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Showing 141 to 160 of 1903 Records
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2015 (12) TMI 1769
Claim of loss for the diminution in value of fertilizer bonds against the sale of fertilizers - Held that:- The assessment order itself shows that in its books, the Assessee categorised the bonds under the head ‘current investment assets’. In that view of the matter, the diminishing value of the bonds not being held as long term investment was in the nature of a revenue loss and could have been claimed as such by the Assessee. The stand of the Revenue that this was only a notional loss and not allowable, is not tenable since bonds held as stock-in-trade can be valued at market rate or cost whichever is less.
Disallowance u/s 14A - claim of the Assessee that it incurred no expenditure, other than the administrative expenses, for earning dividend income - Held that:- Under Section 14A(2) of the Act read with Rule 8D of the Income Tax Rules, 1962 the Assessing Officer is required to make an enquiry if he is not satisfied with the correctness of the claim of the Assessee in respect of such expenditure in relation to income which does not form part of the total income. In the present case it has been averred by the Assessee, and not contradicted by the Revenue, that no interest expenditure has been incurred by it for earning the exempt income. There was no basis for the AO to have disallowed any part of such income on that score. No substantial question of law arises
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2015 (12) TMI 1768
Disallowance of 50% of the indirect expenses incurred in cash - AO has passed ex parte assessment order u/s 144 - Best Judgement assessment - Held that:- Assessing Officer must not act dishonestly or vindictively or capriciously. He must make, what he honestly believe to be a fair estimate of the proper figure of assessment and for this purpose he must be able to take into consideration, local knowledge, reputation of the assessee about his business, the previous history of the assessee or the similarly situated assessee. It is also pertinent to mention that judgment is a faculty to decide matter with wisdom, truly and legally. Judgment does not depend upon the arbitrary, caprice of an adjudicator, but on settled and invariably principles of justice. Thus, in a best judgment, even if, there is an element of guess work, it should not be a wild one, but shall have reasonable nexus to the available material and circumstances of each assessee.
Admittedly the assessee was not in a position to produce supporting evidence, then ad hoc disallowance on account of such failure ought not to be made more than 20% of the expenses. - Decided partly in favor of assessee.
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2015 (12) TMI 1767
Scrutiny / regular assessment u/s 143(3) - validity of issue of notice - effect of revision of belated return - section 139(4) r.w.s. 139(5) - period of limitation - additions towards capital gains - long term or short term capital gain - Held that:- A perusal of sub-section (5) of section 139 would show that the provisions relating to filing of revised return are applicable only to the return filed u/s. 139(1) or return of income filed in pursuance to notice u/s. 142(1) of the Act. A bare reading of the provisions of sub-section (5) of section 139 makes it unambiguously clear that belated return filed under the provisions of section 139(4) cannot be revised.
Since, the revised return filed by the assessee is invalid and non-est in eye of law, the period of limitation for issuing notice u/s. 143(2) has to be calculated from the date of filing of original return. The original return was filed on 12-12-2008 i.e. in the financial year 2008-09 the period of limitation for issuing notice u/s. 143(2) with reference to original return comes to an end on 30-09-2009. Therefore, the notice was clearly issued beyond the statutory period of limitation.
Since, the notice issued u/s. 143(2) is barred by limitation, no valid assessment could have been made on the assessee by Assessing Officer in the absence of valid notice u/s. 143(2) of the Act.
Decided in favor of assessee.
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2015 (12) TMI 1766
Disallowance u/s 14A - expenses related to exempt incomes - assessee company received interest income on tax free bonds, income tax refund and fixed deposits - assessee company also claimed divided income - The assessee company submitted that out of abundant caution and to buy peace of mind and to avoid litigation , the assessee company has voluntarily offered for disallowance of expenditure of ₹ 14,42,900/- us/ 14A of the Act which includes ₹ 5,13,278/- suo moto disallowed in the return of income filed with the Revenue .The assessee company submitted that AO erred in saying that the assessee company has not offered for disallowance any expenditure u/s 14A of the Act in the return of income filed with the Revenue while fact of the matter is that the assessee company disallowed expenditure of ₹ 5,13,278/- u/s 14A of the Act.
