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2016 (8) TMI 1434
Appointment of an arbitrator - Recovery of debts - Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
HELD THAT:- The Arbitration & Conciliation Act, 1996 is an amalgam of the Arbitration Act, 1940, the Arbitration (Protocol & Convention) Act, 1937 and the Foreign Awards (Recognition & Enforcement) Act, 1961. It is a consolidating and amending statute. The object of the Act is to minimize the supervisory role of Court in relation to matters covered by arbitration. The provisions of Section 5 of the Act limit interference of judicial authorities in matters governed by Part-I of the Act and no judicial authority in terms of the said provisions can interfere except where so provided in Part-I of the said Act. By virtue of the said provision, all other statutes have been excluded from operation insofar as they relate to intervention by any judicial authority in matters covered by Sections 1 to 43 of the Act. This Act of 1996 has been held to be a self-contained code.
Arbitration is not a common law right. It is a right created by statute. The rights and remedies are created by the statute. Arbitration is consensual. When the parties have voluntarily agreed to have their disputes resolved by Arbitration, it necessarily implies that they have consciously waived their right to have their disputes adjudicated by any other authority or by any other machinery - the amended provision of Section 19 of the Debt Recovery Act, namely Section 19(8) does not give an absolute power to a constituent to have the counter-claim adjudicated by the Tribunal as the subsequent sub-section, namely Section 19(11) of the RDB Act gives power to the Tribunal to pass an order for exclusion of the counter-claim.
There is no provision in the Act for transfer of suits and proceedings, except section 31, which relates to suit/proceeding by a bank or financial institution for recovery of a debt.
If the petitioner instead of filing an application under Section 9 of the Arbitration and Conciliation Act, 1996 could have filed a suit prior to initiation of recovery proceeding which would be otherwise maintainable there is no reason to conclude that the application for appointment of arbitration in terms of the arbitration clause in the agreement would be barred - Moreover, the application under Section 9 was filed prior to the filing of the recovery proceeding and the respondent has participated in such proceeding and has received substantial benefits in terms of the orders passed in such proceeding.
In view of a clear finding that there is an arbitration agreement between the parties and the party has approached the appropriate High Court, the application under Section 11 of the Arbitration and Conciliation Act is allowed.
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2016 (8) TMI 1433
Disallowance of Provision for Leave Encashment - HELD THAT:- Deduction on account of provision for leave encashment was made on the basis of the judgment of Hon'ble jurisdictional High Court in the case of Exide Industries Ltd. Vs. Union of India EXIDE INDUSTRIES LIMITED AND ANOTHER VERSUS UNION OF INDIA AND OTHERS. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] and subsequently Hon'ble Supreme Court has stayed this judgment of Hon'ble jurisdictional High Court. As Hon'ble Supreme Court decide the issue and by that time the matter can be remitted back to the file of ld AO for fresh adjudication in terms of the decision of Hon'ble Supreme Court. On this, Ld. CIT DR has not objected to the same. Accordingly, we set aside this issue to the file of the AO to await the decision of Hon'ble Supreme Court and decide the issue accordingly. This issue of assessee’s appeal is remitted back to the file of AO
Disallowance of Depreciation on Intellectual Property Rights and Goodwill - main emphasis for disallowance is only on the point that the intellectual properties is not approved by any government or any competent authority - HELD THAT:- Nowhere the income tax act mandates the registration of the intellectual properties for the purpose of granting depreciation u/s 32 of the Act. Getting the intellectual properties registered is within the domain of the assessee and it only offers protection to the assessee from preventing other parties to use the same. The revenue cannot thrust the mandate of registration of the same and mere non-registration of the same does not make the transaction ingenuine or sham. Hence the version of the revenue that IP should be certified by the government authority and it does not fall within the assets specified in IT Rules is without any basis and not tenable.
AO is also directed to rework the opening WDV of this asset in the subsequent year and rework the allowability of depreciation on the same pursuant to this order. In view of this decision, we are not inclined to entertain the alternative claim of the assessee vide ground no. 1(a) that the consideration so paid in the sum of ₹ 4,92,00,000/- has to be construed as Goodwill and depreciation has to be granted accordingly.
