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Showing 141 to 160 of 1831 Records
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2017 (5) TMI 1697
Exemption u/s 11 - charitable activity u/s 2(15) - whether the Respondent/Assessee is a charitable organisation and could be said to be ‘doing business’ to attract the mischief of amended Section 2(15)? - HELD THAT:- While the CIT(A) appears to have also proceeded on the fact that for the earlier AYs the contention of the Revenue stood negated, the ITAT in the impugned order examined it on merits and has returned certain factual findings. The finding was that mere receipt of fees during the AY under consideration by the Assessee did not mean that it was involved in ‘trade, commerce or business’. Further, the mere deduction of tax at source could not lead to conclusion that receipt was taxable in nature.
Having examined the impugned order of the ITAT and having considered the submission of learned counsel for the Revenue, the Court is not persuaded that the impugned order of the ITAT suffer from any infirmity or gives rise to any substantial question of law. - Decided against revenue
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2017 (5) TMI 1696
Demand of service tax on advances received - works contracts - it was held that the liability to tax on the labour portion of work executed by the appellant and which has been duly discharged by them are confirmed - HELD THAT:- Issue notice on the applications for condonation of delay in filing the appeal(s) as also on the appeal(s).
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2017 (5) TMI 1695
Addition as broken period interest - HELD THAT:- The Tribunal relied on the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], which in turn had relied on the ratio laid down by the Hon’ble Bombay High Court in American Express International Banking Corporation Vs. CIT [2002 (9) TMI 96 - BOMBAY HIGH COURT], which in turn, had distinguished the ratio laid down by the Hon'ble Supreme Court in Vijaya Bank Vs. CIT [1990 (9) TMI 5 - SUPREME COURT] and the Hon’ble High Court of Rajasthan in CIT Vs. Bank of Rajasthan Ltd. [2008 (3) TMI 325 - RAJASTHAN HIGH COURT] and had held that broken period interest is allowable as deduction. Following the same parity of reasoning, we hold that the assessee is entitled to the claim of broken period interest of ₹ 16,97,027/-. The ground of appeal No.1 raised by the assessee is thus, allowed.
Disallowance of payment made on account of voluntary retirement of the employees - HELD THAT:- The issue arising before us is identical to the issue before the Tribunal in The Satara District Central Co.Op Bank Ltd. Vs. DCIT [2014 (12) TMI 1217 - ITAT PUNE] and following the same parity of reasoning, we hold that the ex-gratia payment made to the retiring employees in recognition of their services was profits in lieu of salary and is duly allowable as expenditure under section 37(1). The ground of appeal No.2 raised by the assessee is thus, allowed.
Nature of receipts - refund of municipal tax receipts - revenue or capital receipt - HELD THAT:- Assessee had claimed the deduction on account of municipal taxes on actual payment basis, in the earlier years, since the assessee was following mercantile system of accounting. Once the refund of such municipal taxes has been received by the assessee in the year under consideration, the same is to be added as income in the hands of assessee. Accordingly, the ground of appeal No.3 raised by the assessee is dismissed.
Addition on account of prior period expenses - HELD THAT:- The said expenses were on account of advertisement expenditure relating to assessment year 2010-11. The assessee claimed that the expenditure was treated as accrued as and when the bills were submitted to the bank and were sanctioned for payment. AO did not allow the said expenditure and the CIT(A) upheld the same. We find merit in the plea of the assessee that where the bill for prior expenditure was received by the assessee during the year under consideration and hence, the same merits to be allowed as deduction. We direct so. The ground of appeal No.4 raised by the assessee is thus, allowed. The grounds of appeal raised by the assessee are thus, partly allowed.
