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Showing 101 to 120 of 1442 Records
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2022 (2) TMI 1343 - ITAT MUMBAI
Penalty proceedings u/s 271(1)(c) - Estimation of income - bogus purchases - HELD THAT:- We are of the opinion that when the addition is on estimated basis, penalty u/s 271(1)(c) of the Act cannot be levied on such adhoc estimated income. Disallowance of purchases on ad-hoc basis does not tantamount to furnishing inaccurate particulars of income under the provisions of Section 271(1) (c) of the Act.
AO has not doubted the sales and made disallowance of bogus purchases and we rely on the ratio of the Honorable Jurisdictional High Court in the case of M/s Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT] Further the assessing officer made an addition based on the information received from Sales tax department Maharashtra since the said information could not conclusively be proved. DR could not controvert the findings of the CIT(A) with any new cogent evidences or information to take different view - we are not inclined to interfere with the order of the CIT(A) and upheld the same and dismiss the grounds of appeal of the revenue.
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2022 (2) TMI 1342 - ITAT AHMEDABAD
Unexplained credits u/s. 68 - bogus long term capital gain - disallowance of claim of exempted long term capital gain on sale of shares - HELD THAT:- Issue on hand is squarely covered by the order of this ITAT in the group case of the assessee i.e. Smt. Meera Alpesh Kanugo [2022 (9) TMI 809 - ITAT AHMEDABAD] held that the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account.
There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Akash Agarwal may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn.Further, the alleged operators have not named the assessee as a beneficiary in their statements. - Decided in favour of assessee.
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2022 (2) TMI 1341 - ITAT CHENNAI
Levy of late filing fee u/s 234E - quarterly return filed by the tax deductor for the period prior to 01.06.2015 - HELD THAT:- We find that the assessment years involved are prior to 01.06.2015. Therefore, we are of the considered view that the late fee charged by the Assessing Officer under section 234E of the Act, while processing quarterly TDS return under section 200A of the Act, is without any authority and invalid.
Hence, by respectfully following the decision of Fatheraj Singhvi v. Union of India [2016 (9) TMI 964 - KARNATAKA HIGH COURT] we are of the considered view that the Assessing Officer cannot levy late fee while processing of TDS return under section 200A of the Act upto the financial year 2014-15. Since, late fee charged in the present case pertaining to the financial year 2013-14, we direct the Assessing Officer to delete the late fee charged under section 234E of the Act in the intimation issued under section 200A of the Act for the processing of quarterly TDS return filed by the assessee. Appeals filed by the assessee are allowed.
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2022 (2) TMI 1340 - ITAT CHENNAI
Levy of late filing fee u/s 234E - quarterly return filed by the tax deductor for the period prior to 01.06.2015 - HELD THAT:- We find that the assessment years involved are prior to 01.06.2015. Therefore, we are of the considered view that the late fee charged by the Assessing Officer under section 234E of the Act, while processing quarterly TDS return under section 200A of the Act, is without any authority and invalid.
Hence, by respectfully following the decision of Fatheraj Singhvi v. Union of India [2016 (9) TMI 964 - KARNATAKA HIGH COURT] we are of the considered view that the Assessing Officer cannot levy late fee while processing of TDS return under section 200A of the Act upto the financial year 2014-15. Since, late fee charged in the present case pertaining to the financial year 2013-14, we direct the Assessing Officer to delete the late fee charged under section 234E of the Act in the intimation issued under section 200A of the Act for the processing of quarterly TDS return filed by the assessee. Appeals filed by the assessee are allowed.
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2022 (2) TMI 1339 - ITAT AHMEDABAD
Maintainability of appeal on low tax effect - Revenue is in appeal before the Tribunal against the order of the learned Commissioner of Income-Tax - Disallowance u/s. 40(a)(ia) - HELD THAT:- We find that this appeal of the Revenue is no longer maintainable in view of the CBDT Circular No. 17 of 2019 dated 08.08.2019. The mandatory limit for cases in which Revenue can challenge the relief granted by the CIT(A) now stands enhanced to Rs.50 lakhs. This concession granted by the Central Board of Direct Taxes (CBDT) is retrospective in effect inasmuch as it applies to all pending appeals as well. In view of the above position, the appeal of the Revenue is no longer maintainable and is dismissed as such.
It is, however, made clear that on re-verification at the end of the Assessing Officer if it comes out that the tax effect of more than Rs.50 lakhs is being involved in the appeal or the appeal falls within the exemption clause of the Circular, then the Revenue will be at liberty to file Miscellaneous Application to recall the Tribunal order. The application should be filed within time limit prescribed in the Act. Appeal of the Revenue is dismissed due to low tax effect.
