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Showing 481 to 500 of 23051 Records
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2019 (12) TMI 1207
TDS u/s 195 - Royalty - Assessee purchased certain software licenses from M/s.Saipem SPA, Italy, which were used by assessee for providing services to customers for various support functions in accounting, reporting, etc.- Addition u/s 40(a)(i) - whether the aforesaid payments are Royalty payment u/s 9(1)(vi) of the 1961 Act and Article 13(3) of India-Italy DTAA which were subject to income-tax deduction at source u/s 195 ? - HELD THAT:- As could be seen from decision of Hon’ble Karnataka High Court in the case of CiT v. Synopsis International Old Limited [2013 (2) TMI 448 - KARNATAKA HIGH COURT] which decision was rendered in context of Royalty as defined in India-Ireland DTAA wherein definition of Royalty is paramateria to definition of Royalty as used in India-Italy DTAA(except exclusion to aircraft in case of India- Ireland DTAA as detailed above by us in this order by reproducing relevant Article of both the treaties) with which we are seized of and Hon’ble Karnataka High Court has held that grant of non-exclusive non transferable license in computer software with no right to sub-lease or transfer shall fall within Royalty both under DTAA as well u/s 9(1)(vi) of the 1961 Act read with explanations and shall be chargeable to incometax under the provisions of the 1961 Act.
Hon’ble jurisdictional High Court has affirmed the ratio of decision of Hon’ble Karnataka High Court in the case of Synopsis International Old Limited, in a recent judgment in the case of Zylog Systems Limited [2019 (5) TMI 1209 - MADRAS HIGH COURT] . We are bound by aforesaid decision of Hon’ble Jurisdictional High Court decision and Respectfully following the decision of Hon’ble Madras High Court in the case of Zylog, we allow appeal of Revenue
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2019 (12) TMI 1206
TP Adjustment - international transaction of ‘Allocation of shared service charges’ - whether the transaction of Payment of shared service charges on one hand and Import of raw material and Export of finished goods on the other, namely, the manufacturing activity, can be construed as ‘closely linked transactions’? - HELD THAT:- We are dealing with a situation in which the assessee is trying to club the transaction of Payment of shared service charges with the transactions of manufacturing activity, which is a step further away from the technical know-how in the process of manufacturing. In view of the foregoing discussion, it is held that the instant transaction of payment of shared service charges cannot be aggregated with the international transactions concerned with the manufacturing activity. We, therefore, reject the aggregation approach as put forth on behalf of the assessee and ex consequenti, the additional ground is hereby dismissed.
We find that the question of aggregation or segregation of the transactions can arise only when it is proved that the assessee actually availed the services for which it made the payment. We have noted supra that the assessee has admittedly not proved the receipt of the services.
It has further been admitted by the ld. AR that the assessee has no evidence to prove the receipt of services through correspondence or e-mails or visits of the personnel of the AEs.
Once the addition is sustained on the ground that the assessee failed to prove the receipt of services at the very outset, there can be no question of any aggregation.
It is held that neither the aggregation of the transaction of allocation of shared service charges is permissible with the other reported transactions under the TNMM in the facts as are instantly obtaining nor the assessee could adduce any evidence either for the cost sharing arrangement without any mark up or the actual receipt of services. We, therefore, uphold the disallowance.
Addition in respect of the international transaction of ‘Payment of Trademark charges’ - HELD THAT:- Once it was found that the assessee actually paid royalty at total of 4.5% under the international transaction, then the course open to the TPO should have been to determine the ALP of the international transaction of payment of royalty including use of Contractual Trademarks by considering total payment at 4.5%, instead of shutting the door by holding that there was no need to pay further 0.5% of Net Sales Volume when the assessee was already paying 4% towards royalty. The fact that the assessee did pay royalty at 4.5% clearly demonstrates that the payment of further 0.5% ought to have been considered as increase in the rate of royalty from 4% to 4.5%, being the international transaction to be benchmarked by considering total payment of royalty at 4.5%. As the authorities below have proceeded with the disallowance of 0.5% translating into an addition of ₹ 19,96,178/-, we set-aside the impugned order on this score and remit the matter to the file of AO/TPO for determining afresh the ALP of the international transaction of payment of royalty including towards use of Contractual Trademarks by considering the transacted value of the transaction at a combined rate of 4.5%, consisting of Payment of royalty at ₹ 1,99,62,183/- and Payment of Trademark charges at ₹ 19,96,178/-. If in such a fresh processing of the total royalty transaction under the transfer pricing provisions, some adjustment is called for, the same be made. Needless to say, the assessee will be allowed a reasonable opportunity of hearing.