Allowability of depreciation on goodwill - HELD THAT:- Hon’ble Apex Court in the case of CIT vs Smifs Securities ltd [2012 (8) TMI 713 - SUPREME COURT] had held that the assessee is entitled for depreciation on goodwill. It is not in dispute that the assessee had paid consideration towards acquisition of Goodwill. This issue is now well settled and not with any dispute. We find lot of force in the argument advanced by the ld AR that the benefit of decision of the apex court supra was not available during the pendency of proceedings before the ld AO and ld CITA. The facts relating to the same are already on record and does not require any investigation. Accordingly we admit the additional ground raised by the assessee with regard to the claim of depreciation on goodwill in the light of the decision of the Hon’ble Apex Court in the case of NTPC Ltd vs CIT [1996 (12) TMI 7 - SUPREME COURT] .
Levy of Interest u/s 234 C - HELD THAT:- We find that the provisions of section 234C of the Act are very clear without any ambiguity that the same is chargeable only on the returned income.
Adjustment to Arm’s Length Price - Comparable selection - HELD THAT:- There is no dispute with regard to the Most Appropriate Method (in the instant case Resale Price Method) chosen by the assessee for its trading segment. There is no dispute with regard to the identification of Profit Level Indicator. The dispute is only on account of selection of related comparables and adoption of single year margins based on audited financials. In view of the detailed submissions made hereinabove , we deem it fit and appropriate, to set aside this issue to the file of the ld TPO / ld AO to accept the comparable companies who are engaged in the related field as that of assessee and adopt the single year margins based on audited financials of those comparable companies for the purpose of determination of Arm’s Length Price. The adjustment towards the tolerance limit of 5% is also entitled for the assessee while determining the Arm’s Length Price.
Purchase of raw materials & components - Manufacturing Domestic segment - whether the comparable companies have a PE or a branch in India as the assessee had benchmarked the profitability earned in the regions of the AEs ? - HELD THAT:- DRP failed to understand the benchmarking approach as submitted by the assessee. The DRP did not recognize the fact that assessee was comparing AEs margin with comparable companies in AEs region rather than comparing the latter with assessee’s margin earned in India. Thus the ld DRP summarily rejected the transaction by transaction approach adopted by the assessee. We find that the revenue had not brought anything concrete on records either factually or legally to negate the assessee’s approach of determining the Arm’s Length Transaction Price.
Payment of Royalty – Manufacturing Domestic Segment - HELD THAT:- We find that adoption of TNMM by the ld TPO for purchase of raw materials & components under manufacturing domestic segment, had resulted in an abnormal outcome in the transfer pricing adjustment which was even more than the value of international transactions. Hence it would be just and fair to ignore the same. The ld TPO had made the adjustment of ₹ 43,27,604/- to Arm’s Length Price based on a fallacious approach which is neither intended by the Act nor in OECD guidelines. In view of the above discussions, in order to meet the ends of justice in the facts and circumstances of the case, we deem it fit and appropriate, to set aside this issue to the file of the ld TPO / ld AO for determination of Arm’s Length Price based on transaction to transaction approach submitted by the assessee taking the AE as a tested party using CPM as the Most Appropriate Method.
Adjustment to Arm’s Length Price - Sale of finished goods – Manufacturing (Export) Segment - HELD THAT:- TPO had accepted the certified segmental profitability as he has considered ‘Manufacturing Segment’ profitability from the same. However, he did not consider the sub-segment profitability of Manufacturing Segment into Manufacturing (Domestic) segment and Manufacturing (Export) segment based on difference in FAR analysis to determine the profitability from sale of finished goods. The ld AR further stated that the ld TPO in the earlier years has considered prices of international transaction pertaining to export of goods to AEs to be at Arm’s Length wherein the assessee followed the same economic analysis to determine the Arm’s Length Price.
In view of the aforesaid findings and in the facts and circumstances of the case and respectfully following the judicial precedents relied upon hereinabove, we direct the ld TPO / ld AO to consider the certified segmental profitability to determine the Arm’s Length Price of the relevant international transactions and hereby reject the combined segment approach adopted by the ld TPO.
Purchase of raw materials & components – Manufacturing (Domestic) Segment - selection of MAM - HELD THAT:- TPO by selection of wrong tested party produced an abnormal outcome wherein a loss of 5.81% (8.31% - 2.50%) was determined to have occurred for a transaction value of 2.47% of the entire segment. Hence it would be just and fair to ignore the same. TPO had made the downward adjustment to Arm’s Length Price based on a fallacious approach which is neither intended by the Act nor in OECD guidelines. In order to meet the ends of justice in the facts and circumstances of the case, we deem it fit and appropriate, to set aside this issue to the file of the ld TPO / ld AO for determination of Arm’s Length Price based on transaction to transaction approach submitted by the assessee taking the AE as a tested party using CPM as the Most Appropriate Method.
