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Showing 101 to 120 of 1465 Records
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2016 (4) TMI 1366 - SUPREME COURT
Jurisdiction - power of Union of India - mineral oil resources and inflammable substances, which includes RLNG - whether Union of India is competent to take the policy decision? - Held that:- By virtue of Article 73 of the Constitution of India read with Entry 53 of List I, the Union has the power to legislate and take policy decisions in relation to the matters pertaining to mineral oil resources and inflammable substances, which includes RLNG. Further, as has been correctly recorded in the impugned judgment and order, there is no existing legislative provision as far as fixing of the price of RLNG is concerned. Thus, the executive of the Union of India is well within its right to exercise its powers under the Constitution to take such decisions by way of policy decisions.
The respondent-Union of India passed the impugned policy decision dated 06.03.2007 in the larger public interest, keeping in view the need to provide RLNG at viable prices to the existing and new customers alike. It is further clear that it is nearly impossible to predict or even control LNG prices, as the same are controlled by global market forces. The only way to have any semblance of control over the prices of RLNG was to pool the prices of RLNG procured by the off-takers under long term contracts - it becomes clear from a perusal of the documents produced on record that the executive policy decision dated 06.03.2007 to pool the price of RLNG was arrived at after elaborative discussions between representatives of Qatar, India, IOC, BPCL, GAIL, ONGC and other experts in the field. It was an informed decision taken in the interest of the public at large.
There being no evidence to suggest that the impugned policy direction is illegal, arbitrary, unreasonable or otherwise violative of Article 14 of the Constitution of India, we find no reason to interfere with the same - the impugned policy decision dated 06.03.2007 does not suffer from any infirmity in law and is hereby upheld - Appeal dismissed.
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2016 (4) TMI 1365 - BOMBAY HIGH COURT
Reopening of assessment u/s 147 - escapement of income to tax income from M/s. Reliance Petrochemicals Ltd. - HELD THAT:- It is beyond our comprehension as to how the RespondentAssessee could have foreseen during the Assessment proceedings that the Assessing Officer will not bring to tax the income alleged to have earned from M/s. Reliance Petrochemicals Ltd. to tax.
In any case, so far as this Court is concerned, it is a settled issue that in the absence of the Assessing Officer bringing to tax any income earned from the source recorded in the reasons as having escaped assessment in support of the impugned notice, the Assessing Officer has no jurisdiction to bring to tax income earned/received from any other source by the assessee. This is a jurisdictional requirement as held by this Court in Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] . In view of the fact that the issue arising herein stands concluded by the decision of this Court in Jet Airways (supra) no substantial question of law arise for our consideration.
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2016 (4) TMI 1364 - SC ORDER
Assessment in the name of the amalgamating company - HELD THAT:- The learned counsel prays for and is granted two weeks' time by way of last chance to comply with the Office Report.
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2016 (4) TMI 1363 - ITAT KOLKATA
Rectification u/s 154 - TDS u/s 194C OR 194I - application barred by limitation - disallowance u/s 40(a)(ia) - non deduction of TDS u/s 194C on tanker hire charges - Main plank of his argument is that the payments made by the assessee on account of tanker hire charges were in the nature of rent as envisaged in section 194I and not in the nature of works contract covered u/s 194C as taken by the AO - HELD THAT:- We are unable to accept this contention for the assessee as disallowance u/s 40(a)(ia) on account of tanker hire charges was made by AO in the order passed u/s 143(3) on 18.12.2007 and not in the order passed u/s 143(3)/147 on 24.12.2010 and as rightly held by CIT(A), the application filed by the assessee for rectification u/s 154 of the order passed by AO on 18.12.2007 was clearly barred by limitation as per subsection (7) of section 154 which provides that no amendment u/s 154 shall be made after expiry of four years from the end of the financial year in which the order sought to be amended was passed.
The assessment made by AO u/s 143(3)/147 is independent and separate from the order passed u/s 143(3) in as much as the scope of such assessment is limited to bringing to tax the income which has escaped assessment made originally inter alia u/s 143(3) and the theory of doctrine of merger does not apply in the case of assessment made u/s 143(3) originally and the assessment made subsequently u/s 143(3)/147. Both these assessments stand independently on their own footing. We therefore find ourselves in agreement with CIT(A) that the application filed by the assessee for rectification u/s 154 was barred by limitation and the action of AO in rejecting the same was justified on this ground also.
As rightly held by AO as well as by CIT(A), the issue as to whether the amount paid by the assessee on account of lorry hire charges is in the nature of works contract as covered by section 194C or in the nature of rent as envisaged u/s 194I is highly a debatable issue and the rectification of the same is beyond the purview of section 154, the scope of which is very limited. We, therefore do not find any infirmity in the impugned order of ld. CIT(A) upholding the order passed by AO whereby he rejected the application of the assessee for rectification on the issue of disallowance u/s 40(a)(ia) and upholding the same, we dismiss this appeal of the assessee.
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2016 (4) TMI 1362 - SUPREME COURT
Restraint on mining leaseholders from carrying on any mining operations - restraint placed on the ground that none of these leaseholders were in possession of clearances/approvals/consent, required for carrying on the mining operations - interpretation of Sections 8A(3), 8A(5) and 8A(6) of the MMDR Act.