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2019 (12) TMI 1205
Disallowance of dividend distribution by the AO - HELD THAT:- As decided in own case [2018 (7) TMI 1876 - ITAT AMRITSAR] we find no basis for the said addition. Even assuming, for the sake of argument, that the dividend distribution tax was indeed payable by the assessee-company, the Revenue can only proceed under law to exact the same. It does not in any manner lead to the inference of any income having accrued to the assessee as a result. Rather, the said tax, where paid, would stand to be debited to its operating statement (P&L A/c) for the year. We decide accordingly.
Addition on account of standard loan disallowed by the AO - HELD THAT:- Issue to be decided against revenue as relying on assessee own case [2018 (7) TMI 1876 - ITAT AMRITSAR]
Addition on account of losses of fraud committed at main branch, Hoshiarpur and on account of contra entry of interest not decided by the CIT(Appeal) - HELD THAT:- We find that while disallowing the total amount of ₹ 6,00,75,946/-. The AO has also included the amount of ₹ 2.17 crores being provisions made against main branch office of fraud and ₹ 2.58 crores being interest paid to main branch Hoshiarpur without confronting the assessee on this issue. Therefore, we are of the considered opinion that this issue is set aside to the file of the AO for examination and reconsideration of the same after affording a reasonable opportunity of being heard to the assessee. In view of this ground of appeal is set aside to the file of the AO in entirety for reconsideration of the disallowances made.
Disallowance of fuel and hire charges debited to the P&L account - HELD THAT:- In the instant case, we find neither of these two conditions being satisfied; the former being in fact incidental in-as-much as a voluntary expenditure, shown to be for the purpose of the assessee’s business, would qualify for deduction. In our considered view, therefore, the impugned expenditure does not meet the test of section 37(1), and stands rightly disallowed by the Revenue. We decide accordingly, and the Revenue succeeds
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2019 (12) TMI 1204
Deduction u/s 54F - claim rejected as assessee has not deposited the unutilized sale consideration in capital gains account scheme before the due date for filing the return of income for asst. year 2013- 14 as per sec. 54F(4) and construction has not been completed within 3 years from the date of transfer of original asset - HELD THAT:- If the assessee has invested entire sale consideration within three years, then the requirement of complying with provisions of sec.54F(4) cannot come into the way of the assessee for claiming deduction u/s 54F.
Assessee has not completed the construction within 3 years of date of transfer of original asset - As decided in SAMBANDAM UDAYKUMAR [2012 (3) TMI 80 - KARNATAKA HIGH COURT] if he has invested the money in construction of a residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F of the Act. The essence of the said provision is whether the assessee who received capital gains has invested in a residential house. Once it is demonstrated that the consideration received on transfer has been invested either in purchasing a residential house or in construction of a residential house even though the transactions are not complete in all respects and as required under the law, that would not disentitle the assessee from the said benefit.
What is required to be seen is whether the assessee has invested the sale consideration proportionate to the deduction claimed u/s 54F of the Act in construction or purchase of new residential house within the period prescribed in the section. Accordingly, we set aside the order passed by Ld CIT(A) and restore the issue to the file of the AO for verifying the quantum of amount spent by the assessee before three years from the date of transfer of original asset and accordingly for examining the deduction claimed u/s 54F of the Act. - Decided in favour of assessee.
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2019 (12) TMI 1203
Continuance of approval U/s. 10(23C)(vi) in the prescribed form No. 56D - CIT (E) rejected the application - HELD THAT:- In the case of the assessees, the Revenue had earlier granted approval U/s. 10(23C)(vi) of the Act by examining the activities mentioned in the deed of the assessees societies. Thereafter, when the assessees societies had violated the conditions stipulated by the Ld. CIT while granting the approval U/s. 10(23C)(vi) of the Act, additions were made and the approval withdrawn for those assessment years. However, it cannot be presumed that the assessees societies is bound to err year after year by violating the provisions of section 10(23C)(vi) of the Act. It will not be appropriate to withdraw the approval or resist from granting approval U/s. 10(23C)(vi) of the Act when the assessees societies are conducting its charitable activities in the subsequent years sincerely and diligently for the benefit of the public at large without violating any of the conditions stipulated. Such action of the Revenue will deprive the beneficiaries of the assessees societies in obtaining the benefits which is detrimental to the larger interest of the public.