Payment of royalty – Manufacturing (Domestic) Segment - HELD THAT:- TPO while passing the order u/s 92CA(3) of the Act ignored the CUP analysis undertaken by the assessee for justifying the Arm’s Length nature of the international transaction and instead went ahead and clubbed the transaction under the TNMM analysis undertaken by TPO with respect to manufacturing segment. Moreover, when the ld DRP remanded back the case to the file of the ld TPO for analysis of the CUP benchmarking and providing ground wise observations for grounds filed in Form 35A, the ld TPO did not offer any adverse comments with regard to the payment of royalty. TPO while passing the order u/s 92CA(3) of the Act ignored the CUP analysis undertaken by the assessee for justifying the Arm’s Length nature of the international transaction and instead went ahead and clubbed the transaction under the TNMM analysis undertaken by TPO with respect to manufacturing segment. Moreover, when the ld DRP remanded back the case to the file of the TPO for analysis of the CUP benchmarking and providing ground wise observations for grounds filed in Form 35A, the ld TPO did not offer any adverse comments with regard to the payment of royalty.
Payment of Management Service fees – Manufacturing (Domestic) Segment - HELD THAT:- Based on functional analysis, AE was determined as the least complex party and accordingly determined to be the tested party for the purpose of the analysis. Further , TNMM was determined to be the MAM. We find that the assessee undertook to identify comparable companies rendering similar services and the international transaction was determined to be at Arm’s Length. These are enclosed in Pages 295 -303 of the Paper Book. The TPO while passing the order u/s 92CA(3) of the Act ignored the separate transaction level analysis undertaken by the assessee for justifying the Arm’s Length nature of the international transaction and instead went ahead and clubbed the transaction under the TNMM analysis undertaken by TPO with respect to manufacturing segment. Moreover, when the ld DRP remanded back the case to the file of the TPO for analysis of the separate transaction level analysis and providing ground wise observations for arguments raised by the assessee before the DRP, the ld TPO did not offer any adverse comments with respect to economic analysis carried out by the assessee for transaction pertaining to the payment of management service fees.
We hold that the study made by the assessee with regard to payment of management service fees which has been accepted by the revenue in the subsequent years, should be applied for the Asst Year 2008-09 also to put an end to this controversy. Hence in order to meet the ends of justice, we direct the ld TPO/ ld AO accordingly
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2016 (8) TMI 1432
Addition on account of bogus creditors - non-production of books of account at the time of assessment proceedings - HELD THAT:- The assessee has discharged its onus in respect of credit and the Assessing Officer has not raised any doubt in respect of the purchase from the said creditor. The identity of the said party has also been verified. The assessee has submitted the explanation for the inconsistency appearing in the ledger accounts of the parties in their respective books of account. If the Assessing Officer was not satisfied, he should have carried out further enquiries from M/s. Triveni Engineering and Industries Ltd. or from M/s. Bindal Papers Ltd., which he did not. According to us, the assessee cannot not be allowed to suffer because of no action taken on the part of the Assessing Officer for verification. In our view, the assessee has submitted evidences necessary to shift the onus to the Revenue and, therefore, no addition is warranted in the case of the assessee for unexplained credit. In view of above, we hold that the learned Commissioner of Income Tax (Appeals) has passed a reasoned order on the issue in dispute and there is no infirmity in his findings on the issue in dispute. Accordingly, this ground of appeal is dismissed.
Addition of increase in chemical expenses - HELD THAT:- Assessing Officer has neither been able to point out any discrepancy in the bills vouchers etc maintained by the assessee in respect of the expense as also not been able to find out any discrepancy in the records of consumption of the chemicals maintained as per the Central excise rules. The assessee has duly explained the reason for increase in consumption alongwith evidences of increase in cost of chemicals, changed method of production etc. In such circumstances, in our opinion, the ad hoc disallowances cannot be sustained. In view of the above discussion, we hold that order of the Ld. Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no further interference is required from our side, accordingly we confirm the finding of the learned Commissioner of Income-tax (Appeals) on the issue in dispute. The ground of the appeal is dismissed.