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2017 (5) TMI 1694
Addition u/s 32(1)(iia) - depreciation claimed by the assessee relates to assets acquired in the preceding assessment year, wherein the assets were used for less than 180 days and only 10% of depreciation was claimed in earlier year - AO has held that the assessee cannot claim the balance 10% of depreciation in the subsequent year as per provisions of section 32(1)(iia) - HELD THAT:- In the present case, the new asset acquired, installed and put it in use for less than 180 days, the assessee has claimed only 10% of the eligible additional depreciation in the relevant assessment year, which was allowed. Since the assessee was eligible to claim 20% additional depreciation on new asset acquired, the balance 10% of additional depreciation was claimed in the next year relevant to the assessment year under consideration. In similar facts and circumstances, in the case of CIT v. Rittal India Private Limited [2016 (1) TMI 81 - KARNATAKA HIGH COURT] wherein held intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal has rightly held, that additional depreciation allowed under Section 32(i)(iia) of the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal. - Decided in favour of assessee
Addition of employees contribution towards PF/ESI paid belatedly - no deduction u/s 36(1)(va) - HELD THAT:- In the present case, the assessee had remitted the employees contribution beyond the due date for payment, but within the due date for filing the return of income. As relying on M/S. INDUSTRIAL SECURITY & INTELLIGENCE INDIA PVT. LTD [2015 (7) TMI 1063 - MADRAS HIGH COURT] issue decided in favour of assessee.
Disallowance u/s 14A r.w. Rule 8D - HELD THAT:- CIT(A) has stated that against fresh investments of ₹.13.36 crores, the assessee has net operating revenue of ₹.20.87 crores during the year and further sum of ₹.68.47 crores in the general reserve. When the assessee got its own sufficient funds for investment, the Assessing Officer cannot apply Rule 8D(2)(ii) and make the disallowance. Thus, we are of the opinion that the ld. CIT(A) has rightly deleted the disallowance on account of attribution of interest. - Decided against revenue.
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2017 (5) TMI 1693
Penalty levied u/s. 271D - violation of provisions of Section 269SS - whether transfer by way of book entries was bonafide and was not to evade taxes specifically when accordingly to section 269SS deposit/loan of money cannot be accepted otherwise then by an account payee cheque/draft? - ITAT deleted penalty - HELD THAT:- Taking into consideration the observations made by the CIT(A) and the Tribunal, we are are of the considered opinion that Section 269SS of the Income Tax Act, was introduced in statute and taking into consideration the applicability of the provisions, the Tribunal has discussed liability recorded in the books of account by way of journal entries i.e. crediting the amount of party to whom monies payable and debiting the account of a party from whom monies are receivable in the books of account is in contravention of provisions of Section 269T of the Act but in that case also the penalty was held to be not leviable for the reason that transaction was bona fide and was not to evade taxes. In assessee’s case also, the transaction is bonafide and it was not to evade taxes. No infirmity in the order of the ld. CIT (A) which is sustained on this issue. Thus the solitary ground of the Revenue is dismissed.
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2017 (5) TMI 1692
Reopening of assessment u/s 147 - income was declared as additional income before Settlement Commission - HELD THAT:- AO had sufficient information regarding reopening the order and moreover assessee’s writ petition before the High Court was also dismissed and the department was free to initiate the proceedings under section 147 of the Act. Therefore, we are of the view that Revenue is justified in reopening the assessment order. The ground No.1 is dismissed.
Addition on account of brokerage and disallowance u/s 35D - assessee has declared additional brokerage income before Settlement Commission under section 245D - search in the case of Lodha Group was conducted by investigation wing of department and the key person of Lodha made a declaration of additional income in the hands of various entities - HELD THAT:- We find that section 245HA(1) of the income Tax Act lists several circumstances in which the case before the Settlement Commission would abate; whereas in section 32L(1) non - cooperation of the petitioner is the only ground. The Central Excise Officer derives its power its power to assess such abated proceeding vide section 32L(2) of the Central Excise Act. This is identical to powers vested with an AO under section 245HA(2) and 245HA(3) under the Income Tax Act. It is therefore very clear that the provisions of Central Excise Settlement Commission and that for Income Tax settlement Commission are identical. Therefore, the judgment of Hon’ble Gujarat High Court in the case of Maruti Fabrics although pertaining to Central Excise should be applied to cases abated under section 245HA of the Income Tax Act also.