As it appears from the orders of the Ld. CIT dated 29/09/2017, during the period 1/4/2016 till 29/09/2017, no violation is pointed out. Further, from the assessment order of the assessees for the AY 2015-16 dated 27/12/2017 and 22/12/2017 (cited supra) it is evident that there was no violation. In such circumstances, we fail to understand as to why the assessee societies have to be penalised which will ultimately result in hardships to the public at large
Since during the relevant period the assessee societies has neither violated any of the provisions of section 10(23C)(vi) of the Act nor conducted itself detrimental to the conditions stipulated by the Ld. CIT while granting approval U/s. 10(23C)(vi) of the Act on the earlier instance, and further placing reliance on the Circular of the CBDT No.14/2015 dated 17/08/2015 and the decision o COUNCIL FOR THE INDIAN SCHOOL, CERTIFICATE EXAMINATIONS VERSUS DIRECTOR GENERAL OF INCOME TAX [2014 (5) TMI 898 - DELHI HIGH COURT] we are of the considered view that the decision of the Ld. CIT (E) to reject the application filed by the assessees U/s. 10(23C)(vi) is not justified. - Decided in favour of assessee.
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2019 (12) TMI 1202
Denial of claim of deduction u/s 36(1)(viia) - HELD THAT:- We find that identical issue arose in assessee’s own case for A.Y. 2013-14 and the Coordinate Bench of the Tribunal by following the decision of the Tribunal in the case of Bhagini Nivedita Sahakari Bank Ltd [2018 (12) TMI 322 - ITAT PUNE] had decided the issue in assessee’s favour.
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2019 (12) TMI 1201
Addition on account difference between stock declared land stock offered for taxation and treating the same as retraction from surrendered amount - Survey u/s 133A - HELD THAT:- No other incriminating material was found during the course of survey relating to unaccounted stock, excess physical stock was calculated by Revenue authority on estimative and presumptive basis. The stock statement prepared by the survey team on the date of survey itself seems to be on a loose wicket since the remarks column mentioning about the weighment of stock in trucks do not correlate with any actual weighment slip and also the alleged unrecorded stock is practical impossible to be stored on the available space with the assessee. Even after the retraction assessee had not retracted the total surrender but he prudently kept separate record of the sales of physical stock which was 250.03 MT whereas the book stock on the date of survey was 85.433 MT. The difference i.e. 165.27 MT is accepted as unrecorded stock which has been offered to tax by the assessee.
CIT(A) erred in confirming the addition made by the AO for unrecorded stock of ₹ 84,00,000/- merely on the basis of recorded statement and without basis of any material evidence and there the same needs to be deleted. We, accordingly order so and allow ground no.1 raised by the assessee.
Ad hoc addition for offering lower net profit stands confirmed by the CIT(A) - HELD THAT:- AO after taking average of last two years net profit rate applied the same on the turnover disclosed by the assessee and after comparing with the profits disclosed in the preceding year addition of ₹ 2,33,227/- made for lower net profit.
We, observe that during the course of assessment proceedings itself it was submitted that the main reason for the lower net profit during the year was due to increase in the depreciation expenditure which increased by ₹ 2,54,512/- in comparison with the preceding year. This fact went unattended by both the lower authorities Had the AO had considered the increased amount if the depreciation expenses at ₹ 2,54,512/- then the net profit for the year under appeal would not have decreased very significantly from the preceding year and would have been consistent as per the past history.
There is no justification with the Ld. AO of ignoring the material facts and making the addition for lower net profit of ₹ 2,33,227/- and the same deserves to be deleted. We, accordingly order so and delete the addition for ₹ 2,33,227/-. Ground No.2 of the assessee’s appeal is also allowed.
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2019 (12) TMI 1200
Addition on account of long-term capital gain on sale of properties - value of property as per Rent Capitalization Method - as contended that the properties sold were tenanted properties for last 30 years and same were sold to them only as is where basis and were subject to Rent Control Act - revenue contended section 50C reference is applicable for made is for valuation of income-tax purpose and it is not applicable to and provisions of section 16A of Wealth Tax Act are not applicable - HELD THAT:- We find that the provision of section 50C (2) which specifically provides that where reference is made by the AO to Valuation Officer the provisions of section 16A (2), (3), (4) (5) of Wealth Tax Act would apply in the same manner as they apply to valuation referred under Wealth Tax Act. The Rule 3 of Schedule III of Wealth Tax Rules specifically provide for method of valuation of rented building as Rent Capitalization Method. The VO has only stated that it has been valued as per guidelines of Board.
When there is specific provisions in the Act and Which provides valuation as per Rent Capitalization Method. In the case of tenanted properties.
