Transfer pricing adjustment on provisions of ITES - selection/rejection of comparables which we propose to deal with at the outset - computation of RPT - Held that:- Having considered the submissions of the parties, we find that the Tribunal in PTC Software India (P.) Ltd. [2012 (1) TMI 343 - ITAT PUNE] observed the ratio of RPT to total transactions have to be worked out by dividing RPT sales and RPT expenses with total sales and total costs. The aforesaid view expressed by the Tribunal, Pune Bench, was approved by the Hon'ble Jurisdictional High Court in PTC (I) (P.) Ltd. (supra) while holding that RPT has to be considered in the context of total transactions - we restore the issue relating to comparability of the aforesaid company to the Assessing Officer/Transfer Pricing Officer for deciding afresh after working out the RPT.
Companies functionally dissimilar with that of assessee as BPO service provider need to be deselected from final list.
Denial of claim of deduction u/s 10A in respect of Unit-II and Unit-III on the reasoning that they are not new Units, but expansion of earlier Units - Held that:- Tribunal for assessment year 2005-06 [2015 (4) TMI 589 - ITAT MUMBAI], have allowed assessee's claim of deduction under section 10A in respect of Unit-II and Unit-III. The same view was again reiterated by the Tribunal in assessee's own case for assessment year 2010-11. Therefore, respectfully following the consistent view of the Tribunal on the issue in assessee's case as aforesaid, we allow assessee's claim of deduction under section 10A of the Act for the impugned assessment year. - Decided in favour of assessee
Quarrying operations carried on without the necessary sanctions and permitsblasting operations carried on for the purpose of the construction of a National Highway - prohibited operation or not - Held that:- There should also be an expert opinion taken as to the extent and capacity of blasting permitted, considering the proximity of the residences and the time and frequency to which it has to be limited. The complaint raised by the petitioners is with respect to the large scale damage caused to the residences of the petitioners as also the pollution occasioned. The damage caused to the buildings is by reason of the blast induced ground vibrations, the intensity of which would depend upon the quantity of explosives used, an assessment of which has not been undertaken by the district administration; by itself or through an expert agency.
There is also air pollution caused by the generation of air pressure and noise, on the actual blasting, as also the debris thrown into the atmosphere when the rock formations are turned into rubble. The activity hence is also one coming within the ambit of The Environment (Protection) Act, 1986 and The Environment (Protection) Rules, 1986 (referred to as EP Act and EP Rules). The standards prescribed by the PCB hence becomes applicable and without a consent to operate there can be no operations of blasting carried on which effectively is deemed to be a "Mine" as defined under the Mines Act and quarrying of minor mineral is carried on under the MMDR Act. The hazardous effect of blasting carried on has to be assessed and the pollution occasioned too, has to be contained.
The 7th respondent would be obliged to carry out the blasting work only with a consent to operate from the PCB. The understanding of the PCB that the requirements would not be applicable to such road widening work is obviously wrong and contrary to the statutory provisions. In such circumstance, the 7th respondent would have to necessarily obtain a mining permit under the KMMC Rules and a Consent to Operate from the PCB so as to carry on the blasting works - It is also to be verified whether the 7th respondent would have to obtain an Environmental Clearance under the Environmental Impact Assessment Notification No. 2006 (SO 1533E) dated 14.09.2006 issued by the Ministry of Environment and Forests and Climate Change; by S.O. No. 141(E) : dtd. 15.01.2016 - The District administration also would have to conduct a study by an expert agency, or the PCB as to the depth and number of holes, their diameter, the quantity of explosive charge used, the influence it has on the impact of the blasts and so on and so forth to regulate the magnitude of the ground vibrations and ensure that no damage is caused to the 'adjacent material' including buildings as has been specified in the Specifications of MOSRT & H; if at all it is permitted as per the specifications issued by the PCB as made applicable by the KMMC Rules.
The 7th respondent would be entitled to approach the appropriate authorities and continue with the work after getting the requisite sanctions - petition allowed.