Held that:- The contentions of the assessee company that the CIT(A) has accepted the method of computation adopted by the assessee company for assessment year 2005-06 and 2006-07 can not be accepted as first of all principles of res-judicata are not applicable to income tax proceedings, Secondly Rule 8D of Income tax Rules, 1962 is applicable from assessment year 2008-09.
On merits based on facts and circumstances of the case , we have observed above that the substantial activity of the assessee company is to make investments and substantial amount of revenue stream for the assessee company is from dividends and interest income which are exempt from tax. Thus, most humbly we reject the contentions of the assessee company and we uphold the disallowance of total expenditure of ₹ 43,48,277/- made by the AO under Section 14A of the Act read with Rule 8D of Income Tax Rules, 1962 , in the case of the assessee company keeping in view the peculiar facts and circumstances of the case.
Decided against the assessee.
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2015 (12) TMI 1765
Time Limitation - filing the written statement or giving version of the opponent - Section 13(2)(a) of the Consumer Protection Act, 1986 - Held that:- Upon receipt of a complaint by the District Forum, if the complaint is admitted Under Section 12 of the Act, a copy of the complaint is to be served upon the opposite party and as per provisions of Section 13 of the Act, the opposite party has to give his version of the case within a period of 30 days from the date of receipt of the copy of the complaint. There is a further provision in Section 13(2)(a) that the District Forum may extend the period, not exceeding 15 days, to the opposite party for giving his version.
Thus, the opposite party is given 30 days' time for giving his version and the said period for filing or giving the version can be extended by the District Forum, but the extension should not exceed 15 days. Thus, an upper cap of 45 days has been imposed by the Act for filing version of the opposite party.
The question arose in the case of Dr. J.J. Merchant [2002 (8) TMI 835 - SUPREME COURT] whether the Forum can grant time beyond 45 days to the opposite party for filing its version. After considering the aforestated section in the light of the object with which the Act has been enacted, a three-Judge Bench of this Court came to the conclusion that in no case period beyond 45 days can be granted to the opposite party for filing its version of the case - the judgment delivered in the case of Dr. J.J. Merchant holds the field and therefore, the District Forum can grant a further period of 15 days to the opposite party for filing his version or reply and not beyond that.
Reference disposed off.
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2015 (12) TMI 1764
Claim of assessee with respect to club charges (one time entry fees) - revenue v/s capital expenditure - Held that:- Revenue does not dispute that Issue (iv) concerning one time club entry charges has been held to be a revenue expenditure and is covered in favour of the Assessee by the decision of this Court in CIT v. Samtel Color Ltd. [2009 (1) TMI 26 - DELHI HIGH COURT].
Rate of depreciation on computers and peripherals is covered in favour of the Assessee by the decision of this Court in Commissioner of Income Tax v. BSES Yamuna [2010 (8) TMI 58 - DELHI HIGH COURT].
TPA - ITAT allowing the exclusion of Vapi and WAPCOS as comparables and holding that they are not functionally comparable - Held that:- Court finds that while the Assessee provides marketing support services, the first excluded company WASCOS, as a comparable, provides engineering consultancy services and the second excluded company Vapi provides consultancy for water resource management. The reasons given by the ITAT for exclusion of those two entities as comparables appears, therefore, to be fully justified on facts as well as in law. No substantial question of law arises.