Hon`ble Rajasthan High Court in the case of CIT v. Pramod Chand Soni [2017 (9) TMI 1686 - RAJASTHAN HIGH COURT] held that where properties are rented for more than 50 years and was in possession of tenants at the time of execution of sale deed hence, it could be reasonably inferred that such property could not fetch prevalent market rate as compared to other properties.
Similarly in the case of Ramendra Vikram Singh v. ITO [2009 (2) TMI 895 - ITAT, LUCKNOW] it was held that DVO report under section 50C (2) is binding on the AO and it was also held that Section 16A of Wealth Tax Act read with Rule and Schedule III of Wealth Tax Act are applicable to the valuation made under section 50C of the Act.
Similar findings were given by the Hon`ble Punjab & Haryana High Court in the case of CIT v. Prem Nath Anand [1976 (11) TMI 61 - PUNJAB AND HARYANA HIGH COURT] . On careful consideration of facts and circumstances and taking into consideration the cumulative effect of all the circumstances, we are of the considered view that the VO should have determined the valuation of properties by taking Rent Capitalization Method. We further, note that the VO had applied CPWD rate whereas he should have applied PWD rates and should have allowed depreciation @95% of cost taking the life of properties at 60 years. The AO is therefore, directed to consider value of property as per Rent Capitalization Method and compute capital gains accordingly.
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2019 (12) TMI 1199
Unexplained excess cash found during the course of survey - survey u/s 133A - HELD THAT:- Tribunal had categorically directed the A.O. to make verification of the claim of the assessee but instead of making the claim of the assessee, the A.O. yet again made additions, which have been challenged by the assessee in ground Nos.1 to 7. All the grounds are being disposed together for the sake of convenience and brevity. In respect of cash on hand of ₹ 2,50,000/- the explanation of the assessee is that there was some cash on hand. This submission was made before the A.O. by the assessee. However, the A.O. did not verify the contention of the assessee.
As per the assessee, there was repayment by the debtors of ₹ 1,62,524/- opening cash balance was ₹ 36,389/- interest received on amount received from debtors of ₹ 40,000/- sale of opening stock of ₹ 35,800/- proceed of sale of stock of ₹ 2,000/-. All these aspects ought to have been verified by the A.O. Even the Ld. CIT did not call for any remand report from the A.O. regarding these submissions.Therefore, under these facts and circumstances cannot sustain the additions made by the A.O. and the A.O. is directed to delete the additions - Decided in favour of assessee.
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2019 (12) TMI 1198
Long term capital gain or short term capital gain - period of holding - characterization of shares held by assessee in Scorpio beverages private limited whether long-term capital asset or a short-term capital asset - HELD THAT:- Following the decision of the coordinate bench in the case of Mr. Analjit Singh [2017 (12) TMI 306 - ITAT DELHI] we also hold that the gain on transfer of shares of Scorpio beverages P Ltd would be taxable as ‘long-term capital gains' and not ‘short-term capital gains' as assessee has held those shares for more than 12 months. Thus, ground number 4 – 8 of the appeal of the assessee is allowed to above extent.
Sales consideration received accrued to the assessee - HELD THAT:- on one side, preference share capital invested has been considered in the investment in total asset of that company whereas preferential capital issued by the company has not been included in the liability. This resulted in to including that value twice in the valuation of equity shares of that company. Therefore, there is an apparent misinterpretation of the financial statements of the subsidiaries. Therefore, the learned assessing officer is directed to correct the valuation of above five companies by including the value of preference share capital issued by these companies in the total liabilities. Such total liability is to be reduced from total assets of those companies to derive at the value of equity shares. Further, the Assessing Officer is also directed to verify all other figures from the audited balance sheets of all these companies as submitted by assessee and correct it, if it is found that they have been wrongly plotted, compute the value accordingly. Assessee is directed to put before AO such errors and which shall be rectified, if found in order.
Capitalization of interest expenditure - HELD THAT:- Cordinate bench has dealt with this issue in case of husband of appellant thus we dismiss ground of the appeal and confirm the orders of the lower authorities in not allowing the capitalization of interest cost of INR 1 00902358/– as part of the cost of acquisition while calculating capital gain on sale of shares of Scorpio beverages private limited.