Therefore, we are of the view that the judgment of MARUTI FABRICS [2014 (7) TMI 926 - GUJARAT HIGH COURT] is applicable to the facts of the assessee’s case. We find that Hon’ble Gujarat High Court has held that if the petition filed before the Settlement Commission wherein assessee has made declaration but proves that assessee has neither earned such income nor any incriminating material was found during the search relating to undisclosed income then no addition can be made.
Simply relying upon the declaration made before the Settlement Commission no addition can be made. In this group case, the search was conducted in the business premises of Lodha Group and subsequent to search action assessee company along with other companies of Lodha Group filed a petition under section 245C(1) of the Act before Settlement Commission. The assessee has offered additional income of ₹ 5 lakhs towards the land brokerage income. This offer was made for maintainability of petition before Settlement Commission as stated in clause (i) and clause (ia) of section 245C(1) of the Act. We are of the view that after reopening of the assessment order no addition can be made on the basis of income offered by the assessee before Settlement Commission. We find that no incriminating material was found during the course of search action substantiating that assessee has actually earned undisclosed income. Therefore, just because assessee has offered additional income before Settlement Commission, no addition can be made without basis. - Decided in favour of assessee.
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2017 (5) TMI 1691
Appealable Order - Section 35-B of the Central Excise Act - HELD THAT:- This Court is of the considered opinion that as an efficacious remedy to prefer an appeal is available to the petitioner, the present petition is disposed of with a liberty to the petitioner to prefer an appeal in accordance with law.
Petition disposed off.
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2017 (5) TMI 1690
TP adjustment - Advertising, Marketing and Promotion expenses - HELD THAT:- Issue covered against the Revenue and in favour of the Assessee by the decision of this Court in the Assessee's own case in Honda Seil Power Products Ltd. v. Dy CIT [2015 (12) TMI 1333 - DELHI HIGH COURT]
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2017 (5) TMI 1689
Dismissal of a company petition applying the principles of Order 7 Rule 11 of the Code - concept of demurrer interchangeably with an application for rejection of plaint under Order 7 Rule 11 of the Code - HELD THAT:- The expression demurrer, when used in connection with an application seeking dismissal of a petition on a preliminary or maintainability point shall not imply automatic admission of facts contained in the plaint or petition whose dismissal is sought for by opposing party. The principles of Order 7 Rule 11 would apply in relation to such petitions, and if it is found that adjudication of such motion involves mixed questions of fact and law, then adjudication of that question would stand deferred, and those points would be left to be determined on trial. Though there does not appear to be a clear Indian authority on this point as yet, from the decisions to which I have referred to earlier, it is apparent that the practise followed in England and the US had never been accepted as a part of Indian jurisprudence. The term "demurrer" in the Indian context has been construed to have connotation wider than the dictionary meaning, and motions for dismissal of a proceeding on a preliminary point has been commonly referred to as applications "in demurrer". Otherwise, no statutory reference to this term has been brought to my notice. The U.S. and English principle on demurrer does not apply in the Indian context. Law in India proceeds on a different trajectory on this point, and I do not find any reason to adopt a different course though such a course would be compatible with the US and the English principles.
It is not possible for me to conclude at this stage that the consent decree was obtained by playing fraud upon Court. BCCL must have opportunity to meet HIT's challenge to the decree on such allegations through a proper adjudicatory process. A recall petition, which is usually decided following summary procedure for such purpose is inadequate instrument - For the same reason, initiation of contempt action or a proceeding under Section 340 of the 1973 would not be proper course in the facts of this case at this stage.
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2017 (5) TMI 1688
Treatment of income from sale of agricultural land as exempted income - treating the part of income declared by the assessee from the said land as agricultural income - HELD THAT:- There is no dispute regarding the fact that the assessee acquired agricultural land. There is also no dispute that there was agricultural operation in this land before sale of this land.
AO was of the opinion that the amount received on sale of this agricultural property is nothing but long term capital gains on transfer of such an agricultural land and the same was brought into income from business. In this case, the assessee held the land always as fixed asset and not at all converted into stock-in-trade. The character of the land in the hands of the assessee has not changed. There is no material on record in respect of this land to show that the assessee carried on activities of buying and selling of land in a systematic manner so as to justify the action of the AO in treating the activities of the assessee as adventure in the nature of trade.