Estimating the sale of scraps - AO estimated the sale of the scrap at the rate of 2% on the consumption of stores and spares - HELD THAT:- We find that the addition in reference was made without pointing out any discrepancy in bills and vouchers and consumption of stores and spares. Further, the Revenue has not been able to substantiate before us with the annual results of M/s. Ganga Kisan Sahakari Chini Mills Ltd. for assessment year 2008-09 that its result are comparable with the result of the assessee and in absence of which, the rate of scrap estimated in that case, cannot be applied over the case of the assessee. In our view, the estimate of sale of scrap upheld by the Commissioner of Income-tax (Appeals) is reasonable and no further interference on our part is required. Accordingly we uphold the finding of the Commissioner of Income-tax (Appeals) on the issue in dispute. The ground of the appeal is dismissed.
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2016 (8) TMI 1431
TP Adjustment - comparables selection - HELD THAT:- Accounting year of the assessee and comparables are different. The TPO at liberty to recast the financial for the period involved in the assessee’s case. Accordingly, we direct the TPO to recast the financial for the full period of 12 months covering the previous year 2006-07 relevant to the assessment year 2007-08 and thereafter compare with the assessee’s case so as to correct ALP. This ground is remitted to the file of TPO for fresh consideration.
Segmented data in the case of Ador Multi products and Ajanta India. Admittedly, there is segmented data is available in these cases, as such only segmental information which reflects the comparable companies business function related margins should be adopted. Accordingly we remit this issue to the file of TPO to consider the segmented data of these two companies to determine the ALP in this case. This issue is remitted to the file of TPO for fresh consideration.
Granting of ±5% benefit provided in proviso to section 92C(2) of the Act to the assessee while determining the ALP - HELD THAT:- An assessee shall not be entitled to exercise its option as referred to in the proviso to sub-section (2) if the variation between the arithmetical mean and the price at which such transaction has actually been undertaken exceeds five per cent. of the arith metical mean. In view of the retrospective operation of the aforesaid provision, the benefit of ± five per cent as a standard deduction cannot be allowed. In other words, if the variation of arithmetic mean is within the range of ±5%, then the assessee is entitled for benefit of ±5% under the proviso to Sec.92C(2) - we direct the TPO to allow ±5% it, it is within the range of ±5%. Ordered accordingly.
Non providing any adjustment to arm’s length margin of Comparable Companies on account of differences in Research & Development and Marketing activities - HELD THAT:- The assessee sales only to AE and only job work, no work is involved. Hence by placing reliance with the order of Hyderabad Bench in the case of DCIT Vs. Hellosoft India Pvt. Ltd. [2013 (10) TMI 747 - ITAT HYDERABAD] we direct the AO to grant risk adjustment of 1% towards Research and Development. Appeal of assessee is partly allowed for statistical purposes.
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2016 (8) TMI 1430
Accumulation of income u/s 11(1)(a) - depreciation on the assets the cost of which has been fully allowed as application of income under section 11 in the past years - HELD THAT:- Issue raised herein stands concluded against the appellant - revenue and in favour of the respondent – assessee that by decision of this Court in CIT Vs. Institute of Banking Personnel Services [2003 (7) TMI 52 - BOMBAY HIGH COURT]. In fact the impugned order of the Tribunal placed reliance upon the aforesaid decision of this Court to dismiss the revenue's appeal before it. In the above view as the impugned order has followed the binding decision of this Court, no substantial question of law arises for our consideration.
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2016 (8) TMI 1429
Mistakes apparent from record - Rectification of mistakes - Tribunal had omitted to adjudicate the additional ground of appeal that there is no urban land belonging to the appellant on the valuation date, since the said land stood transferred on 5/12/2000 - HELD THAT:- Referring to case of DIRECT RECRUIT CLASS II ENGINEERING OFFICERS´ASSOCIATION AND VERSUS STATE OF MAHARASHTRA AND OTHER [1990 (5) TMI 223 - SUPREME COURT] there can be no doubt that the principles of Constructive Res Judicata, as explained in explanation IV to Section 11 of the CPC, are also applicable to writ petitions. Petitioners had taken a chance of re-arguing the appeal already decided.
Thus, the attempt to re-argue the case which has been finally decided by the Court of competent jurisdiction is a clear abuse of process of the Court, regardless of the principles of Res Judicata, as has been held by Hon’ble Supreme Court in K.K. Modi Vs. K.N. Modi and Ors. [1998 (2) TMI 566 - SUPREME COURT OF INDIA]
The attempt by the petitioners to re-agitate the same issues which were considered by this Tribunal and were rejected expressly in the impugned order is a clear instance of an abuse of process of this Court apart from the fact that such issues are barred by principles of Res Judicata or Constructive Res Judicata and principles analogous thereto.