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2022 (2) TMI 1338 - ITAT BANGALORE
TP adjustment - international transactions entered with AE - plea of the assessee to restrict the transfer pricing adjustment to international transactions entered with A.E only - HELD THAT:- We notice that the decisions relied on by Ld. A.R.of Hindustan Unilever Ltd. [2012 (12) TMI 458 - ITAT MUMBAI] and Tara Jewellers Exports Pvt. Ltd [2015 (12) TMI 1130 - BOMBAY HIGH COURT] support the plea of the assessee. Accordingly, we direct the AO/TPO to restrict the transfer pricing adjustment to the international transactions relating to import of raw materials and finished goods entered with its A.Es.
Exclusion of two comparable companies - M/s. HPM Chemicals & Fertilizers Ltd company is engaged into diversified business activities, viz., manufacture and sale of pesticides, dealing in fertilizers and running a pulverizing mill. However segmental results have not been given. In respect of fertilizers business, this company has received subsidy towards freight as well as for sale of imported fertilizers. All these facts in our view makes this company not comparable with the assessee company. Accordingly, we direct the A.O./TPO to exclude this company.
M/s. Bharat Insecticides Ltd - principal product dealt by the company is stated as “pesticides formulation”. The total revenue from operations is shown at ₹ 261.88 crores in the profit & loss account and the entire turnover pertains to pesticides formulation only as per information given at page Nos.2370 & 2371. We also notice that this company has not reported any other operating revenues in the profit & loss account meaning thereby, the assessee has not carried out any toll manufacturing works during the year under consideration, as submitted by Ld. A.R. Accordingly, we are unable to appreciate the contentions of Ld. A.R. Accordingly, we do not find any other reason to exclude this company from the list of comparable companies. Accordingly, we confirm the order of the AO in including this company as comparable company.
Disallowance of claim of capital expenditure u/s 35(1)(iv) - HELD THAT:- As finding of Ld DRP would make it clear that the assessee’s role is only to provide services for R & D activity of its AE, i.e., it is carrying on the R & D activity also on behalf of its AE. Further, it cannot own the intangible rights arising out of the research and development activities carried on by it. R & D activities also are in the nature of support services provided by the assessee to its AE. Accordingly, DRP has given the finding that the work carried on by the assessee at the instruction, direction and supervision of the parent company happens to be related to R & D. We also find merit in the observation of Ld DRP that the incentive provisions like deduction u/s 35(1)(iv) are given by the Government to encourage Indian Companies and not for doing work for some company located abroad. Accordingly, we are of the view that the tax authorities are justified in disallowing the claim for deduction of Capital expenditure u/s 35(1)(iv) of the Act.
Since the disallowance of capital expenditure is upheld by us, the assessee would be eligible for depreciation on them at applicable rates. We notice that the AO has disallowed only the WDV amount of Rs.1,86,04,299/- claimed by the assessee after deducting the depreciation claimed in the books of account. The AO may examine the claim of the assessee for allowing correct amount of depreciation, if the above said claim is not in accordance with the rates prescribed under the Income tax Rules.
TDS u/s 195 - disallowance of payroll expenses u/s 40(a)(i) - assessee submitted that the above said sum represented only reimbursement of salary and related cost of an employee who was deputed by its AE and the said employee was working with the assessee under its supervision and direction - HELD THAT:- hat is required to be examined in the present context is the terms and conditions of agreed between the assessee and its AE, the nature of services rendered by the expatriate to the assessee etc. In the absence of the factual details, it would be difficult to apply the legal principles laid down by the Hon’ble Karnataka High Court in the above said case. Under these set of facts, we are of the view that this issue requires fresh examination at the end of AO. The assessee should furnish the terms and conditions of agreement, nature of services rendered by the expatriate etc. Even, if there is no written agreement between the assessee and AE, there should be some other material to show the purpose for which the expatriate was deputed to the assessee. Accordingly, we restore this issue to the file of AO. The AO may take a decision on this issue afresh after considering the details, information and explanation that may be furnished by the assessee. After hearing the assessee, the AO may take appropriate decision in accordance with law.
Disallowance of claim of foreign exchange fluctuation on External Commercial Borrowing (ECB) - assessee had availed ECB of USD 20,00,000/- from its foreign AE and said loan was used to acquire assets for its R & D activity - HELD THAT:- As noticed that the AO had disallowed the claim for deduction of capital expenditure u/s 35(1)(iv) - as already confirmed the said disallowance. We also directed the AO to allow applicable depreciation on the capital expenses so disallowed. Consequent thereto, the claim of deduction of loss arising on revaluation of outstanding balance of ECB cannot be allowed u/s 35(1)(iv) of the Act. We noticed that the AO has disallowed the claim holding it to be notional loss. Though the view taken by the AO may not be right, yet the disallowance has to be confirmed for the reasons discussed above. Accordingly, we confirm the disallowance made by the AO. It is not clear as to whether the provisions of sec.43A would apply to the ECB Loan. Hence the assessee may claim the benefit of provisions of sec.43A, if it is applicable to the ECB Loan repayments.