Bogus unsecured loan - incriminating documentary evidence found from the search and seizure carried out by Investigation Wing - statement recorded u/s 132(4) - Held that:- In the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013.
It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed. - Decided against revenue.
TPA - Comparable selection - Held that:- Assessee is engaged in the business of rendering software development services to its Associated Enterprises ("AE"). Capco IT is remunerated on a cost plus basis for the services rendered thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Negative Working capital adjustment - Held that:- There is no need for making any negative working capital adjustment when assessee dos not carry any capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable. We direct the TPO not make negative working capital adjustment. See Adaptec (India) (P.) Ltd. v. Asstt. CIT [2015 (6) TMI 288 - ITAT HYDERABAD].
Deductions u/s 10A computation - Held that:- Direct the A.O. to re-work deduction u/s 10(A) on the principle that what is excluded form 'Export Turnover' must necessarily be excluded from 'total turnover.'
Penalty u/s 27(3) of TNVAT Act - suppression of facts or not - Held that:- In terms of the said provision to levy penalty the Assessing Officer should record his satisfaction that escapement of tax was due to willful non-disclosure. Mere non-disclosure does not automatically lead to levy of penalty. The statute contemplates levy of penalty in cases of willful non-disclosure. Therefore, the petitioner's conduct in paying the tax at the time of inspection prior to issuance of show cause notice can be taken into consideration.
The matter is remanded to the respondent for fresh consideration who shall take note of the conduct of the petitioner in remitting tax even prior to the issuance of show cause notice dated 18.08.2016 and 31.05.2016 respectively - petition allowed by way of remand.
Excisability - waste - Bagasse - Held that:- The questions of law have been answered by Hon’ble Apex Court in the case of Union of India v. DSCL Sugar Ltd. [2015 (10) TMI 566 - SUPREME COURT] conclusively holding that bagasse is not an excisable item and it is only an agricultural waste, which emerges during process of sugar - the questions of law are answered in favour of the assessee and against the department.
TDS u/s 194J - Demand u/s 201(1) - relationship between the assessee and shipping company - Held that:- The nature of relationship between the assessee and shipping company, between the shipping company and seafarers and between the assessee and seafarers have to be determined first, which will in turn would help in determining the nature of liability under the Income tax Act. The nature of relationship could be determined by examining whole gamut of activities along with the agreements and other documents.
A perusal of the orders passed by the tax authorities would show that they have not determined the nature of relationship/contract, as stated above. Hence the view of the tax authorities that the provisions of sec. 194J would apply to the facts and circumstances of the case, in our opinion, is not substantiated. We are of the view that this issue requires fresh examination. Accordingly we set aside the order passed by CIT(A) and restore the issue to the file of the AO for examining the same afresh. We also direct the AO to give the benefit of 3rd proviso to sec. 201(1)
Addition u/s 69A - cash deposits in the bank account - Held that:- The assessee failed to submit any document in support and did not file copy of the VAT return before the Assessing Officer. No evidence was submitted with regard to sales or purchases made. The assessee made cash deposit of ₹ 37,73,695/- in his SB account, however, assessee failed to explain any source of such deposit in the bank account.
Whatever contention was raised by assessee, were found to be false and fabricated. The claim of the assessee of estimated sales of ₹ 29 lacs was not supported by any evidence or material on record. The assessee in the IT Return and in the VAT returns, have not disclosed gross sales of ₹ 29 lacs. No evidence was filed before the authorities below in support of any of the explanation, therefore, source of the cash deposited in the bank account remained unexplained. Even before me, no evidence of any source of bank deposit has been furnished. In the absence of any evidence or material on record to explain the cash deposits in the bank account of the assessee - Decided against assessee.
Addition on account of lesser closing stock declared in income tax return as against declared in VAT return which is arbitrary & unjustified - Held that:- The assessee did not submit any evidence before authorities below therefore, addition of ₹ 4,30,000/- was made. The assessee did not explain the discrepancy found visà-vis VAT return therefore, CIT(Appeals) dismissed this ground of appeal of the assessee. The assessee did not point out any infirmity in the order of the authorities below in making this addition. In the absence of any specific argument or material to point out any error in the orders of authorities below, not inclined to interfere with the orders of authorities below. This ground of appeal of the assessee is dismissed.