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2015 (12) TMI 1763
Addition made on account of interest income from investment in Co-Operative Societies u/s. 80P(2)(d) - A.O. computed the disallowance u/s. 14A r.w.r. 8D - Held that:- The matter is no longer res integra. This Court in The Punjab State Cooperative Milk Producers Federation Limited vs. Commissioner of Income Tax II [2011 (3) TMI 615 - PUNJAB AND HARYANA HIGH COURT] as held as per the bye-laws of the appellant- Federation, deductions were admissible to it under section 80P(2)(a)(i) of the Act on the income derived by it from its members by way of interest on its investments as loan and advances for their working capital - assessee is entitled to deduction under section 80P(2)(d) of the Act after excluding the expenditure attributable to the earning of such income - It may be noticed that section 80P was inserted in place of section 81 which was simultaneously deleted by Finance (No. 2) Act, 1967, with effect from 1-4-1968
Regarding Section 14A - on consideration of facts involved therein had concluded that there was no expenditure which had been incurred by the assessee for earning the income and the same did not form part of total income - Decided against the assessee
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2015 (12) TMI 1762
Benefit of exemption under section 11 denied - proof of charitable activities - Held that:- We fail to understand how a loan amount given to two Mazdoor Sabhas fit into the category of making investment or deposit as per provisions of section 11(5) of the Act, wherein investment have been referred to the investment in saving certificates of the Government as defined in clause (c) of section-2 of the Government Saving Certificate Act and deposits have been referred to being deposit in Post Office Saving Bank account or in Schedule Bank. Thus, it can be safely concluded that the assessee is not covered by the provisions of section 13(1)(d) of the Act.
Therefore, the decisions relied upon by the assessee as mentioned elsewhere do not support.
As mentioned elsewhere the assessee has clearly violated the provisions of section 13(1)(c) r.w.s. 13(3) of the Act. Hence, the assessee is not eligible for the benefit of exemption under section 11 of the Act. The denial of exemption is confirmed.
Taxability of the corpus fund is concerned, we direct the Assessing Officer to decide the issue afresh as per the provisions of the law. In so far as the claim of expenditure is concerned the Assessing Officer is directed to verify whether the amount is given as advance or charged to the P&L Account, after giving a reasonable opportunity of being heard to the assessee and decide this issue as per the provisions of the law.
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2015 (12) TMI 1761
Allowance of expenditure as commission - Held that:- There was no basis for making any disallowance and the same was solely on ad hoc basis. We are in agreement with the findings of ld. CIT(A) that the AO had not brought any material on record to show that the commission expenditure was either bogus or was not an allowable deduction. It is well settled law that no ad hoc disallowance can be made unless the AO brings any specific detail on record which may call for any disallowance.
Advertisement expenditure allowance on product launches and on granty signs - nature of expenses - Held that:- Expenditure in question was in fact in furtherance of business of assessee and, thus, had direct nexus with its business, and by putting neon signs and glow signs, no assets of permanent nature was created, it was an allowable business expenditure - See CIT v. Citi Financial Consumer Fin. Ltd. [2011 (3) TMI 622 - DELHI HIGH COURT].
Royalty/WPC expenses - nature of income - as per AO royalty, which was paid, in order to get the right to use the spectrum, was capital in nature and allowed 25% of the amount claimed - Held that:- The impugned amount was paid as a protection fee and was not a payment which was necessary for running the business, as is in the present case. The assessee could not run the business without making these payments on quarterly basis and, therefore, by no stretch of reasoning this could be held as capital in nature. The issue is no more res integra in view of the decision of Hon'ble Delhi High Court in the case of Fascel Ltd.(2008 (12) TMI 743 - DELHI HIGH COURT) - revenue appeal dismissed.
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2015 (12) TMI 1760
Enhancement of rental income not sustaining the addition made u/s 48 - addition made on account of cessation of liability u/s 41(1) - Held that:- AO observed that the rent has not been revised, the assessee is expected to get higher rent in the relevant year are all on assumptions and presumptions without there being any evidence to that effect. With reference to the report of the Income Tax Inspector that, as a dubious from the AO’s assessment order that the lettable rental value in similar area in financial year 2008-09 is a minimum of ₹ 50/- per sq.ft., but, however, the CIT(Appeals) has rightly observed that the report of the Inspector in estimating the value cannot partake the assessment of an approved valuer, but for the reason of that the Income Tax Inspector is not technical person to submit valuation report. In absence of any evidence it is just improper to fix the rent on mere assumptions and presumptions, therefore, we confirm the order of the CIT(Appeals) on this issue and dismiss the ground no. 1 raised by the revenue.