Allowance of brought forward long-term capital loss brought forward from assessment year 2011 – 12 - HELD THAT:- Above loss was inadvertently claimed by the assessee at INR 2 49822064. Even in the grounds of appeal mentioned the assessee in ground number 23 has mentioned an astronomical figure, which is not the correct fact. Despite this assessee may be granted the brought forward long-term capital loss of INR 2 4982206/– if found in accordance with the law. Similar is the ground number 26 of the appeal where the claim of the assessee is about set off the brought forward long-term capital loss of INR 15336932/– for assessment year 2011 – 12. Assessee is directed to file requisite details before the assessing officer and the AO may examine the same and grant set off of the brought forward long-term capital losses, if found in accordance with the law
Grant of credit for tax deduction at source and advance tax - HELD THAT:- CIT – A has correctly held that if the above amount has been shown in form number 26AS, then AO is directed to grant the credit for tax deduction at source and advance tax paid. No infirmity can be found in such a direction given by the learned CIT – A. Assessee is further directed to submit the requisite details before the learned assessing officer about the tax deduction at source as well as the advance tax paid and reconcile the same with form number 26AS. AO may verify the same and grant credit for the same in accordance with the law. Accordingly, ground number 29 of the appeal of the assessee is allowed with above direction.
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2019 (12) TMI 1197
Addition u/s 68 - Documentary evidences to prove identity, genuineness and creditworthiness of the cash creditors - HELD THAT:- Looking to the fact that the evidence to the best possible extent have been filed by the assessee to explain the cash creditors and the revenue authorities were competent enough to proceed against the cash creditors if they were not satisfied with statement on oath given by the cash creditors. It is clear that the assessee has proved all the ingredients of section 68 of the Act in order to clear the burden of proof. The onus thus shifted on the Revenue to rebut which remained unfulfilled. The persons advanced the loan are man of means and nearly 70% of loan creditors are assessed to tax and the remaining are agriculturists having sufficient agricultural land to earn agricultural income. The affidavit has been filed by all the cash creditors and this fact cannot be disputed. It is also brought to a notice that the alleged loans accepted through account payee cheque were repaid in a month time, has not been disputed by the revenue. AO was made a case of capital building since loans were repaid within a month.
Sufficient material placed on record by the assessee during the course of hearing before both the lower authorities and before us including the statement on oath taken by the Ld. AO and other documentary evidences referred hereinabove, are of the considered view that assessee had proved identity, genuineness and creditworthiness of all the cash creditors beyond doubt for which impugned addition u/s 68 - Appeal of the Revenue stands dismissed.
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2019 (12) TMI 1196
Disallowance of bad debts written-off and debited under the head provision for liquidated damages in the financial statement of the year under assessment - HELD THAT:- When nature of the amount due has not been disputed by the revenue authorities being irrecoverable from the customers against various jobs carried out by the assessee in the course of business nor disputed the explanation given by the assessee before the Ld. CIT(A), aforesaid deductions is eligible for claim during the year under assessment.
So far as question of treating the claim of payment of liquidated damages in the nature of penalty is concerned, when aforesaid damages are undisputedly business expenditure incurred on account of contractual default, the contractual liability cannot be treated as a penal liability.
Hon’ble Supreme Court in case of Prakash Cotton Mills Ltd. vs. CIT [1993 (4) TMI 3 - SUPREME COURT] also decided the issue as to when the amount paid by assessee as interest or damages or penalty could be regarded as compensatory in character as would entitle such assessee to claim it as an allowable expenditure u/s 37(1)
We are of the considered view that when the damages paid by the assessee are business expenditure incurred on account of contractual liability the same cannot be treated as penal liability as has been held by Ld. CIT(A). Moreover, once it has come on record that the amount in question is irrecoverable from the customer and has been written off in the books of accounts during the year under assessment the amount is eligible for deduction u/s 36(1)(vii) of the Act as claimed by the assessee. - Decided in favour of assessee.
Addition of deemed dividend u/s 2(22)(e) - HELD THAT:- Amount paid by assessee company to TPPL was on account of sale of plant and machinery and not on account of loan and in view of CBDT Circular No. 19/2017 of 12.06.2017 the same is a commercial transactions and provisions contained u/s 2(22)(e) are not attracted.
So, we are of the considered view that tax, if any, is to be paid on this amount by the shareholder as the amount is not advance but a business transaction being sale proceeds of the sale of plant and machinery by TPPL to the assessee company. - Decided in favour of assessee.
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2019 (12) TMI 1195
Assessment order passed under section 143(3) r/w section 254 - HELD THAT:- We hold that the present appeal filed by the assessee being not against an appealable order as provided under section 253 of the Act, is not maintainable.
We must observe, the assessee may be having a strong case in its favour on the issue of not forwarding the draft assessment order before passing the final assessment order. However, that issue relating to the validity of the impugned assessment order has to be decided by the appropriate authority as provided under the statute.