Addition on account of alleged lesser labour job declared - Held that:- Assessee did not point out any error in the orders of authorities below therefore, in the absence of any argument or material on record, we are not inclined to interfere with the orders of authorities below - Decided against assessee.
Validity of reopening of assessment - addition u/s 2(22)(e) of deemed dividend - Held that:- The impugned addition as advanced by M/s.Varindavan to M/s.AIA never found reason of re-opening since the reopening notice sought to add loans received from M/s.Keyur Financial Services Pvt. Ltd. Learned departmental representative fails to rebut this factual position.
We notice in this background that in case of CIT Vs. Mohamed Juned Dadani [2013 (2) TMI 292 - GUJARAT HIGH COURT] upholds tribunal’s order quashing a similar reopening on the ground that when the Assessing Officer had not made any addition qua the reason recorded in reopening of the assessment, he could not make additions on some other grounds not forming part of the re-opening reasons recorded. - Decided in favour of assessee.
Disallowance u/s 14A - Held that:- From the Schedule of investments we noticed that entire amount of investments made in equity shares (subsidiary companies and other companies) have been brought forward from earlier year, meaning thereby, no movement in these investment found was during the year under consideration. Other investments made by the assessee consisted of investments made in various schemes of different mutual funds only.
According to Ld A.R, one of the staffs was assigned for this job and hence a portion of his salary has been considered for making disallowance u/s 14A - We notice that the assessee has not made disallowance out of other administrative expenses, even though there was fresh investments in Mutual funds and further there has been activities of purchase and sale of mutual fund units. Considering the activity involved in the investment portfolio of the assessee, we are of the view that a portion of other administrative expenses should also be allocated towards the investment activities. We are of the view that the disallowance u/s 14A may be reasonably estimated at ₹ 50,000/- and the same would take care of other administrative expenses and would meet the requirements of sec. 14A. We set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to restrict the addition to ₹ 50,000/- (including the amount disallowed by the assessee).
Higher rate of depreciation on moulds - @ 30% OR 15% - Held that:- AO to allow depreciation on moulds at 30% as claimed b it. Since there is no change in the facts of the case on this issue, it is held that the appellant is entitled to claim depreciation on moulds @30%. AO is, therefore, directed to allow depreciation on moulds @30% as claimed by the appellant. Ground No 2 of the present appeal is accordingly allowed.
Disallowance under Rule 8D r.w.s. 14A - Held that:- As learned counsel for the assessee rightly points out, the disallowance under section 14A cannot exceed the related tax exempt income during the relevant previous year. This is what co-ordinate benches have consistently held to be the correct legal position. See AUSOM INTERNATIONAL P. LTD. VERSUS ITO, WD-1 (3) , AHMEDABAD [2016 (5) TMI 531 - ITAT AHMEDABAD]
We hold that the disallowance under section 14A must stand restricted to ₹ 8,01,136/-. To this extent, the Cross Objection is allowed, and the relief granted by the CIT(A) is confirmed.
Arbitration and Conciliation - Scope of amended provision - Interpretation of amendment to Section 36 by virtue of Section 26 of Act 3 of 2016 and applicability of Section 36 of Act, 1996 (pre-amended Act) - Held that:- When a specific language is used in the amended provisions of the Act and the intention of the legislature in incorporating such provision is to take away the right whatever accrued to the parties, such statutes can be interpreted without causing any violence, either by addition or by subtracting any words, to the language used in the statute, without frustrating the intention of the legislature considering the plaint language used in the amended Act.
In the present case, the arbitral proceedings commenced before the Council in the year 2008 and terminated on 21.06.2010 by passing an award by the Council. Hence, the proceedings in the present case were commenced and also terminated prior to the commencement of amended Act 3 of 2016.