Deduction allowed on the expenditure incurred during the transfer of an asset deduction can be allowed on the expenditure incurred during the transfer of an asset and it clearly shows that the burden is on the assessee to demonstrate that the expenses incurred for the transfer of asset is fulfilled. In the case on hand also, the assessee produced the bill issued by M/s. Sood Realtors & Developers and the amount paid by the assessee by way of cheque, therefore, the ld. CIT(Appeals) has rightly applied the principle laid down by the ITAT Pune Bench in the case of KRA Holding & Trading Pvt. Ltd. [2011 (5) TMI 498 - ITAT PUNE]. We are of the view that the CIT(Appeals) was rightly justified in directing the Assessing Officer to allow the said deduction.
Addition u/s 41 - Held that:- In the case on hand, the father of the assessee died long back, the said amount given by him as in the nature of personal loan to purchase a house property and also received from the estate of her father entered into the books of account of the assessee since long back. The assessee did not credit the said amount to her profit & loss account Therefore, in our view, scope of section 41(1)(a) is not applicable to the case on hand. Appeal of the Revenue is dismissed.
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2015 (12) TMI 1759
TPA - comparables selection criteria - functional dissimilarity - Held that:- We agree with the proposition of the Tribunal laying down the minimum turnover filter of ₹ 100 crores in the case of the assessee, because the selection of the comparables has to be seen both on quantitative and qualitative criteria. A turnover of a company most likely has a bearing on its comparability as the size of a transaction in absolute value or in proportion to the activities of the companies might affect the relative competitive positions of the buyer and the seller. Accordingly, we direct the TPO/AO to remove the comparables having turnover of ₹ 100 crores.
Comparable cannot be rejected on the export earning filter of 25%
The assessee company is engaged in the business of providing software development & export services mainly to its Associated Enterprises (AEs) i.e. Capgemini Group Companies and third parties. The main service line of the assessee company includes, software technology services; IT outsourcing services; and customizes service software development services, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Deduction u/s.10A - adjustment of losses - Held that:- Losses of section 10A units have to be adjusted against taxable profits of other units after deduction under section 10A has been allowed in respect of each of the profitable unit under section 10A.
Reducing the telecommunication expenditure from the export turnover of the eligible units, the while computing deduction under section 10A - Held that:- As decided in assessee's own case these expenses have been incurred for the purposes of the business of software development at the software units in India. It is that finding which the Assessing Officer was unable to controvert or unable to bring any contrary material to disprove the same. It is in that light that the Tribunal found that the Assessing Officer could not have insisted on the deduction. It is that exercise undertaken by the Assessing Officer which has not been upheld but rather disapproved by the Tribunal. This is a finding purely on the facts and pertaining to the business of the assessee. The facts pertaining to the assessee's business of software development, the charges and which are claimed to have incurred, are in relation to the business of software development within India. They could not be said to be costs deductible from export turnover for the purposes of Section 10A of the Act.
Reducing the expenditure incurred in foreign currency from the export turnover of the units eligible, while computing deduction under Section 10A - Held that:- Tribunal in assessee’s own case for the assessment year 2009-10 wherein it is held it is similar to issue of telecommunication expenses and accordingly, decision of Bombay High Court will be followed. Thus, respectfully following the order of the Hon’ble Bombay High Court and the ITAT decision for AY 2009-10 we set aside the orders of the revenue authorities and direct the AO to delete the disallowance and compute the exemption as per law.
Disallowance of interest and expenses u/s 14A as expenditure incurred for earning dividend income - Held that:- So far as disallowance of interest the same cannot be made as admittedly, the assessee has huge surplus funds which are interest free and, therefore, no disallowance of interest should be made.
As regards the indirect expenses, the same has been disallowed under Rule 8D by the AO in a mechanical way, without satisfying himself after looking into the nature of accounts of the assessee and the nature of expenses debited in the books of accounts as per mandatory requirement of section 14A(2). If assessee’s investments are only in subsidiary companies and mutual funds, then it cannot be held that assessee might have incurred huge expenditure. The assessee had suo moto offered a sum of ₹ 50,000/- for disallowance, which in our opinion, is sufficient for attributing the indirect expenses for earning the exempt income of ₹ 2,83,000/-. - Decided in favour of assessee.