Therefore, it cannot be said that there are any mistakes apparent from record, which are capable of being rectified, exercising the power vested under section 254(2) of the Act. Misc. Petitions are dismissed.
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2016 (8) TMI 1428
Non prosecution of appeal by assessee - non appearance by/on behalf of assessee - HELD THAT:- When the appeal was taken up for hearing, nobody appeared on behalf of the assessee. Notice for hearing was sent to the assessee on 16.06.16. From the acknowledgement card of the post office placed on record, it is seen that the assessee has received the notice of hearing on 17.06.2016. Therefore, we are of the opinion that the assessee is not interested in prosecuting his case. Following the decision of the Delhi Bench of the Tribunal in the case of C.I.T. vs. Multiplan (India) Ltd. (1991 (5) TMI 120 - ITAT DELHI-D) we dismiss the appeal filed by the assessee for non-prosecution.
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2016 (8) TMI 1427
Deduction u/s 80P(2)(a)(i) - assessee is not a co-operative bank - interest earned from loan to associate members - HELD THAT:- Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal has clearly held that the assessee is not co-operative bank and the provisions of Section 80P (4) are not attracted. Therefore, the respondent Society is eligible for exemption under Section 80P(2)(a)(i) of the Act.
The contention of the appellant that the members of the assessee societies are not entitled to receive any dividend or having any voting right or no right to participate in the general administration or to attend any meeting etc., because they are admitted as associate members for availing loan only and was also charging a higher rate of interest, is not a ground to deny the exemption granted under Section 80P (2)(a) (i) of the Act. - Decided against revenue.
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2016 (8) TMI 1426
Deduction u/s 10A - exclusion of the expenditure incurred in foreign currency from the export turnover for the purpose of computing the deduction under Section 10A - HELD THAT:- The Hon’ble Jurisdictional High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others [2011 (8) TMI 782 - KARNATAKA HIGH COURT] had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator.
We direct the Assessing Officer/TPO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while computing deduction u/s 10A.
Deduction under Section 10A without setting off of loss incurred by the non-STPI unit - HELD THAT:- substituted/amended provisions of sec.10A/10B which are applicable in the case of the assessee as well as the decision of the Tribunal in case of Biocon [2014 (12) TMI 838 - ITAT BANGALORE], we decide this issue in favour of the assessee and direct the AO to allow deduction u/s 10A without setting off the domestic losses.
Transfer Pricing Adjustment - comparable selection - HELD THAT:- Assessee is engaged in developing, testing and software solution for group companies as well as for marketing services and solution in India for manufacturing and hospitality industry thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Applying a fixed slab of turnover gives absurd results of comparability however the Tribunal has taken a view that the turnover in any case can be considered as a parameter / criteria for deciding the comparability but the proper yardstick would be a range of multiples of turnover of the tested party on both sides.
Company following different financial year ending on 31.12.2006 - the financial data is not relating to the same period from 1.4.2006 to 31.3.2007. Since the contemporaneous data are not available in respect of this company as provided under Rule 10B(4) of the IT Rules, therefore, we are of the view that this company cannot be considered as a good comparable for want of contemporaneous financial data to be compared with the assessee. Accordingly, we direct the Assessing Officer / TPO to exclude this company from the list of comparables
Since we have excluded various companies from the list of comparables selected by the TPO, accordingly, the A.O/TPO is directed to recompute the ALP from the remaining set of comparables and after considering the benefit of provision to section 92C regarding tolerance range of + or – 5%.
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2016 (8) TMI 1425
Admission of additional evidence by CIT- A in deleting addition - Not giving proper opportunity of verification to AO thus violating the provision of Rule 46A(3) of the Income Tax Rules, 1962 - Disallowance of interest expenses on OD facilities and Disallowance u/s 14A - HELD THAT:- Department should be given proper opportunity to take into consideration the additional evidences for verification. After hearing both sides, we in the interest of justice and equity remand the issues raised in the Ground No. 1 and 2 of the Revenue to the file of the ld. CIT(A) to decide afresh after giving adequate opportunity of being heard to both the parties. Hence, the appeal of the Revenue is allowed for statistical purposes.