It is clear from the language used in Section 85 (2) (a) of 1996 Act and Section 26 of Act 3 of 2016, the amended provisions are not applicable if the arbitral proceedings before the arbitral Tribunal commenced before the commencement of Act 3 of 2016 and pending before arbitral tribunal. If commenced and terminated before the commencement of Act 3 of 2016 the new provisions alone are applicable but not the old provisions. Consequently, section 36 of the old Act cannot be applied to the present facts since the right accrued to the petitioner i.e. deemed stay under Section 36 of the Act was taken away by virtue of amendment to Section 36 by its substitution read with Section 26 of the Act 3 of 2016.
Hence, the petitioner is not entitled to claim benefit under Section 36 of pre-amended Act, as such right was taken away by amendment to declaratory statute substituting new section in the place of old section.
On an over all analysis of the law laid down by various Courts and the principles of interpretation laid down by Court, the following conclusions are arrived (1) Section 26 of Act 3 of 2016 made it clear that the amended provisions shall not apply to all the pending arbitration proceedings commenced before 23.10.2015 and if the arbitration proceedings before the Arbitral Tribunal are terminated before the commencement of the Act, the provisions of new Act i.e. Act 3 of 2016 alone shall apply though any incidental or consequential proceedings are pending before objecting Court i.e. District Court or any other Court.
Award need not be transferred, on that ground the garnishee order cannot be set aside.
In view of the applicability of provisiosn of amended Act 3 of 2016 the remedy open to the petitioner is to file an application under Section 36 of the amended Act 3 of 2016 and on filing of such application, the objecting Court has to pass appropriate order subject to compliance of requirement of 75% under MSMED Act, 2006. Hence, leaving it open to the petitioner to move appropriate application before the objecting Court under Section 36 of the Act as amended by Act 3 of 2016. Thus find no ground to set aside the award pertaining to item Nos.26 to 45.
Consequently, filing of E.P. for the award in respect of item Nos.1 to 25 and garnishee order issued by the II Additional Chief Judge, City Civil Court, Hyderabad for recovery of amount covered by item Nos.1 to 25 is illegal since there is no executable award in view of the order of High Court of Punjab and Haryana. Consequently, the garnishee order to the extent of amount covered by item Nos.1 to 25 is hereby set aside while upholding the impugned garnishee order in respect of item Nos.26 to 45. Accordingly, the points are answered.
Estimation of income from running of a wine shop at 5% of the goods put to sale - Held that:- As the assessee relied upon the decision of the Coordinate Bench of this Tribunal in the case of Secunderabad Wines vs. ITO [2016 (7) TMI 1449 - ITAT HYDERABAD] wherein the Tribunal has upheld the estimation of income at 3% of the cost of goods sold. Both of us are signatories to the said order. Respectfully following the same, we direct the AO to estimate the income of the assessee also at 3% of the cost of goods put to sale.
Agricultural income OR income from other sources - nature of receipt - Held that:- Assessee owns 4.33 acres of agricultural land and his parents also owned more than 16 acres of agricultural land at Gurajala, near Guntur District. Though the assessee has not given the details of the crops grown and the yield of such crops, earning of agricultural income cannot be ruled out. At the time of hearing, the learned Counsel for the assessee agreed for restricting the agricultural income to 50% of the agricultural income claimed by the assessee. Taking into consideration the extent of land held by the assessee, we are inclined to accept the assessee’s contention and we restrict the agricultural income to ₹ 1.00 lakh for the relevant A.Y and the ground of appeal No.3 is accordingly treated as partly allowed for statistical purposes. The balance amount of ₹ 1,35,200 shall be treated as “income from other sources” and brought to tax accordingly
TPA - Comparable selection criteria - functinal dissimilarity - Held that:- Appellant is purely engaged in the business of providing software development services to its parent company. Therefore, the companies functionally dissimilar shall be excluded from the list of comparables to determine the arm's length price in the appellant's case. TPO shall re-work the PLI after incorporating our findings with respect to comparables.