In view of the aforesaid, since the appeal of the assessee is not maintainable, we do not find any justifiable reason to entertain the grounds raised by the assessee including the additional grounds. Therefore, the present appeal filed by the assessee deserves to be dismissed in limine without going into the merits of the various issues raised by the assessee.
Accordingly, we do so. However, as observed by the co–ordinate Bench in case of Tevapharm India (P) Ltd. V/s ACIT [2018 (4) TMI 34 - ITAT DELHI] it is open to the assessee to file an appeal before the first appellate authority and contest all the issues including the validity of the order passed by the Assessing Officer.
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2019 (12) TMI 1194
Disallowance of deduction u/s 43B - sum represented deposit of electricity duty in a designated non-lien bank account - HELD THAT:- considering the declaration filed by the assessee in Form No.8 this issue is restored to the file of the AO for a fresh consideration as per the final outcome of assessee’s appeal
Addition u/s 14A - HELD THAT:- In absence of separate investment account, it is presumed that investment was taken place from common accounts which consist of borrowed fund, over draft account and other trading account utilised for business purpose meaning thereby the AO categorically held that the assessee has used interest bearing borrowed funds, over draft and other trading funds for the purpose of investment which earned exempt dividend income of the assessee. Also observed by the authorities below that investment activities and business activities has its separate nature in principle and no expenditure is allowable on investment activities, which brings exempt dividend income of the assessee. The AO went up to the extent to observe that if the interest bearing fund would have not utilised for investment purpose, the interest payment expense would have been reduced in accordance with the taxable income of the assessee.
AO was right in invoking the provisions of section 14A r.w. rule 8D of I.T.Rules. However, the ld CIT(A) after accepting the alternate plea of the assessee and the computation made thereto by the AO, restricted the disallowance to the amount of ₹ 48,17,000/- under Rule 8D. After carefully considering the orders of lower authorities we are of the view that the CIT(A) was right in restricting and confirming the addition. We, accordingly uphold the findings of the CIT(A) and dismiss the ground of appeal of the assessee.
Addition u/s.2(24)(x) - Delayed contribution to EPF was deposited by the assessee - HELD THAT:- In the instant case, it is not in dispute that the contribution to EPF was deposited by the assessee before due date of filing the return of income u/s.139(1) - In view of above findings of Hon’ble Delhi High Court in the case of CIT vs. Bharat Hotels Ltd. [2018 (9) TMI 798 - DELHI HIGH COURT ] the issue is restored to the file of the Assessing Officer to examine the contributions made with reference to the dates when they were actually made and grant relief to such of claim which qualified for such relief in terms of prevailing provisions of the Act. We clearly obverse that the assessee would be entitled to deductions in terms of section 36(1)(va)
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2019 (12) TMI 1193
Assessment u/s 153A - unexplained expenditure u/s 69C - HELD THAT:- Addition made by the Assessing Officer based on the entries in the books found, belonging to and seized at the premises of the third party, in the absence of cross examination of such party based on which the addition has been made cannot be held to be sustainable in the eyes of the law. - Decided in favour of assessee.
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2019 (12) TMI 1192
Disallowance of expenses incurred towards staff welfare, guest house expenses, club subscription expenses and cost of services - addition made as expenses were not incurred wholly and exclusively for the purposes of the business of the assessee - HELD THAT:- Assessee could not provide complete details/evidences/invoices/bills etc. of these staff welfare expenses and cost of other services to prove that these expenses were incurred wholly and exclusively for the purposes of the business of the assessee and hence under these circumstances and keeping in view that it is an old litigation with a view to end litigation and being fair to both the rival parties, we allow 50% of staff welfare expenses and cost of other services claimed by the assessee as business expenses , while we affirm disallowance of balance 50% of staff welfare expenses and cost of other services claimed by assessee in return of income filed with Revenue.
Club expenses disallowance - We hold this issue in favour of Revenue and hold that club expenses incurred by assessee shall not be allowed as business deduction.