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2015 (12) TMI 1758
TPA - adjustment of selling and distribution expenses - as contented TPO has made adjustment on account of marketing and selling expenses incurred for promoting the sale of products in European countries and reduced the same from the price charged from unrelated parties in Europe - comparables selection - Held that:- The argument of the counsel on the premise that adjustment does not recognize the business realities that much higher expenses/cost is required to be incurred for selling the products in USA has already been considered by the CIT(A) who has held in this regard that the correct way of making adjustment is to start from the export prices charged by the assessee from the unrelated parties in non-US destinations therefore , the expenses incurred by GMI to develop a market for the assessee’s product do not have any relevance for the purpose of making adjustment on account of selling and distribution expense.
What is relevant for the purpose of this adjustment is the selling and distribution expenses incurred by the assessee for distributing its product in non- US locations. The TPO in his order has computed ₹ 0.27 per CD as the amount of adjustment that is required to be made on account of selling and distribution expenses. In this case the TPO has computed ₹ 0.27 per CD as the amount of adjustment that is required to be made on account of selling and distribution expenses. The assessee has not pointed out any defect in the analysis done by the TPO and, accepted by CIT(A). Comparables selected for the benchmarking analysis should be functionally similar and subject to similar business environment and risks. In view of the above the contention raised by the counsel is held to be not maintainable and therefore rejected.
Adjustment on account of geographical differences, we accept the claim of the assessee for adjustment. The CIT(A) or the TPO have not denied or disputed any of the above factual submission to the assessee. A rejection of a claim for general consideration for granting an economic adjustment which on the face of fit is tenable is not a correct way to disregard the facts brought on record. The revenue ought to have appreciated the business and the nature of the market. The observation of the TPO that the export price of 10.4-I-I-0 (Jewel-case CD box) to LG Electronics Inc. in USA was ₹ 13.59 per CD while sale prices of the same product in Poland and German, was ₹ 12.4 per CD is also found to be misconceived and therefore for the reasons stated above we allow the adjustment as claimed by the assessee.
Accordingly if the aforesaid adjustment is applied it is seen that the transaction of the assessee with the AE is at the higher than the arm’s length price and therefore the adjustment so made and sustained is deleted. Consequently we are not inclined to take up remaining objection raised by the learned counsel other than to hold that we find merit the submission that since the AE (GMI) had incurred loss therefore assessee could not be expected to have made more profits than the combined profit made the assessee and its AE i.e. GMI, if it were to make sales directly to the third party customers.
Adjustment on account of arm’s length price of international transactions cannot exceed the maximum arm’s length price i.e. the amount received by the associated enterprise from the customer and the actual value of international transactions. See Globe Vantedge (P) Ltd. vs. DCIT [2009 (12) TMI 668 - ITAT DELHI]- adjustment to be deleted - Decided in favour of assessee.
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2015 (12) TMI 1757
Disallowance of deduction u/s 80IC by allocating indirect expenses to the eligible Unit - as per revenue profit eligible for deduction under section 80IC is to be worked out after deducting all the direct and indirect expenses - Held that:- The words "derived from" has a narrow meaning, inasmuch as it contemplates first degree connection with the eligible Unit as held, inter alia, by the Hon’ble Supreme Court in the case of Pandian Chemicals Limited [2003 (4) TMI 3 - SUPREME Court] and this principle laid down in the context of income is also applicable for the allocation of expenses as held by the Coordinate Bench of this Tribunal in the case of Balarampur Chini Mills Limited -vs.- DCIT [2011 (7) TMI 1150 - ITAT KOLKATA] wherein held that expenses incurred by the assessee under the general head of Office Expenses, which are not directly incurred for the eligible Unit, cannot be said to have first degree connection with such Unit so as to reduce the same on pro rata basis for computing the profit of such Unit eligible for deduction - Decided against revenue
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2015 (12) TMI 1756
TDS u/s 194A - Co-operative Bank requirment to deduct tax while paying interest to its members on time deposits - Held that:- The Ministry of Finance, Government of India vide Circular No.19/2015 in F.No.142/14/2015- TPL, has held that the Co-operative Banks are not required to deduct tax at source on time deposits o f its members paid or credited on or before 1.7.2015.