HELD THAT:- A leaseholder would have a subsisting mining lease, if the period of the original grant was still in currency on 12.1.2015. Additionally, a leaseholder whose original lease has since expired, would still have a subsisting lease, if the original lease having been renewed, the renewal period was still in currency on 12.1.2015. Such a leaseholder, would be entitled to the benefit of Section 8A of the amended MMDR Act.
A leaseholder who had not moved an application for renewal of a mining lease (which was due to expire, prior to 12.1.2015), at least twelve months before the existing lease was due to expire, under the provisions of the unamended MMDR Act and the Mineral Concession Rules, will be considered as not a valid/subsisting leaseholder, after the expiry of the lease period. The provisions of the amended MMDR Act will therefore not enure to the benefit of such leaseholder - A leaseholder who has moved an application for renewal (of the original/first or subsequent renewal) of a mining lease, at least twelve months before the existing lease was due to expire, and on consideration, such an application has been rejected, will be considered as not a valid/subsisting leaseholder. The provisions of the amended Section 8A of the MMDR Act will not enure to the benefit of such leaseholder, because of the express exclusion contemplated for the above exigency, Under Section 8A(9) of the amended MMDR Act.
Consequent upon the amendment of Section 8A of the MMDR Act, the regime introduced through Sub-sections (5) and (6) thereof, provides for three contingencies where benefits have been extended to leaseholders whose lease period had earlier been extended by a renewal - Out of the above three contingencies provided Under Sub-sections (5) and (6) of Section 8A, the contingency as would extend the lease period farthest, would enure to the benefit of the leaseholder.
Unless an order is passed by the State Government declaring, that a mining lease has lapsed, the mining lease would be deemed to be subsisting, up to the date of expiry of the lease period provided by the lease document - in situations wherein an application has been filed by a leaseholder, when he is not in a position to (or for actually not) carrying on mining operations, for a continuous period of two years, the lease period will not be deemed to have lapsed, till an order is passed by the State Government on such application. Where no order has been passed, the lease shall be deemed to have been extended beyond the original lease period, for a further period of two years
A leaseholder having suffered a lapse, is disentitled to any benefit of the amended MMDR Act, because of the express exclusion contemplated Under Section 8A(9) of the amended MMDR Act.
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2016 (4) TMI 1361 - ITAT DELHI
TP adjustment in relation to the international transaction of ‘Payment of export commission’ - ALP determination - HELD THAT:- As per the ratio decidendi in Cushman & Wakefield India 2014 (5) TMI 897 - DELHI HIGH COURT TPO was required to simply determine the ALP of the international transaction of `Payment of export commission’ unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1). As the TPO in the instant case initially determined Nil ALP by holding that no benefit accrued to the assessee and the AO made the addition without examining the applicability of section 37(1), we find the actions of the AO/TPO running in contradiction to the ratio laid down in Cushman & Wakefield (supra). Respectfully following the precedent, we set aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue in conformity with the law laid down above.
TPA from the international transaction of ‘Payment of royalty for exports to AEs’ - HELD THAT:- We are not able to appreciate the view point of the TPO in allowing royalty payment in respect of goods sold to non-AEs and disallowing the same in respect of sales to AEs. Accepting royalty payment to AE in respect of sales to non-AEs goes to show that the ALP of royalty payment stood accepted by the Revenue. Nil ALP has been determined only of the royalty paid in respect of exports made to AEs. Royalty is payable on the basis of manufacturing of goods and not on the sales made. As the rate of royalty paid in respect of exports to AEs is equal to that in respect of sales to non-AEs, which has been accepted by the TPO at ALP, we fail to see as to how royalty paid in respect of exports to AEs is not at ALP - Tribunal has consistently deleted the addition in respect of royalty payment by considering the same to be at ALP, we are disinclined to accept the stand of the ld. DR for restoring the matter to the file of AO/TPO for a fresh determination of the ALP of this international transaction. This issue is decided in the assessee’s favour.
Grant of depreciation u/s 32 on Moulds used for plastic components - @ 15% OR 30% claimed by the assessee - HELD THAT:- AO reduced the depreciation rate on plastic moulds by following the view taken by him in the preceding years. Neither the ld. AR nor the ld. DR could specifically point out the fate of such addition in the earlier years, inasmuch as whether the assessee accepted such addition or if assailed, then the final view taken by the Tribunal in the preceding years on this issue. Similar issue, when came up for consideration before the tribunal for the AY 2006-07, it restored the matter to the AO for deciding this issue afresh after ascertaining the necessary facts. As there is still no clarity on this issue, we deem it fit to follow the view taken by the tribunal for the A.Y. 2006-07. Resultantly, we set aside the impugned order on this issue and remit the matter to the file of AO for deciding the matter afresh.
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2016 (4) TMI 1360 - ITAT MUMBAI
TP Adjustment - adjustment to the arm's length price of business support service segment - HELD THAT:- Business support service provided by the assessee to A.E. is nothing but in the nature of I.T. enabled (BPO) services. The distinctions attempted to be made out by the assessee to differentiate from ITES is too thin a line to hold water. ITES in common parlance is understood to mean a service wherein service provider utilizes telecommunication technologies and internet to provide a wide range of services to companies in the areas of manufacturing, healthcare, banking, insurance, telecommunication, finance, etc.