Disallowance of Product development expenses - HELD THAT:- As it is necessary to find out as to whether the assessee has incurred all these expenses on its own account or on behalf of its AE. If the assessee has incurred expenses on behalf of the AE and the benefits of these expenses go the AE, then the Ld DRP was justified in disallowing this claim. If it is not so, then the assessee is required to prove that these expenses are not capital in nature. The facts available on record are not clear as to whether these expenses are routine expenses incurred for expansion of existing business or not. If it is so, then the relevant expenses are allowable as revenue expenditure. In the absence of relevant details, we feel it proper to restore this issue to the file of AO for examining it afresh in the light of discussions made supra and also in accordance with law. Accordingly we restore this issue to the file of AO.
Disallowance of claim of finance lease charges - HELD THAT:- This issue is now settled by Hon’ble Supreme Court in the case of ICDS [2013 (1) TMI 344 - SUPREME COURT] wherein the Hon’ble Apex Court held that the lessor is the owner of the leased property in case of finance lease and he is entitled to depreciation on it. The contra is that the lessee is eligible to claim the lease payments as deduction. Hence the view taken by the tax authorities are against the decision rendered by Hon’ble Supreme Court. Accordingly we direct the AO to allow the claim of the assessee in accordance with the decision rendered by Hon’ble Apex Court in the case of ICDS (supra).
Disallowance of loss on foreign exchange fluctuation - AO followed the circular issued by CBDT in No.3 of 2010 dated 23.03.2010 and held that the mark to marked loss (revaluation of forward contracts as on Balance sheet date) is not allowable as deduction - HELD THAT:- We dealt with the disallowance of Rs.1,03,58,338/- pertaining to loss arising on revaluation of ECB loan. Also confirmed the disallowance made by the AO. Hence, the disallowance of very same amount, which is included in the above said amount results in double disallowance. However, there is slight difference in the figures. The Loss arising on revaluation of ECB loan was Rs.1,03,58,338/- when we dealt with the issue in the earlier paragraph. However, the loss arising on revaluation of ECB loan was shown in the break-up details given above. Hence this difference needs to be reconciled and it has to be shown by the assessee that both the figures pertain to same claim. Accordingly, we direct the AO to examine the claim of double disallowance and delete the double disallowance, if any.
There should not be any dispute that the realised losses pertaining to revenue account is allowable as deduction. The AO may verify the details and allow the deduction.
We are unable to understand as to why the assessee did not offer the amount pertaining to Forward contract premium and MTM transaction as its income. Accordingly, we restore this issue to the file of AO for examining this issue.
Disallowance of interest expenditure - HELD THAT:- As submitted that the Ld DRP directed the AO to examine the above said claim of the assessee, but the AO retained the disallowance in the final assessment order without carrying out necessary examination. In view of the above, we restore this issue to the file of AO for examining the claim of the assessee in accordance with law.
Setting off of brought forward business losses and unabsorbed depreciation - HELD THAT:- This issue requires examination at the end of AO as per the records. Accordingly, we restore this issue to the file of AO.
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2022 (2) TMI 1337 - ITAT BANGALORE
TP Adjustment - reference to the TPO in respect of specified domestic transactions - transfer pricing provisions Applicability to transactions entered by the assessee with the related parties covered u/s 40A(2)(b) - HELD THAT:- We hold that the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act.
We however notice that the co-ordinate bench in the case of Textport Overseas [2017 (1 2) TMI 1719 - ITAT BANGALORE] has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) - Following the same, we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act - reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA.
As pointed out by D.R, the co-ordinate bench, in the case of Texport overseas P Ltd, has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) - we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act. In view of the above conclusion, we refrain from adjudicating other issues raised by the assessee in the grounds of appeal with regard to correctness of determination of ALP of the SDT.
Addition u/s 68 - assessee has failed to prove the genuineness, identity and creditworthiness of the creditors - failure of the assessee to furnish copy of stock register - HELD THAT:- This cannot be a proper reason for rejecting the claim of the assessee when the confirmation letter, purchase register along with sample invoices were furnished by the assessee. Assessee also submitted that payments have been made to all the 3 parties and that evidence would demonstrate that the trade creditors were genuine.
Taking into account these circumstances, we are of the view that it would be just and appropriate to set aside the issue with regard to the addition to the AO for consideration afresh in the light of the evidence already filed by the assessee and also in the light of the further evidence that the assessee may file with regard to repayment of the trade credits. AO is directed to consider the claim of the assessee in accordance with law, after affording assessee opportunity of being heard.
Appeal by the assessee is treated as partly allowed for statistical purposes.
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2022 (2) TMI 1336 - KARNATAKA HIGH COURT
Validity of assessment proceedings u/s 153(3) - period of limitation - Refund Claim alongwith interest as per Section 244 - HELD THAT:- The period u/s 153(3) read with Section 153(4) would stand extended till 31.12.2018 in terms of Section 92CA(3A) and the TPO would then be required to pass an order as on 31.10.2018. In the present case, the notice of TPO is dated 09.07.2021 as per Annexure-L. Clearly, on the admitted period available as discussed above, the notice is beyond the time prescribed and is the one barred by limitation and is liable to be set aside on that sole ground alone.