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2015 (12) TMI 1755
Benefit of N/N. 21/2002-Cus., dated 1st March, 2002 - ‘kits’ for conversion of petrol and diesel vehicle into compressed natural gas/propane or liquefied petroleum gas driven vehicles - Held that: - Tribunal has in STANDARD CONSULTANTS LTD. Versus CC., CE. & ST. (APPEALS-II), HYDERABAD [2008 (9) TMI 656 - CESTAT, BANGALORE] held that the benefit of concession of additional duty at 5% is available on the goods imported.
Unjust enrichment - Held that: - the respondent has furnished a certificate of the Chartered Accountant indicating that the burden of duty has not been passed on - the ground of ‘unjust enrichment’ would not hold against the assessee.
Appeal dismissed - decided against Revenue.
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2015 (12) TMI 1754
Maintainability of appeal - in the impugned order Redemption fine of ₹ 1,82,392/- has been imposed on M/s. Metro but in appeal memo the amount of redemption fine has been mentioned as ₹ 2 lakhs - Held that: - the Committee of Commissioners has directed that the appeals is to be filed against M/s. Metro recording the fact that the learned Commissioner (Appeals) has reduced the Redemption Fine to ₹ 1,82,392/- and no proposal for imposing penalty on M/s. Metro but, in the Appeal Memo, the amount of Redemption Fine is shown as ₹ 2,00,000/- and penalty on M/s. Metro is proposed, the same is contrary to the Review Order. As the Revenue has not corrected the said discrepancies pointed out by the respondents, therefore, I hold that the appeal filed against M/s. Metro is defective, hence not maintainable.
The review order directs to file the appeal to the extent of demand of ₹ 28,07,0897- whereas in the appeal memo the amount of duty has been mentioned as ₹ 36,88,077/- and penalty was also sought to be imposed of ₹ 36,88,077/- - Held that: - appeal is defective. On that account itself, appeal is not maintainable against M/s. Pymen Cable India.
In the Review Order, there is no proposal to file the appeal against Shri Sandeep Garg and M/s. Ashok Cables Corpn - maintainability of appela against these persons - Held that: - in the impugned order, no penalty has been imposed on M/s. Metro. But M/s. Metro and Shri Sandeep Garg have challenged the impugned order before this Tribunal in Appeal Nos. E/120 & 121 of 2010 wherein this Tribunal held that no allegations are sustainable against them, therefore, no penalty is imposable on Shri Sandeep Garg, accordingly - appeal dismissed.
The Committee of Commissioners has proposed to file appeal against M/s. Ashok Cable Corporation, therefore, the prayer of the learned Counsel is not acceptable that the Committee of Commissioners has not proposed to file appeal against M/s. Ashok Cable Corporation - As there is no arguments advanced on the merits in this appeal, the same is required to be heard on merits, therefore, the Registry is directed to list the said appeal for hearing on 22.01.2016.
Application disposed off.
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2015 (12) TMI 1753
Issues Involved:
1. Transfer pricing adjustment
2. Rejection of transfer pricing analysis
3. Eligibility under section 10A of the Act
4. Use of single year data
5. Use of additional filters/modification of filters
6. Rejection of certain comparable companies
7. Determining inappropriate companies as comparables
8. Adopting inappropriate approach of selection of companies as comparables
9. Adjustment for working capital
10. Adjustment for risk difference
11. Applicability of 5 percent variation from mean of comparable margins
12. Penalty proceedings and levy of interest
Detailed Analysis:
1. Transfer Pricing Adjustment:
The Tribunal dismissed the grounds related to transfer pricing adjustment as general in nature, thus requiring no adjudication.
2. Rejection of Transfer Pricing Analysis:
The Tribunal found that the transfer pricing analysis conducted by the appellant and the comparable companies identified were rejected without proper adjudication.
3. Eligibility under Section 10A of the Act:
The appellant did not press this ground, and it was dismissed as not pressed.
4. Use of Single Year Data:
The appellant did not press this ground, and it was dismissed as not pressed.
5. Use of Additional Filters/Modification of Filters:
The appellant did not press this ground, and it was dismissed as not pressed.
6. Rejection of Certain Comparable Companies:
The Tribunal remitted the issue back to the DRP for detailed reasons for selecting/rejecting each comparable, noting that the DRP had not considered the objections in an objective manner.