CENVAT credit - godowns hired at different places - place of removal - Held that:- It does not appeal to common sense how CENVAT credit is impermissible when storage of the goods was made in hired godowns. That has direct nexus to the manufacturer to remove congestion in the factory. Therefore such integral connection does not call for denial of the Cenvat credit of the service tax paid on rent paid to avail godown facility - Credit allowed - appeal allowed - decided in favor of appellant.
The Supreme Court of India granted four weeks to the respondent to file a counter affidavit. The case will be listed before the court after the four-week period.
Smuggling - Heroin - Acquittal of Offences - the case of the prosecution is based upon depositions of official witnesses only with no independent witness coming forward to support the prosecution story. Therefore, the prosecution case is rendered doubtful and giving benefit of doubt to the accused, they should be acquitted of the charges framed against them - Held that:- Though the case of prosecution is based upon deposition of official witnesses but since no previous enmity is alleged or proved between the accused and such official witnesses, their testimonies cannot be discarded for such reason. It needs to be mentioned here that at the time of recovery two independent witnesses, namely, Shri Parteek Kapoor and Shri Balbir Ram had been associated but they were not examined by the prosecution during the trial. It needs to be mentioned here that the prosecution is not required to examine each and every witness cited by it in the list of witnesses and non-examining of independent witness does not affect the case of the prosecution adversely. Therefore, the statements of official witnesses in the absence of independent corroboration can certainly be relied upon. The prosecution has successfully proved its charge against the accused conclusively and affirmatively by leading sufficient cogent, convincing, reliable, ocular and documentary evidence, therefore, there is no question of accused being involved in this ease falsely.
In the instant case though Section 50 of the NDPS Act is not applicable, since recovery was not effected from personal search of accused but even then the officers of DRI had served both the accused with notice under Section 50 of the NDPS Act and the accused had given their option that their personal search and search of the car might be conducted in the presence of Gazetted Officer. Shri SJS Chugh, being Gazetted Officer was there and search of both the accused and that of the car was conducted in his presence. Therefore, there was no violation of Section 50 of the NDPS Act in this case.
The accused-convicts can be granted certain concession in that regard, keeping in view the facts and circumstances of the case and considering that no previous conviction is alleged or proved against the accused, they are stated to be only earning member of their family and they are behind the bars for several years - appeal disposed off.
Assessment of income - Assessee carrying on two independent activities, - one of insurance business which was reflected in Policyholders’ Account by the assessee and the other, being an independent activity depicted in Shareholders’ Account, as per the detailed findings given in the assessment order - Held that:- Assessee has time and again brought to the notice of the AO that assessee is engaged only in the business of life insurance. It has been brought to the notice of the AO that no other business has been carried out. The investments were made in line with the requirement of applicable regulations. It is further noted that nothing has been brought out by the AO in the assessment order to show if any other business has been done by the assessee. Shareholders’ Account and Policyholders’ Account have been separately maintained for the purpose of meeting the requirement of law as mentioned above also. There was no justification to artificially disintegrate the business by separately assessing the amount transferred from one account to the other by the assessee for the purpose of maintenance of accounts as per requirement of law. As relying on Tribunal order wherein it has been held that assessee was engaged in only one business, i.e. business of life insurance - recomputation of income made by the AO was rightly rejected by the Ld. CIT(A). As a result, Grounds 1(i) & 1(ii) raised by the Revenue are hereby dismissed.