What needs to be noticed is that the proceedings were restored back to TPO/AO/DRP in terms of the order dated 03.11.2016. Petitioner submits that since the entirety of the proceedings have been restored to the Officers abovementioned, the consequential refund of tax beyond the admitted liability is to flow and there is no further discretion at the end of the Department.
If what has been restored is the entirety of the proceedings and as held above the notice dated 09.07.2021 being time barred, the logical consequence of refund of amount in excess of admitted liability insofar as the tax paid will have to be made good by the respondent-Department taking note of the principle under Section 240 of the Income Tax Act.
Accordingly, the notice is set aside and the respondents to refund an amount in terms of the discussion made hereinabove alongwith interest as per Section 244 of the Income Tax Act for the Assessment Year 2006-2007, before the end of April 2022.
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2022 (2) TMI 1335 - ITAT BANGALORE
Short term capital gain - Slump sale - negative net worth - Assessee considered the net worth at zero on slump sale - computation of capital gains where the net worth of an assessee is negative - Whether DCIT and CIT(A) erred in computing the short term capital gain by adding the negative net-worth instead of restricting the same to NIL as deeded cost, since cost cannot be a negative value - appellant had transferred the pharma undertaking for a consideration of Rs.100 in view of the negative net-worth and capital gain on such transfer can never be more than Rs.100 -
HELD THAT:- As decided in M/S. SUMMIT SECURITIES LIMITED [2012 (3) TMI 176 - ITAT MUMBAI] held that that the Assessing Officer was not right in adding the amount of liabilities being reflected in the negative net worth to the sale consideration for determining the capital gains on account of slump sale. The Hon’ble Special Bench however agreed with the contention of the Revenue that the negative net worth cannot be ignored for working out the capital gains in case of a Slump Sale.
Thus, we hold that negative net worth cannot be ignored for computing capital gain on slump sale. We thus, direct the Ld.AO to compute the capital gains in accordance with the principles laid down by Hon’ble Special Bench in case of M/s. Summit Securities Ltd. (supra). Appeal filed by assessee stands dismissed.
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2022 (2) TMI 1334 - MADRAS HIGH COURT
Stay of demand - entitlement to waiver/stay of the recovery proceedings in terms of Section 220 (6) - HELD THAT:- We are inclined to dispose the writ petition with the observation that the third respondent before whom an application was filed u/s 220 (6) by the petitioner on 17.08.2021 shall dispose the same within a period thirty days from the date of receipt of copy of this order. It is needless to state that before passing such order, the petitioner shall be heard.
In case, the petitioner has indeed paid income tax on the demonetized currency received by the petitioner, as it was allowed to sell petroleum products by receiving the consideration in demonetised currency during the period between 09.11.2016 and 30.12.2016 and tax was paid the second respondent may exercise the discretion in terms of the observation rendered LG Electronics India Private Limited [2018 (7) TMI 1905 - SC ORDER]. All further recovery proceedings pending disposal of appeal are subject to order to be passed by the third respondent on the petition filed by the petitioner u/s 220 (6).
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2022 (2) TMI 1333 - ITAT AHMEDABAD
Addition u/s 56(2)(viib) - Method adopted by the assessee for determining the FMV of shares - excess consideration received by the assessee for issue of shares, to the extent the consideration received exceeded the Fair Market Value of shares - HELD THAT:- The facts of the case are that the assessee had issued 60,000/- shares of face value 10 at the premium of Rs. 90. To justify its valuation, the assessee had submitted valuation report by C.A. in which the land and building were valued at their market value as on the date of issue of shares. The market value of land and building was also duly substantiated by a valuation report. The revenue has rejected the valuation report of the shares stating that the assessee ought to have valued the fair market value of the shares only as per the method prescribed under Rule 11UA of the Act rules of Income Tax Rules, 1961.
The method adopted by the assessee for determining the FMV of shares issued during the year is held to be in accordance with law.
The decisions relied upon by the CIT(A) of the ITAT Delhi in the case of Agro Portfolio(p) Ltd. [2018 (5) TMI 1088 - ITAT DELHI] is clearly not applicable in the present case since it related to the applicability of NAV method or DCF method for valuation of shares, which is not the issue in the present case. The decision of the ITAT Hyderabad in the case of Medplus Health Services P .Ltd [2016 (3) TMI 549 - ITAT HYDERABAD] has we find been incorrectly interpreted by the CIT(A) to apply to the facts of the present case since the ITAT in the said case had rejected the adoption of market value of shares as fair market value and held that the same has to be determined as provided in law.
The addition therefore made by the revenue authorities u/s. 56(2)(viib) of the Act is be held not sustainable in law and we direct deletion of the same.