The services provided broadly are call centre service, payroll, insurance claim, credit card processing, including customer care, human resources, administration, back office data processing and accounting. The nature of services rendered by the assessee, as could be seen from the facts on record, are akin to services provided by ITES companies. Therefore, effort should be made to find out comparables which are functionally similar within ITES segment. It is also a fact that in the preceding assessment year, assessee itself has classified the service rendered as that of an ITES provider. There being no change in the nature of service provided in the impugned assessment year, the claim of the assessee that it should be classified as a business support services provider is not acceptable. In view of the aforesaid, we decline to interfere with the orders of the Departmental Authorities on this issue.
Comparable selection - HELD THAT:- Vishal Technologies Ltd., having outsourced substantial part of its business to third party vendors cannot be held as a comparable to a company which does the work itself.
Cosmic Global Ltd. being engaged in providing translation services and medical transcription business is not a comparable to ITES providers - Cosmic Global Ltd. to be functionally different from the assessee excluded it from the list of comparable.
Infosys BPO Ltd cannot be rejected as a comparable on the basis of high turnover alone. However, as far as other contention of the learned Authorised Representative relating to brand value, goodwill, economies of scale, etc., are factors which cannot be ignored while selecting Infosys BPO Ltd. as comparable as they have a crucial bearing on profitability. As these aspects have not been considered either by the TPO on DRP, we are inclined to restore the issue relating to selection of Infosys BPO Ltd., as a comparable to the file of the Assessing Officer / Transfer Pricing Officer for deciding afresh after considering the submissions of the assessee and all other relevant facts.
Adjustment in respect of provisions of U.K. visa processing services - HELD THAT:- The price charged by the assessee from its A.E. at Nepal cannot be considered as comparable in respect of international transaction with its A.E. at Mauritius. Departmental Representative also fairly submitted before us, the price charged to Nepal A.E. is not a valid CUP for various reasons like courier charges, bank charges, etc. In the aforesaid view of the matter, the issue has to be restored back to the file of the Assessing Officer / Transfer Pricing Officer for deciding afresh after considering the submissions of the assessee in the light of relevant facts on record - assessee has provided two internal CUP by way of provisions of services to U.K. / U.S.A. visa authorities directly by the assessee at ₹ 400 and ₹ 350 per application which according to the assessee are valid CUP. The assessee has also submitted that the inclusion of biometric services will not make a material difference in the price charged to the A.E. compared to price charged to U.K. / U.S.A. visa authorities by the assessee directly. While deciding the issue, the Transfer Pricing Officer must take into consideration the aforesaid submissions of the assessee and also the claim of the assessee that the services rendered to its overseas A.E. at Mauritius are more or less similar to services rendered by the assessee to U.K. / U.S.A. visa authorities except biometric services. Both the assessee and the Transfer Pricing Officer must also deliberate whether any adjustment at all is required to be made to the price on account of biometric recording services and if so, what should be the quantum - Assessee appeal stands partly allowed for statistical purposes.
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2016 (4) TMI 1359 - ITAT MUMBAI
Deduction u/s.80IA(4) - claim denied as assessee company is not an ‘Inland Port’(infrastructure facility) as per the Explanation to Section 80IA(4) - HELD THAT:- As decided in assessee's own case [2014 (8) TMI 975 - ITAT PUNE] Container Freight Station (CFS) run by the respondent-assessee is eligible for deduction under Section 80IA of the Act as an infrastructure facility - Decided in favour of assessee.
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2016 (4) TMI 1358 - ITAT MUMBAI
Disallowance u/s 14A r.w. Rule 8D - AO made disallowance of managerial expenses being 0.5% of average value of average value of investments - HELD THAT:- The facts brought before us were that no dividend income or any other exempt income has been received by the assessee during the year under concern. This factual position has not been disputed by the Ld. DR. Under these circumstances, position of law is now very clear that no disallowance u/s 14A can be made in absence of actual receipt of any exempt income. We derive support for our view from the judgment in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] it is further noted by us that in any case Ld. CIT(A) had sustained disallowance of ₹ 5,00,000/- against which the assessee has not filed any appeal. Thus, the order of Ld. CIT(A) is in accordance with law and facts, and no interference is called for therein and therefore, same is upheld. - Decided against revenue
Addition u/s 40a(ia) - failure of the assessee in deduction of tax at source on the amount debited in the P & L account under the head software and project development expenses - payments are made by the assessee to the foreign parties - HELD THAT:- The liability of the assessee in deduction of tax at source cannot arises unless the AO holds that income in the hands of the payee is chargeable to tax in India, especially in view of judgment of GE India Technology Centre P. Ltd V/s. CIT and Another [2010 (9) TMI 7 - SUPREME COURT] Further, even if the liability of the payee is determined on the basis of retrospective amendments made by Finance Act, 2010 or Finance Act, 2012, even then, the obligation to deduct TDS cannot be created through retrospective legislation in view of detailed judgment of Hon’ble Delhi High Court in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] and CIT vs. Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] and various other judgments directly on this issue.