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2016 (8) TMI 1424
Computation of deduction u/s 10A - exclusion both from export turnover as well as total turnover - HELD THAT:- See Sak Soft [2009 (3) TMI 243 - ITAT MADRAS-D] wherein it is held that communication charges attributable directly to the export of article or thing outside India has to be excluded both from export turnover as well as total turnover while computing exemption u/s 10A of the Act. In view of the ratio laid down as above, the finding of the DRP on this issue is upheld and ground raised by the Revenue is dismissed.
TP Adjustment - exclusion of comparables - HELD THAT:- No infirmity in the order of the DRP in directing the AO/TPO to exclude the companies from the list of comparables considering their advantageous brand value along with high turnover. Accordingly, this ground of appeal of revenue is dismissed.
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2016 (8) TMI 1423
TP adjustment - non adjustment against the custom duty component while determining the ALP - HELD THAT:- TPO has not considered the custom duty adjustment on the reason that it is equivalent to central excise in commercial market. This is not correct. The Tribunal consistently holding that while determining ALP, there should be suitable adjustment in respect of custom duty. Accordingly, we direct the A.O. to give suitable adjustment against the custom duty component while determining the ALP.
Air freight charges adjustment while computing the ALP - HELD THAT:- Assessee is in the field of manufacturing and testing of throttle body, rocker arm, solenoid valve, LPG gas mixer, vaporizer, LPG Tank etc. and the assessee has to transport the raw materials very urgently to meet the end of the customers. The assessee is importing the entire various components which is required to manufacture its final products. In the course, it incurred air freight charges, which is abnormal expenses and adjustments to be made while determining the ALP, as it is affecting the operating profits. The plea of the assessee is to be accepted, more so, following case of Transwitch India Pvt. Ltd. V. DCIT [2012 (5) TMI 314 - ITAT DELHI] wherein the adjustments towards abnormal expenses incurred by the assessee to be considered while determining the ALP. Accordingly, we direct the TPO to consider the same while determining the ALP.
Variation in exchange rate adjustment while determining the ALP - assessee entered into contract in adverse prices fixed on the prevailing exchange rate and due to fluctuation in exchange rate, there is loss and that exchange fluctuation to be considered while determining the ALP - HELD THAT:- It is normal that exchange rate is subject to fluctuation due to economic conditions. While determining the ALP, one has to consider these factors, more so, our view is fortified by cases of Honda Trading Corp. India Pvt. Ltd. V. ACIT [2013 (6) TMI 184 - ITAT DELHI] for the assessment year 2007-08 and DHL Express (India) Pvt. [2011 (4) TMI 856 - ITAT MUMBAI] for the assessment year 2006-07. Accordingly, we direct the TPO to provide considerable exchange fluctuation adjustment while determining the ALP - issue is remitted to the file of the TPO for determining the ALP after considering the above three components i.e. customs duty adjustment, air freight adjustment and foreign exchange fluctuation adjustment. - Appeal of the assessee is partly allowed for statistical purposes.
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2016 (8) TMI 1422
Proceeding in case of non-operational/ dissolved / struck off company - Appeal filed by Department before High Court- - HELD THAT:- A communication issued from the office of Registrar of Companies, dt.7-4-2011 indicating that pursuant to sub-section(5) of Sec.560 of the Companies Act,1956 the name of Gopal Shri Scrips Pvt. Ltd, has been struck off from the Register and the said company is dissolved.
In the light of the communication placed for our perusal dt.7-4-2011, no purpose is going to be served in examining the substantial question of law which has been raised for consideration in the instant appeal and on account of these change in circumstances, the present appeal has become infructuouos and accordingly stands dismissed. The appellant is still at liberty to file application if any occasion arises in future.
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2016 (8) TMI 1421
Correct head of income - assessee have constructed commercial complex and rented out the unsold shops / offices on lease - Business income or income from house property - HELD THAT:- Assessee have constructed commercial complex and rented out the unsold shops / offices on lease. In case of Commissioner of Income Tax 12 Vs. M/s. Sane & Doshi Enterprises [2015 (4) TMI 882 - BOMBAY HIGH COURT] the income of the assessee was treated as income from house property. Finding identical facts and circumstances of the present case, we are of the view that in the present case the law is quite applicable and the income of the assessee is liable to be treated as income from the house property and accordingly he would be entitled exemption u/s.22 of the Act.