Whether a land is agricultural land or not is essentially a question of fact. The question has to be answered in each case having regard to the facts and circumstances of that case. There may be factors both for and against a particular point of view. We have to answer the question on a consideration of all of them, a process of evaluation and the inference has to be drawn on a cumulative consideration of all the relevant facts. It may be stated here that not all the factors or tests would be present or absent in any case and that in each case one or more of the factors may make appearance and that ultimate decision will have to be reached on a balanced consideration of the totality of the circumstances.
The expression 'agricultural land' is not defined in the Act, and now, whether it is agricultural land or not has to be determined by using the tests or methods laid down by the Courts from time to time.
Land in question cannot be considered as stock in trade in the hands of assessee or capital asset liable for taxable capital gains on its transfer. It is nothing but transfer of agricultural land in terms of Sec.2(14)(iii) r.w.s. 10(37) of the Act and transfer of that land cannot lead to taxable capital gains or income from business. Consequently, it is not liable for taxation. Once we have considered it as agricultural land, and agricultural income accepted by the CIT(Appeals) as agricultural income, it is to accepted as so. - Decided against revenue.
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2017 (5) TMI 1687
Wealth tax assessment - assessability of properties to wealth tax - HELD THAT:- As in SHRI NIRANJAN LAL DATA [2011 (11) TMI 830 - ITAT JAIPUR] held that all the six properties are not to be included in the wealth of the assessee by giving a detailed reasoning against each property.
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2017 (5) TMI 1686
Nature of expenditure - expenditure on consumption of stores and spares - revenue or capital expenditure - HELD THAT:- Issue decided in assessee' own case [2011 (12) TMI 519 - ITAT AHMEDABAD] whereby the issue is restored to the file of AO.
Depreciation on Goodwill - HELD THAT:- As in assessee’s own case for A.Y. 2007-08 whereby the additional ground raised by assessee in ITAT was admitted and the issue was restored to the file of CIT(A).
Depreciation on lease assets - HELD THAT:- Issue decided against the Department by ITAT’s order in assessee’s own case for A.Y. 2006-07
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2017 (5) TMI 1685
Additional depreciation u/s.32(1)(iia) - disallowance of claim as no increase in the installed capacity during the previous year to the extent of 25% as required u/s.32(i)(iia) to allow the additional depreciation - whether no solid backing has been provided to substantiate its claim for additional depreciation ? - HELD THAT:- AO brushed aside the Certificate issued by Chartered Engineer without verifying the facts of the case. If the AO is having some reservations regarding the capacity installation and for admission of the Chartered Engineers Certificate as an evidence, he should have examined the Chartered Engineer Certificate regarding the increase in capacity as per the provisions of the Income Tax Act before brushing aside the Chartered Engineers Certificate.
The other alternative available for the AO is to make a personal visit along with Chartered Engineer and examine the correctness of increase in the installed capacity or refer the matter to DVO. Instead, the AO simply relied on the annual accounts in spite of the fact that the assessee has explained that the assessee it is engaged in manufacturing, the machinery which is unique to each customers custom built non-homogenous product and non-repetitive in nature which makes the measure of installed capacity as a subjective affair.
CIT(A) made the personal visit to the factory and had discussed with reference to the measurement of the installed capacity on the basis of material removal ratio and given a finding that increase in capacity as percentage w.r.t. the earlier year is above 25%. For a query from the bench, the Ld.DR replied that the there was an increase in production more than 25% after installation of the plant and machinery and there were substantial increase in power consumption and other related items of productions. Considering totality of the facts that the CIT(A) has given clear analysis of measurement and made personal visit and given a finding that the increase in capacity as percentage is more than 25%. - Decided against revenue.