7. Determining Inappropriate Companies as Comparables:
The Tribunal excluded Compucom Software Ltd., Kals Information Systems Ltd., and Avani Cimcon Technologies Ltd. from the list of comparables, citing functional dissimilarities and excessive related party transactions. The Tribunal relied on various precedents, including the assessee's own case in assessment year 2006-07 and other decisions by the Pune and Bangalore Benches of the Tribunal.
8. Adopting Inappropriate Approach of Selection of Companies as Comparables:
The Tribunal remitted the issue back to the TPO to consider the appellant's suggested companies as comparables and pass a speaking order thereon, provided the appellant had furnished the data during the pendency of proceedings.
9. Adjustment for Working Capital:
The Tribunal noted that the DRP had summarily rejected the issue without proper adjudication. The issue was remitted back to the DRP for fresh adjudication, with the Tribunal noting that working capital adjustment had been allowed in subsequent assessment years.
10. Adjustment for Risk Difference:
The Tribunal remitted the issue back to the DRP for fresh adjudication, noting that the DRP had not properly considered the issue raised by the appellant.
11. Applicability of 5 Percent Variation from Mean of Comparable Margins:
The appellant did not press this ground, and it was dismissed as not pressed.
12. Penalty Proceedings and Levy of Interest:
The Tribunal found the issue of penalty proceedings premature and noted that the levy of interest under sections 234A, 234B, 234C, and 234D is consequential in nature. This ground of appeal was dismissed.
Conclusion:
The appeal of the assessee was partly accepted, with several issues remitted back to the DRP and TPO for fresh adjudication and detailed reasoning. The Tribunal provided specific directions to exclude certain companies from the list of comparables and to consider the appellant's suggested companies, ensuring a thorough and objective analysis in line with legal precedents.
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2015 (12) TMI 1752
Issues Involved:
1. Disallowance of premium paid to LIC under "Employer-Employee Scheme" as capital expenditure.
2. Deletion of disallowance of speculation loss on account of cancellation of foreign currency forward contract by treating it as trading loss.
Detailed Analysis:
1. Disallowance of Premium Paid to LIC under "Employer-Employee Scheme" as Capital Expenditure:
Facts and Arguments:
The assessee company paid premiums to LIC under the "Employer-Employee Scheme" for two directors. The Assessing Officer (AO) disallowed the premiums as capital expenditure, arguing it was a close-ended fund with a lock-in period of three years and not a term policy. The AO also contended that the premiums paid for shareholders were not supported by any specific rules or directions from the CBDT.
CIT(Appeals) Observations:
The CIT(Appeals) upheld the AO's disallowance, stating:
- The investment was a close-ended fund with a lock-in period of three years.
- It was not a term policy and did not provide life coverage.
- The expenditure was incurred for shareholders, not employees.
- No specific CBDT instructions supported the claim as revenue expenditure.
Tribunal's Analysis:
The Tribunal noted that:
- Keyman Insurance Policy premiums are allowable deductions under Section 37(1) of the Income Tax Act, 1961.
- CBDT Circular No.762 dated 18.2.1998 supports the deduction of premiums paid for Keyman Insurance Policies.
- Directors of a company can be considered employees, making the premiums paid allowable under the scheme.
The Tribunal referenced the ITAT Bilaspur Bench decision in Sunita Finlease Ltd. Vs DCIT, which held that premiums paid on Keyman Insurance Policies should be allowed as business expenditure. The Tribunal concluded that the premiums paid by the assessee company for the directors are covered by the CBDT Circular and allowed the appeals of the assessee.
2. Deletion of Disallowance of Speculation Loss on Account of Cancellation of Foreign Currency Forward Contract by Treating it as Trading Loss:
Facts and Arguments:
The assessee, engaged in manufacturing garments and wind power generation, claimed a loss of Rs. 1,06,61,901 due to the cancellation of foreign currency forward contracts. The AO disallowed this as a speculation loss, arguing it was not a trading loss.