Disallowance u/s 35(2AB) - AO disallowed weighted deduction claimed by assessee u/s 35(2AB) of the R&D expenditure incurred by assessee, while the learned CIT(A) allowed the claim of the assessee for weighted deduction of R&D expenses - HELD THAT:- As per facts emerging from records, the AO has given clear and positive finding that evidences in support of expenses incurred on in-house approved R&D facility are not submitted by assessee during the course of assessment proceedings and there is no findings on this issue by learned CIT(A) but we have already held that no deduction u/s 35(2AB) of the 1961 Act can be allowed to assessee on this short ground of non entering into an agreement for cooperation with Secretary, DSIR and for audit of accounts of approved R&D facility as held by us in this order and in case if at any stage our above decision is over-ruled by Hon’ble Superior Courts on that count, then the matter shall be remitted back to the file of the AO for denovo adjudication for verifying the eligible expenditure spent by assessee on its approved inhouse R&D facility for computing weighted deduction u/s 35(2AB) of the 1961 Act , after considering all the evidences/explanations which the assessee may like to rely in its defense and after giving proper and adequate opportunity of being heard to assessee in accordance with principles of natural justice in accordance with law .
Disallowance of proportionate interest expenditure on interest free advances made by assessee to its group concerns - as stated by AO to be made out of interest bearing funds and the AO has disallowed proportionate interest expenses as the assessee has failed to prove commercial expediency in granting these interest free advances to group companies - HELD THAT:- The assessee has issued Floating Rate Notes(FRN) to the tune of US $ 120 Million in the year 1996 which were due for repayment/maturity in 2003. These FRN’s were denominated in Foreign currency carrying interest and the assessee had incurred interest expenses as well loss on foreign exchange fluctuations on these FRN’s. It was also observed by tribunal that said FRN’s were issued for financing the import into India of capital goods for its operations and projects in which the assessee is involved and for general corporate purposes permitted by Government of India, which is stated in the offer document issued by assessee. It is also observed that Chennai-tribunal in a decision rendered in assessee’s own case [2016 (12) TMI 1800 - ITAT CHENNAI] of which one of us being Hon’ble Judicial Member was part of Division Bench who pronounced that order) has remitted the matter back to the AO for fresh adjudication as to allowability of proportionate interest expenses with interest free advances made to associated companies - we are of the considered view that the matter is required to be restored to the file of the AO for fresh adjudication de-novo
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2019 (12) TMI 1191
Revision u/s 263 - related parties u/s.40A(2)(b) - HELD THAT:- AO had again issued notice u/s.142(1) of the Income Tax Act dated 03.11.2016 which is at page 24 to 26 and in this respect the reply was also filed by the assessee before the AO which is at page no.20 to 23 and had filed all the replies along with documents and participated into the enquiry proceedings being carried out by the AO. We, further noticed that since the assessee has filed the audited reports containing all the details regarding related parties u/s.40A(2)(b) along with name, PAN, Relations, nature of transactions and payments made. Even otherwise, the assessee has also duly furnished the report from expert in Form 3CEB as required by Law, wherein all the details of payment made related to party were mentioned i.e. name of persons with whom specifically domestic transactions as entered into, description of transaction along with quantitative details if any. Total amounts paid or payable in the transaction as per the books and as computed by the assessee having regard to arm’s length price. The method used for determining the arm’s length price which also goes to show that there is nothing on the record to suggest that assessee had made any excessive payments to the related parties which has caused loss to the Revenue.
Payment of bank guarantee commission and renewal fees - HELD THAT:- With regard to payment of bank guarantee commission and renewal fees is concern, in this regard, we have seen from the record that specific query was raised by the AO and the assessee had submitted ledger account vide letter dated 25.11.2016 and also duly replied to the query vide letter dated 26.12.2016.
All those facts goes to show that the AO has applied his mind and after considering the same and has passed the assessment order u/s.143(2) of the Act and hence it cannot be said that this is a case of no enquiry. It is well settled that both the conditions vis-à-vis before of AO should be erroneous and assessment was prejudicial to the interest of Revenue and both those conditions should be cumulatively specified by the ld.Pr.CIT.
In the present case the matter belongs to A.Y. 2014-15 and the Explanation 2 was inserted in the Act u/s.263 by Finance Act 2015 w.e.f 01.06.2015. Even otherwise, taking into consideration the cumulative facts observed by us in the present case as well as the legal proposition laid down by the higher courts we are of the view that in the present case the AO had made enquiry and assessee has also placed on record all the documents as were required by the AO in respect of both the issues as now raised by the ld.Pr.CIT. Thus, the order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue.
Merely just because the view taken by the AO was not found acceptable does not mean that the AO has failed to make requisite enquiries. Thus, the view taken by the AO was plausible view, which cannot be disturbed by the Ld. Pr.CIT. Therefore, the ld. Pr.CIT was not correct in exercise the jurisdiction under section 263 of the Act. In view of these facts and circumstances, we quash the proceedings initiated in the impugned order passed under section 263 of the Act and allow the appeal of the assessee.