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2017 (5) TMI 1684
Higher claim of deduction u/s 80IB - not providing interest and remuneration to the partners - Whether Section 80IB (10) enables AO to re-compute the profit of undertaking claiming deduction u/s 80IB i.e. the partnership firm as in the present case and not the case of partner’s admissibility towards interest/ remuneration as held in the case of Smt. Mala Tandon [2011 (6) TMI 855 - ITAT AMRITSAR] ? - HELD THAT:- On interpretation of the partnership agreement and considering the wish of the partners reflected in the partnership deed, not to pay /charge interest on the partners capital and the remuneration, the learned tribunal has rightly deleted the disallowance made by AO with respect to the deduction claimed u/s 80IB.
As rightly observed by tribunal, mere incorporation of interest on the partners’ capital and remuneration does not signify that the same are mandatory in nature. We concur with the view taken by the learned tribunal. We see no reason to interfere with the impugned judgment and order passed by the learned tribunal. - decided against revenue.
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2017 (5) TMI 1683
Monetary limit - Low tax effect - maintainability of appeal - HELD THAT:- The tax effect involved in this appeal is less than ₹ 10 lakhs. In view of the latest circular issued by the Central Board of Direct Taxes (CBDT), instructed its officers not to file an appeal before this Tribunal, wherein the tax effect is less than ₹ 10 lakhs. This Tribunal is of the considered opinion that the appeal filed by the Revenue is not maintainable. Accordingly the appeal of the Revenue stands dismissed.
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2017 (5) TMI 1682
Disallowance of prior period expenses - assessee following mercantile system of accounting - ITAT deleted the addition - HELD THAT:- Issue is covered by the decision of this Court in Chambal Fertilizers and also decision of Delhi High Court in case of SMCC Construction India Ltd. vs. Assistant Commissioner of Income Tax [2013 (10) TMI 1227 - DELHI HIGH COURT] prior period expenses had crystallized/settled in the year. The reasons to believe recorded do not show as to on what basis the Assessing Officer has formed a reasonable belief that the said expenditure had not crystallized during the year relevant to the assessment year. It is apparent the Assessing Officer suspects that the income has escaped assessment. But mere suspicion is not enough. The reasons to believe must record reasons, the reading of which should demonstrate, that such a reasonable belief could be formed on some basis/foundation and was in fact formed by the Assessing Officer that income has escaped assessment. - Decided in favour of assessee.
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2017 (5) TMI 1681
Penalty u/s 271(1)(c) - excess amount of deduction claimed u/s 35(2AB) - HELD THAT:- We find that in the certificate dated 26.09.2008 the auditor has certified that (i) the assessee-company has maintained separate accounts for the R&D Centre approved by DSIR u/s 35 (2AB) and (ii) the accounts have been satisfactorily maintained and the expenditure certified are also in consonance with DSIR guidelines. The assessee-company’s claim for weighted deduction is supported by the auditor’s certificate as per the Form prescribed by the DSIR. In the present case, the auditor’s certificate for the approved R&D unit has certified the total eligible expenditure for weighted deduction u/s 35(2AB) at ₹ 15.84 crores. From the above, it is clear that the assessee-company has claimed weighted deduction on the basis of tax audit report and the auditor’s certificate.
In Reliance Petroproducts (P) Ltd. [2010 (3) TMI 80 - SUPREME COURT] held that merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not attract penalty u/s 271(1)(c) - Decided in favour of assessee
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2017 (5) TMI 1680
Addition u/s 68 - statement of Mr. Mukesh Choksi was relied on for making the addition - HELD THAT:- The course of search conducted upon the Shri Mukesh Choksi group, statement of Shri Mukesh Choksi was recorded and in his statement he has admitted that he was providing accommodation entries to those who were interested to earn capital gain.
On a careful perusal of the assessment order, find that there is no finding with regard to the supply of statement of Shri Mukesh Choksi to the assessee. Nothing is available on record, wherefrom it could be inferred that assessee was ever allowed to cross-examine Mr. Mukesh Choksi. It is settled position of law that statement or the evidence which is being relied upon by the AO for making the addition in the hands of assessee, the same should be confronted to the assessee and the assessee should be allowed to cross-examine the witness in this regard.