CIT(Appeals) Observations:
The CIT(Appeals) followed the Tribunal's earlier decision in the assessee's case for the assessment year 2006-07, where it was held that forex transactions by an exporter are not speculative transactions but business losses. The CIT(Appeals) allowed the assessee's appeal, treating the loss as a business loss.
Tribunal's Analysis:
The Tribunal reviewed the decision of the co-ordinate Bench in the assessee's case and other relevant cases, including:
- CIT v. Badridas Gauridu (P) Ltd, where the Bombay High Court held that forex transactions by an exporter are business losses.
- DCIT v. Asvini Fisheries Pvt Ltd, where it was held that forex contracts entered into by an exporter are not speculative transactions.
The Tribunal concluded that the forex derivative transactions should be considered in proportion to the export turnover. If the transactions exceed the export turnover, the excess should be treated as speculative loss. The Tribunal remanded the issue back to the AO for fresh consideration, directing the AO to distinguish between completed transactions and prematurely canceled contracts.
Conclusion:
The Tribunal allowed the assessee's appeals regarding the disallowance of premiums paid to LIC under the "Employer-Employee Scheme" and remanded the issue of speculation loss on forex contracts back to the AO for fresh consideration. The appeals of the assessee were allowed, and the Revenue's appeal was allowed for statistical purposes.
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2015 (12) TMI 1751
Unexplained cash credit u/s 68 - discharge of onus - Held that:- The assessee has received the loan of ₹ 15 lakhs from Smt. Purnima Tiwari. She was assessed to tax since 1987-88. She has given confirmation letter. She has PAN and also filed income tax returns. The computation of income, capital account and balance sheet were also submitted. The assessee has also submitted copy of her bank account fromwhere the assessee received the amount. The source of source was also explained. The assessee has paid interest and deducted TDS which is duly reflected in Form 26AS. The depositor is engaged in the business since long. The assessee also requested the Assessing Officer to issue summons to depositor but he did not act on the request of the assessee. All these facts cumulatively show that the assessee was able to discharge the onus placed upon it in terms of section 68 - Decided against revenue
Addition made on account of receipts not recorded in the books of accounts - Held that:- CIT(A) has rightly granted part relief to the assessee as both service tax and escort charges were shown separately in the profit and loss account on net basis. The learned DR failed to controvert the findings of the learned CIT(A). We, therefore, sustain the same.
Addition on account of disallowance out of certain expenses on the basis of discrepancies found therein - Held that:- CIT(A) has granted relief to the assessee on the ground that the vouchers prepared by computers and hand-writing and the entries made therein were narrative. The learned DR failed to controvert the findings of the learned CIT(A) with any positive evidence contrary to that. Considering all these facts, we sustain the order of the learned CIT(A) - Revenue appeal dismissed.
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2015 (12) TMI 1750
Compensation for giving up right to receive pension - nature of receipt - Held that:- This Tribunal in the case of Mr. Ramkrishna Agarwal -vs.- ACIT [2014 (7) TMI 1265 - ITAT KOLKATA] wherein a similar amount received by the assessee as compensation for giving up his right to receive pension was held to be capital receipt not chargeable to tax.
As rightly pointed out by the ld. D.R., the amount in question received by the assessee was never claimed by the assessee but although this claim was made by the assessee for the first time before the ld. CIT(Appeals), the impugned order of the ld. CIT(Appeals) does not show that he has verified the same from the relevant documentary evidence, such as the relevant partnership deed giving the assessee his right to receive pension, agreement whereby the right to receive pension, if any, was given up by the assessee for the amount in question, etc. He has contended that this matter may, therefore, be sent back to the file of the Assessing Officer for verifying the claim of the assessee. Ground No. 1 of the assessee’s appeal is accordingly treated as allowed for statistical purposes
Addition on account of share of goodwill received by the assessee on his retirement from the partnership firm - Held that:- As the issue involved in the present case as well as all the material facts relevant thereto are similar to the cases of Shri Amitabh Singh (2007 (6) TMI 304 - ITAT DELHI) decided by the Coordinate benches of this Tribunal, we respectfully follow the decision rendered in the said cases to hold that the amount in question received by the assessee as his share of goodwill on retirement from the firm is not chargeable to tax being capital receipt.
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