Set aside the finding of the CIT(A) in question and direct the Assessing Officer to re-assess the income of the assessee in view of the observation made above. - Decided in favour of assessee for statistical purpose.
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2016 (8) TMI 1420
Deemed dividend addition u/s 2(22)(e) - partners of the assessee-firm held more than 10% shares in both the companies as had received advances from the said companies and companies were having accumulated profits - provisions of section 2 (22)(e) were applicable in the case under consideration to the extent of committed profits retained by those companies - HELD THAT:- The assessee firm is not the share holder of the companies i.e. it is also a fact that in case of one of the companies the transactions were in the course of regular business-it was neither loan nor advance. As the assessee was not registered shareholder of the companies, so, the provisions of section 2(22)(e)were not applicable to it. SEE CIT v. Subrata Roy [2015 (3) TMI 767 - DELHI HIGH COURT]. -
TDS u/s 195 - Addition u/s 40(a)(ia) - payments were made to non-resident entities - PE in India - HELD THAT:- We are aware that the section 195 of the Act deals with the deduction of tax at source by the payer, i.e., the assessee, if the payments are to be made to a non- resident. The obligation to deduct the tax at source arises only when the payment is chargeable under the provisions of the Act-i.e. taxable in India. Facts of the case are that the assessee had made payments to non-resident agents, that the agents did not have PE in India, that the services were rendered outside India. In our opinion, considering these facts the assessee had rightly not deducted tax at source for making the payments to the non-resident agents.
Non-resident agent was only procuring orders for the assessee and following up payments and no other services were rendered, held that the non-resident agent did not provide any technical services to the assessee, that the commission payment made to the non-resident agent did not fall under the category of royalty or fees of technical services and, therefore, the Explanation to section 9(2) had no application to the facts of the assessee's case. The commission payments to the non-resident agents were not chargeable to tax in India and, therefore, the provisions of section 195 were not applicable.- Decided against revenue.
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2016 (8) TMI 1419
Gift of shares to company - transfer of capital - gift transaction - Applicability of provisions of section 56(vii)(a) - HELD THAT:- Equity interests are transferred by the assessee without consideration and it was a voluntary act. AO has not brought any adverse material against the above to conclude that the transactions involve the payment of consideration to the firm and the transfer of shares is not a voluntary act. In that sense, we find that the impugned Agreement dated 26.2.2010 has the required ingredients of the "gift" agreement. This view gets strength from the finding of Honble Ahmedabad High Court in the case of M/s. Prakriya Pharmachem vs. ITO [2016 (1) TMI 946 - GUJARAT HIGH COURT] and the related transfer of shares constitutes an exempt transfer under the provisions of section 47(iii) of the Act. We have also perused the order of Honble Bombay High Court in the case of the recipient company NECL [2014 (4) TMI 480 - BOMBAY HIGH COURT] during the Stay Petition related proceedings and find that the assessee's claim of gift agreement is prima facie approved. - assessee grounds are allowed.
Gift transaction is done only between the biological persons and not the firms and the companies - HELD THAT:- The decision of the Tribunal in the case of DP World (P) Ltd [2012 (10) TMI 444 - ITAT MUMBAI] KDA Enterprises [2015 (4) TMI 9 - ITAT MUMBAI] are relevant for the legal proposition that the gifts transferred by the Indian company to the foreign company constitutes a valid gift and the transfer is an exempt transfer u/s 47(iii) of the Act. Further, we accept the Counsel‟s proposition that share transfer by way of gift is allowable u/s 56(2)(viia) & 56(2)(viib) - assessee grounds are allowed.
Applicability of provisions of section 28(iv) of the Act. - HELD THAT:- These provisions imply the arising of any benefit / perquisite to the assessee-firm. On facts of the present case, we find, there is no such any benefit or perquisite to the assessee firm by transfer of shares of UPL and UEL to NCPL. Assessee is the transferor and gained nothing in the process. It is the finding of the CIT (A) that the assessee did not receive any consideration - assessee grounds are allowed.
Disallowing maintenance charges claimed as a deduction while computing income under the head income from house property - Municipal Taxes and maintenance charges and claimed deduction - HELD THAT:- Tribunal in the case of Sharimila Tagore [2004 (6) TMI 591 - ITAT MUMBAI] considered the non-occupation charges paid to the society has the "depressing effect" on the ALV in the hands of the land lord of the property. Assessee now wants similar deduction at the time of calculating the ALV and not the deduction u/s 24.