Disallowance of stamp duty charges - treating expenses as capital expenditure as against revenue expenditure claimed by the assessee - Held that:- This issue stands decided by the AO in favour of the assessee on the basis of legal principle by relying upon the orders of the Tribunal in the case of HDFC Standard Life Insurance Co Ltd [2013 (10) TMI 1072 - ITAT MUMBAI]. In this year also, there would be no point in sending the issue back for futile exercise as the decision has already been taken, which can be applied here also. We have considered the request of the Ld. Counsel. No objection or any contrary argument was made by the Ld. CIT-DR in this regard. - Decided against revenue
Addition on account of Negative Reserve - Held that:- AO has himself took a decision that the Negative Reserves cannot be added back while computing the income of life insurance assessee company u/s 44 read with rules 1 & 2 of First Schedule of the Income-tax Act, 1961. Under these circumstances, we find that no dispute is left on this issue. Therefore, we find that addition has been rightly deleted by the Ld. CIT(A) on the basis of his well reasoned findings. - decided against revenue
Grant of benefit of exemption u/s 10(32) on dividend income received - Held that:- We have gone through the order passed by Ld. CIT(A) also and find that the benefit of exemption was granted by the Ld. CIT(A) relying upon the judgement in the case of Life Insurance Corporation of India vs CIT (1977 (11) TMI 25 - BOMBAY HIGH COURT) as well as ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI). AO in Order Giving Effect has also granted relief to the assessee by relying upon these judgements. Under these circumstances, we do not find it necessary to interfere in the finding of Ld. CIT(A) and, therefore, the order of the Ld.CIT(A) is upheld. These Grounds raised by the Revenue are dismissed.
Addition u/s 14A on the basis of Rule 8D - Held that:- In view of the special provisions applicable to the insurance companies, we are of the opinion that the provisions of section 14A r.w.r. 8D were held not applicable to the insurance companies i.e., lCICI Prudential Insurance, HDFC Standard Life Insurance Company. Therefore, the SSI Life Insurance Company Limited (assessee in the present case should not be any exception.
Exemption u/s 10(23AAB) in regard to income of pension fund to be allowed as relying on ICICI Prudential Insurance Co Ltd vs ACIT (2012 (11) TMI 13 - ITAT MUMBAI).
Classification of goods - potato chips, kurkure and cheetos masala balls and other flavours known as namkins - claim of assessee is that it falls within a specific heading “Deshi sweetmeats, kulfi, ice-cream and namkins” irrespective of use of preservative, and was liable for a rate of 6%, whereas the claim of Revenue has been that it falls under a generic entry “preserved food articles”, and was liable to be taxed @ 12%.
Whether product of the appellant-company viz. 'kurkure', 'potato chips' and 'cheetos' fall in the category of Entry 78 of Notification dated 25.10.2000 and does not come within the ambit of Entry 150 of the said Notification?
Held that:- I do concur with the arguments of the learned counsel for the Revenue that the product in which the assessee is dealing, though technically can be said to be namkin but taking into consideration the specific entry under the Act, it can only be placed in the category of “preserved food article” because the assessee for whatever reasons adds number of preservatives and nitrogen gas may be for purposes that it lasts longer, but adding preservatives and nitrogen is sufficient to hold that it may fall within category of entry 150 of “preserved food article”.
Common parlance understanding - Held that:- The Apex court time and again has observed that in cases like this, test of “common parlance” is to be applied and taking into consideration, if we apply the common parlance test, if a consumer goes to market and asks for namkin, normally the shopkeeper who may be selling both locally made namkin bikaneri bhujia, chana dal, chewra etc. as also the product of assessee, will immediately provide “bikaneri bhujia, chana dal, chewra” etc. and only if one specifically asks for “potato chips, kurkure and cheetos” etc., then the shopkeeper may give such items otherwise the product of namkin like sev, bikaneri bhujia, mogar etc. would immediately be given by the shopkeeper. Even normal ordinary meaning of namkin in my view is bikaneri bhujia, chana dal, chewra or a similar product.
Thus, potato chips, kurkure and cheetos can clearly be said to be “food articles” and though may be that it may taste like a namkin, but cannot really be said to be pure and simple namkin, it can only be classified to be falling in the category of “food articles” - the question of law is required to be answered against the assessee and in favour of the Revenue - petition dismissed - decided against petitioner.
Constitutional validity - levy of service tax on person manufacturing alcoholic liquor for human consumption on job work basis – Section 66B of the Finance Act, 1994 read with 65B(40) and section 66D - Notification No. 14/2015/-ST dated 19th May 2015 - Held that:- Issue notice, fixing a returnable date within eight weeks.
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