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2019 (12) TMI 1190
Penalty u/s. 271C - TDS default - Period of limitation u/s 275 - Competent officer - reasonable cause for non-compliance with the provisions as envisaged u/s.273B - Assessee in default for not deducting tax at source u/s.201(1) and also levying interest on tax not deducted at source from the date on which tax ought to have paid to the credit of the Central Government till the date on which the payments are made u/s. 201(1A) - HELD THAT:- There was actually non-deduction of tax at source by the Assessee but the TDS deducted was given credit only on the basis that the payees have filed their returns of income showing the amounts received from the Assessee and hence the Assessee was given the benefit of TDS deducted to that extent as per the decision of the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverage Pvt.Ltd. [2007 (8) TMI 12 - SUPREME COURT] .
The plea of the Assessee that failure to deduct tax at source was unintentional and was under the bonafide belief that tax is not deductible on payments in question has to be accepted in the given facts and circumstances of the case. It is also not disputed that the default was noticed only at the time of Survey Proceedings. Taking into consideration the nature of business and small town in which the Assessee carries on business and other circumstances, we are of the view that this is not a fit case for levy of penalty u/s.271-C as the circumstances pointed out above would be reasonable cause for the failure of the Assessee to deduct/short deduct tax at source. We therefore cancel the order imposing penalty u/s.271-C - Decided in favour of assessee.
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2019 (12) TMI 1189
Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT:- AO has followed the due procedure of law and also had specific information in his possession, received from the DIT(Inv.) which indicated that certain amounts had been received in the form of bogus share capital/premium/loan from Sh. Surinder Kumar Jain who were entry operators.
AO has elaborately discussed in the assessment order as to how the amounts received in the form of share capital/share premium etc, had not been properly examined at the time of earlier assessment and also how this information was fresh information and specific in nature, which clearly indicated that there was omission/failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
AO has also relied upon various judicial pronouncements stated in the assessment order to highlight such omission or failure to disclosed fully and truly all material facts what clearly justified reopening of the assessment beyond four years.
In the present case there was enough evidence and justification with the AO to reopen the assessment beyond period of four years. It has been widely held by the Courts that it is not necessary to prove beyond doubt that income has escaped assessment and it is sufficient that the AO has recorded his reasons and followed the due procedure of law for reopening of the assessment. In .view of factual matrix of the present case, I do not find any reason to interfere with the findings of the AO that this was a fit case for reopening of the assessment and accordingly the contentions and Grounds of the appellant are dismissed.
Addition on account of share capital and share premium - In the factual matrix of the present case, where entries had been taken from paper companies and Credit worthiness of the Parties as well as the genuineness of the transaction had not been discharged by the appellant, there was no justification to accept the contentions of the AR Of the appellant that the additions were not justified. Accordingly, after careful consideration of the facts of 'the present case, there is no material or submissions provided by the AR of the appellant, which calls for any interference In the decisions of the AO. Accordingly, this addition of ₹ 90 Lacs made by the AO is upheld. These Grounds are therefore dismissed.
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2019 (12) TMI 1188
Disallowance u/s 41(1) - whether merely because assessee has shown the outstanding liability for years and non-furnishing of complete details, cannot be the reason for considering the liability has ceased to exist? - HELD THAT:- Liability has not ceased. The facts remain undisputed by both authorities are that these amounts were debited by the assessee and allowed by the Revenue. We find that the impugned addition was made by the Revenue authorities by doubting existence of these liabilities and that the assessee has not written back and continue to show these liabilities as outstanding in the balance sheet.
AO has not brought any evidence on the record to show that liability has ceased. The assessee has not written off the liability in the accounts. Therefore, there would not be any addition under section 41(1) of the Act. Hon'ble High Court in the case of Bhogilal Ramjibbhai Atara [2014 (2) TMI 794 - GUJARAT HIGH COURT] considered this aspect and observed that even if debt itself is found to be non-genuine from the very inception that also in terms of section 41(1) of the Act, there is no solution for that. In other words, addition cannot be made unless liability in the accounts has been written off. - delete the disallowance - Decided in favour of assessee.
Non-granting of set off of unabsorbed depreciation and carry forward of short term capital loss - HELD THAT:- CIT(A) has recorded a finding that no discussion on these issues has been made by the AO, and also the assessee has not made any submission on this ground. CIT(A) has set aside this issue to the file of the AO with direction to verify the records and allow the claim if allowable as per law. We are of the view that no prejudice will be caused to the assessee with this direction of the ld.CIT(A) to the AO, and therefore, no interference is called for on this issue.
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