Employees' Provident Fund paid belatedly - disallowance of employees contribution to Provident Fund deposited belatedly, as per section 2(24)(x) of the Act r.w.s 36(1)(va) - HELD THAT:- Assessee fairly admitted that this issue was covered against the assessee by the decision of Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT]. In view of the above, the disallowance of Employees’ Provident Fund paid belatedly is upheld.
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2022 (2) TMI 1332 - DELHI HIGH COURT
Maintainability of orders passed by ACIT u/s 179 - respondents raises a preliminary objection to the maintainability of the writ petitions on the ground that the petitioners have an alternative effective remedy by way of revision petitions u/s 264 - learned counsel for the petitioners wishes to withdraw the present writ petitions with liberty to file revision petitions.
HELD THAT:- With the aforesaid liberty, the present writ petitions along with pending applications stand disposed of. It is clarified that in the event the revision petitions are filed within two weeks, the matters shall not be dismissed on the ground of limitation. The rights and contentions of all the parties are left open.
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2022 (2) TMI 1331 - ITAT BANGALORE
TP Adjustment - assessee bench marked its international transactions on the TNM method - A.R. submitted that the TPO has considered the services rendered by the assessee as “Information Technology Enabled Services” (ITES) and accordingly selected comparables which are providing BPO/KPO services - HELD THAT:- TPO had recharacterized the activities of the assessee in AY 2008-09 and 2009-10 also and since the same was disputed by the assessee before the Tribunal, the ITAT has restored the issue of transfer pricing adjustment to the file of the TPO by the coordinate bench - Thus we restore this issue to the file of the AO/TPO with similar directions.
Disallowance of provision for warranty - A.R. submitted that the assessee has been providing for warranty liability on accrual basis on the basis of percentage of sales at the end of each year - contention of the assessee is that it is following a scientific method for determining the amount to be provided for warranty liability - HELD THAT:- We notice that the AO has rejected the claim without finding fault with the method adopted by the assessee to determine the quantum of provision. This is not justified. When the assessee is following a scientific method consistently which also approximately corresponds with the actual expenditure incurred subsequently, then there is no reason to disallow the provision for warranty as held by Hon’ble Supreme Court in the case of Rotork Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] Accordingly, in AY 2011-12, the Tribunal has restored this issue to the file of the AO for examining it afresh. Accordingly, following the decision rendered by the coordinate bench in the assessee’s own case for assessment year 2011-12, we restore this issue to the file of the AO for examining it afresh.
Disallowance of software expense - disallowance u/s 40(a)(i) - AR prayed that both the issues, viz., software expenses disallowed as capital in nature and disallowed u/s 40(a)(i) of the Act require re-examination by considering the above said decisions - HELD THAT:- We find merit in the submissions of Ld. A.R. Accordingly, we restore both the issues relating to software expenses to the file of the A.O. for examining them afresh in the light of above said decisions and also any other decision, information or explanations that may be furnished by the assessee before him.
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2022 (2) TMI 1330 - KERALA HIGH COURT
Reimbursement of taxes due to the petitioner under the goods and service tax - HELD THAT:- Having regard to the nature of anomalies pointed out by the petitioner, this Court is of the opinion that a serious consideration ought to be made by the competent amongst the respondents to the anomalies pointed out by the petitioner. As apparently, there is a patent irregularity, which may require an earnest application of mind on the part of the respondents while considering the representation of the petitioner.
This writ petition can be disposed of - there will be a direction to the 2nd respondent to consider and pass appropriate orders on Ext.P7 and Ext.P8 representations, as expeditiously as possible, at any rate, within a period of three months from the date of receipt of a copy this judgment. The petitioner shall also be granted an oppotunity of hearing, before a decision, as directed, is taken.
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2022 (2) TMI 1329 - KERALA HIGH COURT
Reimbursement of taxes due to the petitioner under the goods and service tax - HELD THAT:- Having regard to the nature of anomalies pointed out by the petitioner, this Court is of the opinion that a serious consideration ought to be made by the competent amongst the respondents to the anomalies pointed out by the petitioner. As apparently, there is a patent irregularity, which may require an earnest application of mind on the part of the respondents while considering the representation of the petitioner.
This writ petition can be disposed of directing consideration of the representations dated 03.12.2020 and 12.10.2021 submitted by the petitioner to the 1st respondent in a time bound manner. Since the 2nd respondent is the competent authority to consider, the representations shall be forwarded by the 1st respondent to the 2nd respondent within two weeks of the receipt of a copy of this judgment.
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2022 (2) TMI 1328 - ITAT DELHI
Disallowances of club expenses - expenditure was not incurred wholly and exclusively for the purpose of business - HELD THAT:- As noticed that above issue is squarely covered in favour of assessee by order of coordinate bench for assessment year 2001 - 02 in case of assessee wherein it has been held that club expenses are in nature of business expenditure and therefore allowable to appellant relying on decision of honourable Bombay High Court and Gujarat High Court. The honourable Supreme Court has also held in CIT vs. United Glass manufacturing company limited 2012 (9) TMI 914 - SUPREME COURT that club expenses are also PO of business expenditure. The honourable Delhi High Court has also taken similar view 2009 (1) TMI 26 - DELHI HIGH COURT in view of this ground number 3 of appeal of assessee is allowed.