It is quite evident that statement of Mr. Mukesh Choksi was relied on for making the addition, but assessee was never allowed to cross-examine him. AO was not justified in making addition in the hands of assessee, without allowing the assessee to cross-examine Mr. Mukesh Choksi, whose statement was relied upon for making the above additions. Set aside the order of CIT(Appeals) and restore the matter to the file of AO with a direction to first confront the statement of Mr. Mukesh Choksi to the assessee and allow him to cross-examine Mr. Mukesh Choksi to dig out the truth in this regard. - Appeal of assessee is allowed for statistical purposes.
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2017 (5) TMI 1679
Penalty levied u/s 271AAA - revenue has carried out survey operations only u/s 133A of the Act in the hands of the partnership firms and not individual partners - HELD THAT:- It is an admitted fact that the assessee Shri Kumar Satur Nathani was only subjected to search operations u/s 132. The revenue has carried out survey operations in the hands of business firms u/s 133A of the Act and the assessee Shri Roop Kishanchand Khemani has given statement u/s 131 of the Act.
There should not be any dispute that the provisions of sec. 271AAA shall apply to the assessee in whose hand the search was conducted during the period commencing from 01-06-2007. Even though the D.R contends that the search conducted in the hands of Shri Kumar Satur Nathani should be extended, yet we are unable to agree with the said contentions, since the provisions of sec. 132 of the Act shall apply only in respect of persons in whose case the search warrant was issued. Under the Act, a partnership firm and its partners are treated as separate taxable persons. In any case the revenue has carried out survey operations only u/s 133A of the Act in the hands of the partnership firms. Hence, in the absence of search operation u/s 132 of the Act in the hands of Shri Roop Kishanchand Khemani, we are of the view that the assessing officer has misdirected himself in levying penalty u/s 271AAA
Penalty levied u/s 271(1)(c) - contentions of the assessee are that the revenue was having only incomplete information in its hand - HELD THAT:- The assessees have voluntarily furnished all the details that were available with them. Further they have given authorization to the AO to collect necessary details from the HSBC bank. Thus, they have furnished all the materials available with them and they have also offered explanations as to why this income was not declared by them. Even though the income does not belong to the AY 2007-08, still they have agreed to offer the same in that year and also paid taxes. None of the explanations of the assessee was found to be false. Under these set of facts, the Ld A.R contended that the immunity given under Explanation 1 shall be available to the assessee. We also find merit in the said submissions and accordingly accept the same.
The penalty levied in the hands of both the assessee u/s 271(1)(c) in AY 2007-08 is not sustainable on account of legal issues discussed above as well as on merits. Appeals of the assessee are allowed.
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2017 (5) TMI 1678
Disallowance of provision for warranty expenses - HELD THAT:- This issue is covered, in favour of the assessee, by a coordinate bench decision in assessee’s own cases for the assessment yea₹ 2000-01, 2001-02, 2002-03, and 2004-05. DR, nevertheless, relies upon the stand of the Assessing Officer, even as he has no submissions to make on as to why should the Tribunal not follow these binding judicial precedents. We have also noted that Hon’ble jurisdictional High Court has declined to admit the appeal on this issue and the matter has thus attained finality. Thus we uphold the plea of the assessee and direct the AO to delete the impugned disallowance.
Disallowance for provision for expenses - HELD THAT:- There cannot be any dispute about the genuineness of the provision to this extent, as the related payment has indeed been made, in respect of the expenses of that year, in the subsequent year. We, therefore, deem it and proper to allow the provision to this extent. The alternate plea of the assessee is thus upheld. In any case, learned counsel for the assessee did not have much to say in support of the basic plea either inasmuch as no scientific basis, for quantification of provision, was furnished.
Disallowance of prior period expenses - HELD THAT:- while dealing with the earlier grounds of appeal, this is a peculiar case in which the accounts are finalized within 10 days of the annual closing, so as to facilitate consolidation of accounts by the US based parent company, leading to practical problems with respect to creation of adequate provisions on the basis of cogent material. We have also noted that the assessee had presented a copy of the ledger account to the AO which showed that the expenses were actually incurred in October 2005. The incurring of expenses, or its bonafides, are thus not really in doubt. In these circumstances, in our considered view, the disallowance was not really called for. We, therefore, direct the AO to delete this disallowance.