In those cases where the expenditure has been capitalized, the claim of depreciation if otherwise allowable under the law cannot be disallowed merely on the basis of application of section 40(a)(i) for failure to deduct tax at source. In support of his proposition, Ld. Counsel has relied upon the decision of Mumbai Bench of the Tribunal in the case of SKOL Breweries Ltd. [2013 (1) TMI 623 - ITAT MUMBAI] . The Ld. Counsel has also argued that there have been duplicate disallowances/additions by the officers. One item has been disallowed at more than one place.
It is directed that the AO shall take into considerations these submissions and shall not make duplicate double disallowance/ additions of one item - assessee is free to take all the factual and legal issues before the AO as may be considered appropriate as per law, and AO is also free to ask for further details and evidences from the assessee as may be considered appropriate - Ground partly allowed for statistical purposes.
Disallowance in respect of provisions of expenses u/s 40(a)(ia) - CIT-A deleted the addition - HELD THAT:- When payments were made TDS was deducted, has not been disputed by the Revenue. It is nobody’s case that any payment has been made subsequently without deduction of tax at source. Thus, admitted facts on record or that in the subsequent years, either the TDS has been deducted while making the payment or crediting the amount in the account of payee or the excess amount of provisions has been written back. Thus, factually, there is no loss to revenue. Under these circumstances we find that no interference is called for in the order of Ld. CIT(A), and therefore, same is upheld.
Disallowance of capital work-in-progress written off by the assessee during the year as business loss - as per revenue these expenses are allegedly capital in nature - HELD THAT:- We differ with the views of the lower authorities. It is noted that expenses were incurred in connection with the existing business. Admittedly, the expenses incurred were of routine nature i.e. salary, professional fee etc. These expenditure are, otherwise clearly of the revenue in nature. It is further noted that the Ld. CIT(A) appears to have misread the judgment in the case of CIT vs. Tata Robins Fraser Ltd [2012 (10) TMI 59 - JHARKHAND HIGH COURT] as held that such expenses were allowable as revenue expenses. Also relying on M/S. MANGANESE ORE INDIA LIMITED [2016 (2) TMI 711 - BOMBAY HIGH COURT] we find the actions of lower authorities as contrary to law and facts and therefore we direct the AO to delete the disallowance and treat these expenses as revenue in nature. Thus, this ground is allowed.
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2016 (4) TMI 1357 - BOMBAY HIGH COURT
Exemption u/s 11 denied - assessee trust was not carrying on educational activities falling within the definition of education as contemplated under Section 2(15) - HELD THAT:- The issue whether or not the educational activities carried out by the Trust in terms of objects did not satisfy Section 2(15) of the Act was not examined by the Tribunal. This in view of the decision of ACIT Vs. Surat City Gymkhana [2008 (4) TMI 16 - SUPREME COURT] to the effect that once registration is granted a trust under Section 12A of the Act then it is not open to the Assessing Officer while examining compliance with Section 11 of the Act to revisit objects of the assessee and to hold contrary to the registration granted. Thus the nature of activity in terms of Section 2(15) of the Act was not verified nor considered by the Tribunal. In the above view, question (a) as posed does not arise out of the order of the Tribunal and thus, it is not entertained.
Whether Tribunal was justified in holding that the AO cannot examine the objects to the Society as long as there is valid registration u/s 12A granted to the assessee? - The impugned order of the Tribunal has followed the decision of the Supreme Court in Surat City Gymkhana (supra) wherein it has been held that once the trust has received registration under Section 12A of the Act and that registration is subsisting then it is not open to the Assessing Officer to re-examine the objects of the trust to take a view contrary to the view taken while granting registration under Section 12A of the Act. The Tribunal observed that the only examination to be carried out by the Assessing Officer is whether or not the provisions of Section 11 have been complied with by the assessee for purpose of extending benefit of the exemption.
As question (b) stands concluded by the judgment of the Apex Court in Surat City Gymkhana (supra). Therefore, question (b) as posed does not give any rise to any substantial question of law.
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2016 (4) TMI 1356 - CALCUTTA HIGH COURT
If the petitioners supply a legible computerized printout of the scheme and the schedule of assets in acceptable form to the department, the department will append such computerized printout, upon verification, to the certified copy of the order without insisting on a handwritten copy thereof.
Let costs assessed at 300 GMs be paid by the applicants to the Central Government.
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2016 (4) TMI 1355 - ITAT JAIPUR
Capital gain computation - addition u/s 50C - AO denying the benefit of Valuation Report to the assessee - AO without awaiting for the Valuation Report of the Valuation Officer had passed the assessment order on 13.03.2014 and held that the assessee has under reported the sale consideration - HELD THAT:- The reference was made by the AO to the Valuation Officer on 22.1.2014. Therefore, the Valuation Officer has 6 months time as per section 142A(6) to submit the report to the Assessing Officer. However, despite that the AO insisted for submission of the report by 10th March 2014 and in fact, the report was received in the Office of the AO on 13th March, 2014. The AO, in our view, was duty bound to wait for the report of the Valuation Officer as per the mandate referred herein above and thereafter he is statutorily bound to grant opportunity of being heard to the assessee and consider the report of the Valuation Officer. In our view, the AO has brazenly violated the provisions of law and has committed serious error in denying the benefit of Valuation Report to the assessee. In view thereof, we have no option but to uphold the finding of the ld. CIT (A). In view of the above, the appeal of the revenue is required to be dismissed and is accordingly dismissed.