Disallowance of prior period expenses - HELD THAT:- We find that certain expenditure alleged to be relating to prior period was payable during the previous year 2008-09, as per the claim of the assessee. It is evident, the reason for disallowing assessee’s claim is, it was not made through a revised return of income. As we find, identical issue came up for consideration before the coordinate bench in assessee’s own case in assessment years 2000-01 to 2008-09.
Adjustment made to the Arm’s Length Price (ALP) of reimbursement of expenses - HELD THAT:- As in a cryptic order passed, learned Commissioner (Appeals) has disposed of the issue by stating that the assessee offered average mark-up of 21.21% and accordingly directed the Assessing Officer to compute the adjustment by charging mark-up of 21.21% on cost. On perusal of materials on record, we are convinced that the conclusion drawn by Commissioner (Appeals) is erroneous, as, the assessee has never offered mark-up of 21.21%.
The assessee has sought risk adjustment of 21.21% to be made to the margin of the comparables towards credit risk differences - Commissioner (Appeals) has completely misconstrued the submissions of the assessee - various other submission made by the assessee, including the submissions made relating to selection of comparables, have not at all been considered by Commissioner (Appeals). We deem it appropriate to restore the issue to the file of the AO for de-novo adjudication after providing due opportunity of being heard to the assessee.
It is open to the assessee to furnish further evidence to demonstrate that the reimbursement by AEs on cost to cost basis does not require charging of any mark-up. While deciding the issue, the Assessing Officer must also examine assessee’s claim that in assessment year 2010-11, reimbursement of expenses on cost to cost basis was accepted by the TPO. Assessing Officer must provide a reasonable opportunity of being heard to the assessee before deciding the issue. This ground is allowed for statistical purposes.
Disallowance being the expenditure incurred by the assessee towards purchase of books, magazines and periodicals - HELD THAT:- As decided in own case 2000-01 to 2008-09 2019 (3) TMI 735 - ITAT DELHI Expenditure incurred by assessee on 'purchase of books and journals cannot be held to be a capital expenditure. There is no change in facts and circumstances of case, nature of expenditure is also same, no contrary judicial precedent cited, therefore, following decision of coordinate bench, and hence, we dismiss ground of appeal of revenue.
Disallowance of deduction claimed u/s 80IA - profit derived from business of generation of power - HELD THAT:- As in assessee’s own case in assessment year 2000-01 to 2008-09 2019 (3) TMI 735 - ITAT DELHI Revenue has submitted that Tribunal has passed an order of remand on question of computation of profit and gain from business in terms of sub- section (8) to Section 80IA. Learned counsel for respondent-assessee submits that Assessing Officer is competent to decide said question as per law and hands and power of Assessing Officer have not been curtailed and present order does not give any specific or clear finding/direction. We take statement made by learned counsel respondent-assessee on said aspect on record. Both parties will be entitled to raise their contentions on computation of eligible profit/loss from eligible business.
Adjustment made on account of ALP of corporate guarantee - HELD THAT:- As keeping in view the amendment made to section 92B of the Act, provision of corporate guarantee has to be regarded as an international transaction in terms of section 92B of the Act. The Hon’ble Madras High Court in case of PCIT v. Redington (India) Ltd. 2020 (12) TMI 516 - MADRAS HIGH COURT after taking note of the amendment to section 92B of the Act, has held that provision of corporate guarantee will fall within the scope and ambit of international transaction as defined under section 92B of the Act. Therefore, we hold that provision of corporate guarantee towards loan availed by the AEs constitutes international transaction under section 92B of the Act.
Commissioner (Appeals) has deleted the adjustment made in relation to provision of corporate guarantee simply on the reasoning that it is not an international transaction. Therefore, he has not considered the issue on merits. On perusal of material on record, we have observed, in course of proceeding before the TPO as well as before learned Commissioner (Appeals), the assessee had advanced detailed submissions on merits contesting the adjustment made on account of provision of corporate guarantee. While the TPO has completely rejected the submissions of the assessee, learned Commissioner (Appeals) did not deal with them as he held that the provision of corporate guarantee is not an international transaction. Thus, in our view, the assessee deserves a fair opportunity to contest the issue relating to the determination of ALP of guarantee commission to be charged on provision of corporate guarantee on merits.
We restore the issue to the Assessing Officer for de-novo adjudication after due and reasonable opportunity of being heard to the assesse. Ground is allowed for statistical purposes.