Denial of carry forward of Long Term Capital Loss and setting it off against exempt Long Term Capital Gains - assessee had claimed exemption under section 10(38), in respect of the long term capital gain - HELD THAT:- We find that the issue is now covered, in favour of the assessee, by a decision of the coordinate bench, in the case of G K Ramamurthy Vs JCIT [2010 (2) TMI 28 - ITAT BOMBAY-G] we uphold the plea of the assessee. The action of the Assessing Officer on this point is reversed, and the set off of loss carried forward as thrust by the Assessing Officer, is vacated.
TP Adjustment - adjustment on account of international transaction of sales made to the Associated Enterprises - imposing internal CPM by comparing margins on sale to AEs and non-AEs - HELD THAT:- Just because the assessee has sold the same product, as exported to the AEs, to the domestic enterprises, CPM method cannot be applied. That is precisely what the TPO has done. There is no other objection taken by the authorities below. There is a difference in geographical location of the market as also in the value chain and utility of the product. It is also important to bear in mind that while the products sold by the assessee to the AEs are propriety products, having unique specifications which non AEs cannot obtain from others, the assessee is in a position to fetch higher prices for the same from non-AEs.. The action of the TPO, in imposing internal CPM by comparing margins on sale to AEs and non-AEs, cannot thus be justified. The benchmarking, on TNMM basis as a corroborative measure, also justifies this conclusion.
In view of all these factors, and as sales to the AEs and non-AEs, which belong to different class of markets, cannot be compared on the peculiar facts of this case, the assessee is indeed justified in its plea. We uphold the same and direct the Assessing Officer to delete the impugned ALP adjustment.
Disallowing provision towards warranty expenses - HELD THAT:- This issue is covered, in favour of the assessee, by a coordinate bench decision in assessee’s own cases for the assessment yea₹ 2000-01, 2001-02, 2002-03, and 2004-05. DR, nevertheless, relies upon the stand of the Assessing Officer, even as he has no submissions to make on as to why should the Tribunal not follow these binding judicial precedents. We have also noted that Hon’ble jurisdictional High Court has declined to admit the appeal on this issue and the matter has thus attained finality. Thus we uphold the plea of the assessee and direct the AO to delete the impugned disallowance.
Adjustment in relation to the international transaction relating to payment of Royalty - HELD THAT:- What the TPO has adopted to be an ALP is essentially on the basis of intra AE transactions but in the scheme of CUP analysis such an approach is not permissible. The approach adopted by the authorities below is thus wholly devoid of legally sustainable merits. There is no other justification for the impugned ALP adjustment. In any case, in the assessment year 2006-07, these royalty payments have been held to be arm’s length payments by the DRP and that matter rests there. In view of these discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned ALP adjustment. The assessee gets the relief accordingly
Adjustment in relation to the international transaction relating to sales made to Associated Enterprises - HELD THAT:- Learned representatives fairly agree that whatever we decide for the assessment year 2006-07 on this issue will apply mutatis mutandis in this assessment year as well. Vide our order earlier, we have upheld the said plea of the assessee and directed the Assessing Officer to delete the similar ALP adjustment in respect of sales to AEs. We see no reasons to take any other view of the matter in this year. Accordingly, this ALP adjustment also stands deleted.
TDS u/s 195 - disallowing the commission expenses paid to non residents - HELD THAT:- As the recipient of the commission did not have any tax liability in respect of income embedded in such payments and as liability under section 195 can come into play only when the recipient has a tax liability in respect of income embedded in the related payments, the assessee cannot be faulted for not having deducted tax at source, and, disallowance under section 40(a)(i) does not, therefore, come into play. Respectfully following the views so expressed in WELSPUN CORPORATION LIMITED AND VICE-VERSA [2017 (1) TMI 1084 - ITAT AHMEDABAD] , with which we are in considered agreement, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned disallowance
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