Since we are upholding the valuation made by the Valuation Officer as well as the order passed by ld. CIT (A), therefore, the ground no. 2 of the assessee is also dismissed.
Deduction u/s 54F - proof of purchase of new asset within the period of two years after the date of transfer of original asset - HELD THAT:- It is the admitted case that sale of unauthorized commercial land was effected on 31.1.2011 and the agreement to sale for purchase of agriculture land was executed between Shri Khiv Singh and the assessee on 2.6.2011 of the land bearing Khasra No. 1262 at village Muhana admeasuring 1.99 hector and 0.37 hector.
If Shri Khiv Singh and Shri Naurat Singh were the owners of the property, how the agreement can be executed solely by Shri Khiv Singh and how the entire sale consideration was received by Shri Khiv Singh on 2.6.2011 in the absence of any registered power of attorney in his favour executed by Shri Naurat Singh , prior to the agreement . Moreover, the agreement dated 2.6.2011 cannot be relied upon for any purpose in view of the provisions of section 17 read with section 19 of the Registration Act and Stamp Duty Act.
The agreement dated 2.6.2011 cannot be relied upon by the assessee to claim the purchase of capital asset within the statutory time limit provided by section 54F. Moreover there is no independent document or evidence to support the transfer of capital asset in favour of the assessee on 2.6.2011 or thereafter but before the registration of the sale deed dated 29.3.2013.
Since we have already held that there is no transfer or purpose of the property in pursuant to the agreement dated 2.6.2011, therefore, the assessee in our view has not been able to prove that he has purchased new asset within the period of two years after the date of transfer of original asset. Since the assessee has purchased the new asset by virtue of registered sale deed on 29.03.2013 after getting the General Power of Attorney from the brother of the seller, namely, Shri Khiv Singh dated 25.3.2013, therefore, the new asset (agricultural land) was purchased by the assessee beyond the period of 2 years. Thus the benefit of section 54F cannot be acceded to the assessee. In view thereof, the ground of the assessee is required to be decided against the assessee
Moreover, if we look into the size of the agricultural land purchased by the assessee vide registered sale deed dated 29.3.2013, we find that the total size of the plot is 37,000 sq. ft. whereas the constructed portion of the entire complex was only 1553.50 sq. ft. (tin shed). Therefore, also the assessee cannot be given the benefit of section 54F within the meaning of law as the property purchased by him was an agricultural land and the house was constructed only of 1553.50 sq. ft. against the total size of land admeasuring 37,000 sq. ft. . The character of remaining property was continued to be the agricultural in nature. In view thereof ground no. 1 is dismissed.
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2016 (4) TMI 1354 - ITAT MUMBAI
TP adjustment - addition made under the provisions of Chapter X of the act on the basis of a markup of cost plus 21. 30% - comparable selection - characterisation of the transaction - HELD THAT:- Assessee-company, engaged in the business of providing marketing and other support services to its Associated Enterprise (AE) thus companies functionally dissimilar with that of assessee need to be deselected from final list.
For determining ALP the TPO should identify the identical or almost identical services/ business/products. It is rightly said that a mango cannot be compared with an apple though both grow on trees and both are fruits.
Provisions of section 92 were introduced in the Act, so that under-charging or over-charging by AE in intra-group transactions can be prevented that intra-group transfers can be valued. Restructuring of legitimate business transaction would be an arbitrary exercise. However, there are two exceptions to the rule. The first being where the economic substance of the transaction differs from its form. In such cases, the tax authorities may disregard the parties’ characterisation of the transaction and re-characterise the transaction in accordance with its substance. The second exception is when the form and substance of the transaction are the same but the arrangements made in relation to the transaction, when viewed in their totality, differ from those which would have been adopted by the independent enterprise behaving in a commercially rational manner. The second exception also mandates that the actual structure should practically impede the tax authorities from determining an appropriate transfer price. We find that the TPO/DRP has not brought on record any material to prove that either of the two exceptions were present in the case under consideration.
Provisions of Chapter X were never aimed to make adjustment at any cost, but to decide fairly and equitably that the price quoted by an assessee with regard to an international transactions entered into with its AEs are at ALP. The burden is on the assessee to prove that transactions with its AEs are above board and it is paying/charging the same rate that is prevalent in the open market. The comparables selected by the assessee should not be ignored lightly, unless and until it can be proved that the variables selected by it were functionally or otherwise different from the job done by it. TPO is free to make search and refer to other comparables. But, this is not an unbridled power. He has to prove that comparables selected by him were engaged in the similar or almost similar activities of the assessee. In the case under consideration, the TPO had selected comparables which had no similarity at all with the activities of the assessee.
We are unable to understand is how the results of companies dealing in foreign exchange/maintaining freight station or engaged in providing end-to-end engineering services can be compared with marketing and allied services. Selection made by the TPO is comparables was neither methodical not scientific. It is found that NCP margin as per the TP study of the assessee was 10. 14%, that NCP margin, after excluding the six comparables, is 12. 05%. Thus, it is within the permissible limit of +/-5%. Considering these facts, we decide the first effective ground of appeal(GOA-1to7) in favour of the assessee.
