Held that:- hWen the expenditure in the case of the assessee is towards application software then by following the decision of the co-ordinate bench of this Tribunal in the case of Broadman Communications Technologies Pvt. Ltd. [2015 (6) TMI 1122 - ITAT BANGALORE] we decide this issue in favour of the assessee.
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2016 (3) TMI 1209
Determination of arm’s length interest rate - Held that:- This issue is similar to the issue raised in earlier year, wherein the DRP has directed the AO to adopt the interest rates of the loanee country and to search in the ‘Loan connector’ data base which was not done by the AO/TPO. Thus we direct the TPO to follow accordingly in this year also and examine the ALP on similar lines.
Deduction claimed u/s. 35D - Held that:- We direct the AO to examine the above and allow relief as in earlier years, since claim is arising in earlier years. With this, this ground is considered as allowed.
Adjustment made under the head ‘Foreign Exchange Loss’ - Held that:- Respectfully following the decision taken in earlier year, we direct the AO to allow the loss as claimed. Moreover, as seen from the order of the DRP, the DRP also directed the AO to include the foreign exchange loss or gain as part of operating cost vide para 4 & 5 with reference to foreign exchange fluctuation gain on restatement of FCCBs. When the DRP directed the AO to treat the foreign exchange fluctuation as an operational cost revenue/cost vide para 8.3, we are unable to understand how the AO can take a decision now treating it as a speculative loss, contrary to the direction of the DRP
Un-realized foreign exchange gain on FCCBs - whether treated as ‘income’ or not? - Held that:- We direct the AO to treat the above amount as on capital account, to be adjusted in capital accounts. However, if any benefit was obtained by assessee in the TP provisions by treating this amount as operational income, we direct the AO/TPO to examine the working again, so as to exclude the amount from the computation and if any adjustment is required. Assessee cannot take advantage of its own stand to the detriment of Revenue in TP provisions. There should be a constant approach. Treatment of this gain as operational income does not arise as the same was not treated as income, therefore any computation based on that has to be reexamined. This issue can be considered by the TPO afresh and if necessary, necessary proceedings can be initiated under the TP provisions as a direction by the Bench. With these directions, these grounds are allowed.
Realised foreign exchange fluctuation pertaining to assets as ‘business income’ - Held that:- AO is directed to allow the claim from the computation of income to adjust the same from the cost of assets in accordance with the provisions of Section 43A. These grounds are also treated as allowed
Disallowance of depreciation on computer software - Held that:- There is no adjustment to be made u/s. 43(6) towards the cost of assets which are capitalised, in case of failure to deduct tax. The provisions of Section 40(a)(ia), therefore cannot be extended to the disallowance of depreciation which is allowable u/s. 32. In case any default is there for non-deduction of tax, AO could have invoked the provisions of Section 201/201(1A), but cannot resort to disallowance of depreciation u/s. 40(a)(ia) on an asset which was capitalised in the Books of Account and depreciation was claimed. The action of the AO cannot be upheld. Accordingly, he is directed to allow depreciation as claimed by assessee in its computation. The alternate contention of excess disallowance becomes academic. The disallowance so made by the AO is deleted.
Adjustments made to the export turnover for the purpose of computing deduction u/s. 10AA - Held that:- We direct the TPO to exclude the amounts which are considered for disallowance, other than those expenses pertaining to freight, telecommunication charges or insurance attributable to the delivery of articles or things outside India or directly relatable to service outside India. Grounds are considered allowed accordingly.
Non-grant of Foreign Tax Credit - Held that:- Since the taxable income as per the return of income was NIL, assessee did not claim the FTC in its return of income. While making the various disallowances, AO was informed about the details of FTC but AO did not consider the same. It was the submission that AO should examine the FTC entitlement in case, there is any taxable income while giving effect to the order of the ITAT. After considering the rival contentions, we agree with assessee’s contentions. In case, assessee’s claim of total income being NIL was not accepted by the AO and any disallowances or adjustments are made, then, assessee’s claim for FTC also should be examined, before raising any tax demand on assessee.With these directions, the ground is considered allowed for statistical purposes.
Disallowance of year end professional charges - invoking the provisions of Section 40(a)(ia) - Held that:- The order of the DRP cannot be accepted. First of all, DRP should have seen whether the amounts are credited to individual accounts or general provision was made. Not only that explanation © to the section 194J specifies that credit in the Books of Account also attracts TDS. Since the direction of the DRP is not in accordance with the provisions of the Act, we have no hesitation in reversing the said decision. The AO’s action is upheld. However, AO is directed to examine whether the amounts so disallowed are pertaining to the unit in which assessee has claimed 10AA deduction and if so, the disallowance would increase the profits of such unit. Accordingly, deduction u/s. 10AA may have to be increased. This aspect requires examination by the AO. Subject to that, Revenue’s ground is treated as allowed.
Disallowance of depreciation on servers - Held that:- No reason to interfere with the order of the DRP. The servers are the part of computer equipment and cannot work in isolation. Accordingly, the directions are upheld. Revenue’s ground on this issue is rejected.
Adjustments made to export turnover for the purpose of deduction of Section 10AA - Held that:- It is admitted that on a parity of comparison, whatever is reduced from the export turnover has to be reduced from the total turnover and this principle was accepted by the jurisdictional Karnataka High Court in the case of CIT Vs. Tata Elxsi Ltd.[2014 (9) TMI 1013 - KARNATAKA HIGH COURT], which the DRP has followed. We do not see any reason to interfere with the above principle, however, we have already directed in assessee’s appeal to exclude certain expenditure which was disallowed by the AO from the export turnover. Consequently, there will be adjustments to be made to the total turnover also.
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2016 (3) TMI 1208
Stay of demand - Income attributed in India - period of sty in India - Held that:- Assessing Officer has assessed the income of ₹ 20 crore (appx), i.e., about 10 times to the returned income, violating CBDT Instruction No.96 dated August 21, 1969, therefore requisite demand is required to be stayed and also law settled in Soul v. DCIT [2008 (8) TMI 502 - DELHI HIGH COURT] as refereed.
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2016 (3) TMI 1207
Denial of an opportunity to make alternative arrangements for its counsel who at the last moment declined to act as such - the decision in the case of Millennium Appliances India Ltd. Versus Union of India & Others [2017 (5) TMI 594 - DELHI HIGH COURT] referred - Held that: - application disposed off.
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