TP adjustment - interest chargeable on the loan advanced to the AE by applying the rate of 6% - HELD THAT:- Assessee’s contention that advancement of loan to AE is a share holders activity, hence, would not come within the purview of international transaction is unacceptable, in view of the amendment made to section 92B of the Act by Finance Act, 2012, with retrospective effect from 01.04.2002. As regards the merits of the issue, the facts on record indicate that while the TPO has determined the ALP of the interest chargeable on the loan advance to AE by applying SBI prime lending rate of 15%, learned Commissioner (Appeals) has substantially reduced it to 6%. The rate of 6% adopted by learned Commissioner (Appeals) is fair and reasonable considering the LIBOR rate of 4.42% prevailing at the relevant point of time. Therefore, we do not find any reasonable basis to interfere with the decision of learned Commissioner (Appeals). Ground raised is dismissed.
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2022 (2) TMI 1327 - ALLAHABAD HIGH COURT
Levy of penalty U/s 8 D(6) of the UP Trade Tax Act - payments were made but T.D.S. could not be deducted as required under Section 8 D (1) of the Act - it is submitted that T.D.S. amount along with interest was deposited prior to initiation of penalty proceeding under Section 8 D (6) of the Act and there was no loss of revenue - Whether the Tribunal justified in not considering the specific remand direction of this Hon'ble Court?
HELD THAT:- Admittedly, it is not in dispute that the payment of T.D.S. amount along with interest of upto date has been deposited and this fact has also been noticed in the order passed by this Court in the earlier round of litigation i.e. in T.T.R. No. 358 of 2010 vide order dated 12.2.2015 by which the matter was remanded to the Tribunal for reconsideration. The Tribunal has upheld the levy of penalty under Section 8 D(6) holding that once there was failure to comply with the order, the levy of penalty is justified.
Hon'ble the Supreme Court in the case of HINDUSTAN STEEL LIMITED VERSUS STATE OF ORISSA [1969 (8) TMI 31 - SUPREME COURT] clearly shows that the penalty could not be levied merely on the basis of failure to carry out statutory obligation.
This Court has specifically held that once the amount of T.D.S. along with interest has been deposited, there is no loss to the revenue - In the present case, the revisionist has deposited the amount along with interest even before initiation of penalty proceedings under Section 8 D (6) of the Act. Once the T.D.S. amount along with interest has been deposited before initiation of penalty proceeding under Section 8 D (6) of the Act, the penalty proceeding could not be justified as there was no loss of revenue.
The revision is allowed with cost of Rs. 5000/-, which shall be deposited within a month. The revenue is at liberty to recover the said amount from the erring officer.
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2022 (2) TMI 1326 - ITAT BANGALORE
TP Adjustment - interest on loan advanced to its Associated Enterprise - HELD THAT:- After hearing both the parties we are of the opinion that this issue is covered by the order of Tribunal in assessee’s own case - reasoning given by Ld. DRP for rejecting the TPO’s methodology of adopting interest rates applicable to loan transactions between Indian parties, in our view, is justified. We notice that the Ld DRP has determined the ALP of interest rate at 12 months Libor + 500 basis points. There is no dispute with regard to the fact that the loan transaction is with its AE and further the interest rate spread noticed by the Ld DRP was between 3% to 8%. Accordingly we are of the view that the ALP may be determined at 12 months LIBOR plus 300 basis points. We modify the directions given by Ld. DRP and direct the AO to adopt 12 months LIBOR plus 300 basis points for determining the interest income om the loan advanced to the AE and asses the same accordingly.
Interest on outstanding balance from the Associated Enterprise Tejas Communications Pte. Ltd., Singapore - After haring both the parties we observe that this issue was covered by the decision given in the case of CIT-9 Vs Indo American Jewellery Ltd. [2013 (1) TMI 804 - BOMBAY HIGH COURT]. In view of the above order, this issue is decided in favour of the assessee.
Guarantee Commission with respect to the corporate guarantee provided by the assessee to its Associated Enterprises - This issue is covered by the orders of the Tribunal in Medrich Limited [2021 (4) TMI 1321 - ITAT BANGALORE] in the case of M/s. Manipal Global Education Services Pvt. Ltd. [2019 (5) TMI 1942 - ITAT BANGALORE] and in the case of Xchanging Solutions Ltd. [2016 (10) TMI 1211 - ITAT BANGALORE] wherein it was directed to AO/TPO to make TP adjustments in respect of corporate guarantee at 0.50% for the assessment years under consideration. In view of the above order, we decide these issues in favour of the assessee.
Disallowance of deduction under section 35(2AB) - After hearing both the parties it has been observed that this issue is covered by this Tribunal [2015 (3) TMI 535 - ITAT BANGALORE] where in the Tribunal has reversed the findings of the A.O. in his assessment order passed for A.Y. 2008-09 and the appeals were decided in favour of the assessee. Hence, keeping in view of the above order of the Tribunal, these grounds of the assessee are decided in favour of the assessee and hence these grounds of appeal are allowed.