Non-compliance of the direction of the DRP by the AO - as argued by the AR that the DRP had directed the AO to allow deduction of ₹ 1. 32 lakhs under section 80 G of the act against the interest income of ₹ 10. 02 lakhs, that the AO had not allowed the said deduction - HELD THAT:- We are of the opinion that the AO is bound to give effect to the order of the DRP. If he has not passed the order till date with regard to deduction under section 80 G of the Act, he should pass the order within a fortnight after receiving our order.
Charging of interest u/s. 234 of the Act, are of consequential nature. Appeal filed by the assessee stands partly allowed.
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2016 (4) TMI 1353 - ITAT MUMBAI
Disallowance u/s 14A read with Rule 8D - HELD THAT:- As relying on GODREJ AND BOYCE MFG. CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] no doubt the expenditure incurred to earn the exempt income is liable to be disallowed on reasonable basis by providing the reasonable opportunity to the assessee in accordance with the law specifically in view of the observations made
Disallowance of expenditure incurred in respect of reimbursement of property taxes to Precision Component(P) Ltd.(PCPL) - Assessee has drawn support from a letter claimed to have been signed by the assessee and the land lord, which states that the assessee here in should reimburse the property tax - HELD THAT:- The monthly rent paid by the assessee was ₹ 1,16,000/-. The property tax reimbursed by the assessee works out to ₹ 30,63,248/-, which works out to about 26 months of rent. This proportion appears to be highly disproportionate and beyond human conduct and probabilities. A tenant, under normal circumstances would not agree to bear such a high cost. Hence there appears to be merit in view taken by tax authorities. However, we notice that they have taken adverse view without conducting any enquiry.
There is merit in assessee contention that the reimbursement of property tax partakes the character of rent only - what is required to be seen is as to whether to aggregate amount of rent plus reimbursements compares well with the earlier years payment. If it does not compare well, then it is the duty of the assessee to justify the payment.
This issue required fresh examination at the end of AO. Accordingly we set aside the order of learned CIT(A) on this issue and restore this issue to the file of Assessing Officer for fresh examination.
Allowance of the expenditure incurred upon the advertisement and promotion - HELD THAT:- As decided in assessee's own case [2008 (4) TMI 535 - ITAT MUMBAI], [2006 (7) TMI 569 - ITAT MUMBAI] , [2009 (3) TMI 990 - BOMBAY HIGH COURT], [2009 (8) TMI 1246 - BOMBAY HIGH COURT] such expenditure has been treated as revenue expenditure.
Accrual of income - commission accrued to the assessee on the date of actual receipt of commission or on the date of payment by the client directly to the principal and not on the raising of invoices - when the commission received by the assessee company is required to be taxed? - HELD THAT:- The assessee company in the assessment year 1997-98 changed his method of accounting to show the said commission on receipt basis. No doubt, the A.O. disallowed the same but the Hon’ble Tribunal in his judgment [2006 (7) TMI 569 - ITAT MUMBAI] found justifiable to tax an amount at the time of receipt and appeal against the said order was dismissed by the Hon’ble Bombay High Court [ 2009 (3) TMI 990 - BOMBAY HIGH COURT] - Decided against revenue
Depreciation @ 60% on computer peripherals like rack, printer, port, routers, cord etc. - HELD THAT:- This controversy has been decided by the Tribunal in case filed as DCIT Vs. Datacraft India Ltd. [2010 (7) TMI 642 - ITAT, MUMBAI] and CIT Vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] as held computer accessories and peripherals cannot be used without the computer. Consequently, as they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% .
TP adjustment - determination of arm’s length compensation as per order of the Transfer Pricing Officer(T.P.O) - HELD THAT:- In view of the report of Transfer Pricing Officer no adjustment was made to declare the arm’s length price by the assessee, therefore, in view of the said circumstance no addition on account of transfer pricing adjustment was being made to taxable income declined by the assessee. Nothing came into notice that the findings given by the Assessing Officer as well as learned CIT(A) were wrong against law and fact. Hence this issue is decided in favour of assessee and against the revenue.
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2016 (4) TMI 1352 - ITAT MUMBAI
Disallowance of interest and other expenditure u/s 14A by attributing it to earning exempt income u/s 10 - denial of exemption u/s 10(38) in respect of long-term capital gains on sale of shares held as long term investments and taxing it as business income - disallowance of amortization of Employee Stock Option Plan (ESOP) expenses - disallowance of software expenditure towards licences fees - HELD THAT:- As relying on assessee's own case appeal for fresh adjudication after granting a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. AO is directed to decide the same strictly in the light of the ratio laid down in the said order of the Tribunal .
Broken period interest debited to the Profit & Loss Account - whether the same is required to be adjudicated in view of the judgment in the case of CIT vs. HDFC Bank Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT] - HELD THAT:- After hearing both the parties on this issue, we remand the Ground no.5 to the file of the AO as desired by the ld Representatives of both the parties for fresh adjudication. AO is directed to adjudicate this issue in the light of the said judgment of Hon’ble High Court (supra) complying with the ratio laid down in the said judgment on the issue under consideration - Appeal of the assessee is allowed for statistical purposes.
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2016 (4) TMI 1351 - CALCUTTA HIGH COURT
Right to get represented by the advocates/chartered accountants at the hearing - Identification Committee of the SBI? - Wilful defaulters or not - Held that:- This Bench in its decision KINGFISHER AIRLINES LIMITED VERSUS UNION OF INDIA AND OTHERS [2016 (1) TMI 43 - BOMBAY HIGH COURT] was called upon to consider whether the United Bank of India (hereafter the UBI) was justified in refusing permission to the petitioning company to be represented by its advocates. It was held, in view of the facts pleaded in the responses to the impugned notices, that the petitioning company could claim no right to be represented by an advocate at the hearing before the GRC of the UBI.
The administrative act of grant/refusal to grant must be preceded by quasi-judicial exercises. Insofar as the master circular is concerned, there is no doubt that the lender identifies a defaulting borrower who ought to be placed in the list of wilful defaulters and upon hearing the version of the defaulting borrower ultimately decides in regard to its inclusion/noninclusion in the list. Notwithstanding the requirement of the master circular regarding the requirement of compliance with natural justice, the GRC/Identification Committee of the lending bank not being authorised to take evidence cannot be said to discharge functions other than administrative - Having regard to the above, there is no question of holding in favour of representation of the petitioners before the GRC/Identification Committee by an advocate. It cannot be gainsaid that the right of an advocate to practice is not unrestricted and is subject to reasonable restrictions.
Petition dismissed.
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2016 (4) TMI 1350 - CESTAT NEW DELHI
Demand of Interest and penalty - delay in discharging of duty - Held that:- There is delay in payment of duty by the respondent - Since, interest liability is compensatory in character, levy of the same is automatic, wherever there is delay in payment of duty - the interest demand dropped in the impugned order is set aside and the appeal is allowed in favor of Revenue.
Imposition of penalty - Held that:- There was no intention on the part of the respondent in defrauding the Government Revenue inasmuch as the respondent has sufficient balance in its Cenvat account for discharging the duty liability. Further, non-payment of duty on the waste product is attributable to the interpretation of the provisions of law and also supported by the decisions of the judicial forums - penalty rightly set aside.
Appeal allowed in part.
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2016 (4) TMI 1349 - ITAT DELHI
Addition u/s 14A - sufficiency of own funds - HELD THAT:- On perusal of the balance sheet of the appellant company it is apparent that assessee has its own interest free funds of ₹ 135.15 crore against investment made of only ₹ 482 crores, therefore the presumption should be available with the assessee that as funds invested in this investment is out of its interest free funds. See RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT] - We also get support from Hon’ble Bombay High Court’s decision in case of CIT v HDFC bank limited [2014 (8) TMI 119 - BOMBAY HIGH COURT] where identical view has been taken. In view of this, we reverse the decision of the ld. CIT (A) in confirming the disallowance. - Decided in favour of assessee.
TP Adjustment - Comparable selection - comparability of international transactions with an uncontrolled transaction - HELD THAT:- Merely because the company is having negative net worth but when the FAR is comparable, it cannot be said to be non comparable unless it is shown that how the negative net worth of the company has impacted the profitability of the comparable company.
The issue decided by Special bench in the case of DCIT V Quark Systems Limited [2009 (10) TMI 591 - ITAT, CHANDIGARH] where in the negative net worth company was considered and it was held that business organization with negative net worth cannot be treated at par with a normal business organization. However while considering that issue the comparable was also functionally not comparable in that case. Therefore there was no view expressed in that decision that though comparable has similar FAR still negative net worth company is required to be excluded without showing the impact of negative net worth on the profitability of the company. In view of this we direct the inclusion of this Company i.e. Muller & Phipp India Limited as comparable for the purpose of determining arms length price.
Other sales exclusion while working out PLI - HELD THAT:- No reason that the ld TPO to exclude the other sales of ₹ 1214675/- to be excluded while working out PLI. Against this no argument have been advanced by the ld DR that how the order of the ld CIT(A) is incorrect. In view of this we direct that other sales shall be included as operating income for working out PLI.
Corporate support service exclusion - CIT(A) has held that Corporate Support Services are aggregated with the distribution function of the assessee and are insignificant in volume therefore included as operating income of the assessee - HELD THAT:- DR has fairly agreed that if that income is to included as operating income then proportionate expenses are also required to be included as operating expenses. In our view there is no expenditure has been excluded pertaining to corporate support services. While working out the entity level PLO in case of TNMM method we are of the view that the Corporate Support service income should be included as operating income and therefore we do not find any infirmity in the order of the ld CIT(A).
Liabilities No Longer required written back - This amount has been excluded by the ld TPO without assigning any reason - CIT(A) has confirmed his view as it is an extraordinary item - Argument of the ld DR that safe harbour rules also provides for not considering it as operating income. HELD THAT:- We are of the view that safe harbour rules is optional and if the assessee has opted then only he has covered by it otherwise not. Therefore in the present case the assessee cannot precluded from stating that provision returned back written form part of the operating revenue. - Provisions no longer required written back is to be excluded if the assessee makes the provision and also reverses it as a normal business activity. Further if it is on account of revenue nature it should be included. However if the liabilities originally created are on account of capital items then their write back cannot be a normal instances of the business and hence to be excluded as operating income. As the fact for such write back are not available on record we set aside this issue to the file of the Ld. AO/ TPO to examine as per above direction and decide the issue afresh. Needless to say that the assessee may be provided reasonable opportunity for providing these details.