Disallowance u/s 14A of the Act read with Rule 8D - HELD THAT:- We inclined to remit the issue in dispute to the file of AO for re-examination to see whether investment which yielded exempt income made out of interest free own funds and decide accordingly.
Revenue expenditure for scientific research is allowable expenditure as per section 37(1).
Charge interest at the rate of LIBOR + 500 points - The loan has been given by the Indian Entity, therefore, the annualized average yield rating of interest rate of 14.74% is to be applied.
Depreciation in respect of capital expenditure on fixed assets since the A.O. disallowed the same on the reason that this expenditure is allowed as revenue expenditure on the direction of the Ld. DRP - The claim of deduction u/s 35(2AB) of the Act has been allowed to the assessee. Now this ground has become infructuous and dismissed accordingly.
Revision u/s 263 - As seen from the assessment order, the AO closed his eyes on the issues raised by the Principal CIT for the reasons best known to him and accepted the deduction claimed by the assessee in his return of income. Though AO is required to make necessary enquiries himself regarding the various claims of the assessee, he failed to do so. Therefore, the issues dealt by the Principal CIT were within his powers to invoke the provisions of the section 263 of the Act where such enquiry was prima facie warranted. In view of the above, we are of the opinion that the Ld. Principal CIT was justified in invoking the provisions of section 263.
Disallowance made under section 14A read with Rule 8D AND reversal of provision for doubtful debts - As the assessee inadvertently claimed the lower amount of Rs.1,95,17,376/-as against the correct amount to be claimed - In this case, Ld. Principal CIT given a direction to reconsider the above two issues afresh after giving an opportunity of hearing to the assessee. He has not suggested any addition on this count. Being so, we do not find any infirmity in the findings of Ld. Principal CIT. Further we make it clear that the A.O. shall not be influenced by any observations made by Principal CIT in his order. The A.O. should carry out the enquiry independently and pass fresh assessment order after giving opportunity of hearing to the assessee. Hence, the appeal filed by the assessee is dismissed.
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2022 (2) TMI 1325 - ITAT DELHI
Carry forward and set off of losses in the case of certain companies - set off of brought forward losses u/s 79 on the ground that there has been change in the shareholding - CIT-A after noting the shareholding pattern, held that through-out the holding company was WSP Cyprus and the change in ultimate holding company form WSP UK does not affect the shareholding of WSP Cyprus in the assessee company - HELD THAT:- There is no change in the shareholding of the Assessee company, i.e. WSP Cyprus held 99.99 percent shares in the Assessee company - WSP Cyprus was the registered and beneficial shareholder of the Assessee company in AY 2012-13 (i.e. the year in which loss was incurred) and in AY 2013-14 & AY 2014-15 (i.e. the years in which such loss was set-off);
Change in ultimate holding company from WSP UK (upto 31 July 2012) to WSP Canada (from 1 August 2012) does not affect the shareholding of WSP Cyprus in the Assessee company - There is nothing on record which could indicate that ultimate holding company was the beneficial shareholder in the Assessee company having more than 51% or more voting right.
Thus it is well settled proposition that registered shareholder is beneficial owner of shares, unless such shares are held in the capacity of a nominee/agent/trustee of the real owner which is not the case here. Accordingly, the order of the ld. CIT (A) is confirmed and the same is based on correct appreciation of facts and law. Ground No.1 in both the years is determined against the Revenue.
Disallowance on account of club expenditure - AO has disallowed amount in the name of the Director considering the said expenses personal in nature - HELD THAT:- CIT (A), after referring to various decisions, held that expenses in relation to club fee are to be treated as business of the assessee and an allowable expenditure. We do not find any infirmity in such finding and the same is confirmed. Ground No.2 of AY 2014-15 is dismissed.
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2022 (2) TMI 1324 - GUJARAT HIGH COURT
Stay of demand - Recovery proceddings - AO asked the writ applicant to deposit 20% of the total demand for the purpose of staying the further recovery - HELD THAT:- In the appeals filed by the writ applicant before the CIT(A) under Section 246A of the Act, interim applications have also been filed requesting the CIT(A) to stay the demand or recovery.
In a very recent pronouncement by this very Bench in the case of Harsh Dipak Shah vs. Union of India [2022 (2) TMI 1208 - GUJARAT HIGH COURT] this Court took the view that the Principal Commissioner, undoubtedly, has the power and the jurisdiction to stay the demand or recovery under Sub-section (6) of Section 220 of the Act, but while saying so, this Court also took the view that the CIT(A), being an appellate authority, also has the inherent power to stay the recovery or demand pending the final disposal of the appeal.
All the three writ applications are disposed of with a direction to the CIT(A) to take up all the interim applications filed by the writ applicants and pass an appropriate order in accordance with law. Till the CIT(A) decides such applications, the interim order passed by this Court shall continue. We may only observe that while deciding such applications, the CIT (A) shall keep in mind the principles of law explained by this Court in the case of Harsh Dipak Shah (supra).
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