Profit on account of foreign exchange / Repairs and maintenance expense - HELD THAT:- We are of the view that foreign exchange gain if it is arising out of sales of goods that it should form part of the operating income of the assessee. It was submitted that Forex gain has arisen on account of export of goods. Ld. TPO as well as CIT (A) has not considered this issue and therefore we set aside it to the file of ld. TPO to deal with this issue on merit after giving proper opportunity of hearing to the assessee.
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2016 (4) TMI 1348 - ITAT MUMBAI
Rejection of books of account - allowance of provisions of interest - HELD THAT:- As decided in HITESH S. MEHTA VERSUS DCIT CENTRAL CIRCLE- 23, MUMBAI [2013 (10) TMI 1065 - ITAT MUMBAI] One of the reasons for not allowing the provisions of interest claimed by the assessee is that the books of accounts produced by the assessee during the assessment proceedings has been held to be unreliable. Shorn off all other unnecessary details, considering the facts and circumstances in toto, we are of the view that it would be appropriate that the issue is set aside to the file of the Ld.CIT(A) to adjudicate afresh on merits in respect of the issue pertaining to the rejection/reliability of the books of accounts produced by the assessee after giving due opportunity of being heard to the assessee
Addition u/s 69C - Personal expenses - HELD THAT:- As decided in PRATIMA H. MEHTA case [ 2013 (8) TMI 991 - ITAT MUMBAI] Expenses in the nature of household and personal expenses may comprise of kitchen/food expenses, expenses for maintenance of residence, expenditure on education of children, expenses on religious occasions, expenditure on tour and travels, expenses for special occasion of celebration on anniversaries / birthdays, medical expenses, etc. The assessee has not furnished any details to explain as to how all these essential expenses to pull on the day to day life have been incurred. I therefore, conclude that these expenses have been met from the undisclosed sources of income of the assessee. Therefore estimate an amount of ₹ 1,00,000/- p.m. as his personal expenses. Accordingly an amount of ₹ 12,00,000/- is added as assessee’s total taxable income under section 69C - thus we set aside the ground to the file of the CIT(A), thus ground No.3 is allowed for statistical purposes.
Addition u/s 14A - HELD THAT:- The assessee has earned dividend income and LTCG against which, no expenses have been said to be attributable. AO has mechanically applied Rule 8D which admittedly is not applicable in AY 2006-07. Once that is so, then the entire basis of computation of disallowance is incorrect. Looking to the nature of expenditure and claim of the assessee that it has business loss which has been assessed by AO also, we are of the opinion that this matter should be set aside to the file of the AO to work out some reasonable basis for disallowance after examining the nature of accounts and the nature of expenses debited by the assessee. Accordingly, ground No.4 is treated as allowed for statistical purposes.
Addition on account of personal household expenses - HELD THAT:- After considering the rival submissions and on perusal of the relevant finding in the impugned order, we find that the addition made by the AO as well as sustained by the CIT(A) are though on ad-hoc basis, but same was done because no details of expenditures was filed by the assessee. Before us, the Ld. Counsel has submitted that, most of the expenses have been incurred by Dr. Hitesh S Mehta and other family members living in a Joint family set-up. Further other members have contributed for household expenses and that some of the additions have been confirmed on account of personal household expenses by the Department. On these facts and circumstances, we inclined to scale down the additions to ₹ 3 lakhs. Accordingly, addition sustained on account of personal household expenses would be ₹ 3 lakhs
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2016 (4) TMI 1347 - ITAT BANGALORE
Addition u/s 68 - assessee failure to fulfill requisite condition of identity of creditor and genuineness of the transaction, despite the opportunities given by the AO - HELD THAT:- We find that the amount in question is a brought forward balance as shown in the account of the two parties viz., M/s.Beijia Industrial Co. Ltd., and M/s.S.I.International Co., who are stated to be suppliers of the assessee.
CIT(A) has recorded the fact that the assessee has claimed this amount being a brought forward balance in the ledger accounts of the creditors - AO made the addition on the ground that the assessee failed to produce the confirmation of the creditor - this amount was shown as credit for the financial year 2005-06 and continued as carried forward till this year, then it would not be a case of credit entries in the books of account of the assessee during the year under consideration.
Therefore, when no cash credit was entered into books of account during the year under consideration, then no addition u/s 68 can be made in respect of this amount of credit balance shown in the books of account.
As regards the genuineness of the transaction is concerned, if the assessee failed to prove the existence of the liability in question then the addition can be made under the provisions of sec.41(1) or sec.28 of the Act and not u/s 68 - wet aside this issue to the record of the AO to re-examine the same in the light of the judgment of the Hon’ble Delhi High Court in the case of Usha Stud Agricultural Farm Ltd.(2008 (3) TMI 91 - DELHI HIGH COURT). The assessee is also directed to explain the status of the repayment of the liability. - Decided in favour of assessee for statistical purposes.
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