This appears to be a new argument raised by the Ld AR for the assessee. CIT (A) adjudicated this issue only from the point of view of section 24 and allowable deductions. In one view, this issue need re-adjudciation in the light of the new argument and the decision of the Tribunal (supra). Considering the above, we are of the opinion, this part of the ground needs to the remanded to the file of the AO for fresh adjudication. - Decided in favour of assessee for statistical purposes.
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2016 (8) TMI 1418
The Gujarat High Court, in 2016, ordered a notice for final hearing returnable on 21.9.2016 for a Special Civil Application. The matter was not admitted to avoid separate consideration, and respondents were called upon to file a reply. An interim order passed in the Special Civil Application would continue.
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2016 (8) TMI 1417
Arm's length price of interest at LIBOR+2% - whether it should be higher than LIBOR+2%, because the LIBOR is not the rate of consideration for loan transactions as it differs from country to country - Held that:- Referring to Tribunal in assessee company's own case, we direct the Assessing Officer to accept the interest rate charged at LIBOR+1% as an arm's length price.
Transfer Pricing Addition in respect of Corporate Guarantee - Held that:- Guarantee commission at the rate of 0.5% from its Associate Enterprise can be said to be at arms length. Thus, respectfully following the decision of Tribunal in assessee company`s own case, whereby issue were decided in favour of the assessee company. Accordingly, we direct the AO/TPO to compute and charge the guarantee commission at the rate of 0.5% from its Associate Enterprise.
Addition on account of adjustment in respect of interest on recharactarising share application money as Loan advanced to Associate Enterprise - Held that:- AR for the assessee company stated that the share application money can not be treated as loan amount merely because there is a delay in issuance of shares by the subsidiary in the name of the assessee. The assessee company further stated that the same identical issue is covered by the Hon`ble Mumbai Tribunal`s order in assessee's own case for A.Y. 2007-08. Share application money can not be treated as loan amount merely because there is a delay in issuance of shares by the subsidiary in the name of the assessee.
Addition in respect of interest and finance expenses related to acquisition of shares of foreign subsidiary and disallowance of the same under section 36 (1) (iii) - Held that:- Interest expenditure incurred by the assessee is out of commercial exigency of the business and hence should be allowed as business expenditure under section 36 (1) (iii) of the Act, and we accordingly direct the Ld. CIT (A) / AO to delete the addition for A.Y.2008-09.
Expenditure towards the foreign travel of its employees for expansion of its business acquired in Canada - Held that:- Since the foreign travel expenses are incurred by the assessee company in respect of the visit of its employees to overseas places in pursuance of its acquisition of call centre business in Canada and expanding the business thereof, the same should not be disallowed because all these expenses are related to business purpose and covered under the provisions of section 37 (1), therefore, we do not hesitate to direct the CIT (A) / AO to delete the said addition. In the result, appeal of the assessee is allowed on this ground.
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2016 (8) TMI 1416
Disallowance u/s. 14A r.w. Rule 8D - Held that:- AO has not recorded any dissatisfaction with reference to the maintenance of accounts and the expenses disallowed by the assessee for earning exempt income. AO has not recorded any reasons for not accepting the expenditure disallowed by the assessee for earning exempt income.
The funds available with the assessee are much more than the investments made during this Assessment Year. Therefore, in view of the submissions made before the Ld. CIT(A) that the funds available with the assessee are much more than the investments made by the assessee, we restore this issue to the file of the AO with a direction to verify as to whether the funds available with the assessee are more than the investments and in case the available funds are more than the investments, no disallowance is required to be made u/s. 14A r.w. Rule 8D(2)(ii) - Appeal filed by the assessee is allowed for statistical purpose.
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2016 (8) TMI 1415
Disallowance u/s 14A - Held that:- Tribunal directed the AO to restrict the disallowance u/s. 14A of the Act, to the exempt income earned by the assessee. In the process, the ITAT has considered all the relevant case law - National Thermal Power Co. Ltd. V. CIT [1996 (12) TMI 7 - SUPREME COURT], CIT v. Pruthvi Brokers and Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT], Gujarat Gas Ltd. V. JCIT [2000 (4) TMI 19 - GUJARAT HIGH COURT] and Goetze (India) Ltd. V. CIT [2006 (3) TMI 75 - SUPREME COURT]
In view of the above, we direct the AO not to make any disallowance of interest u/s.14A read with rule 8D.
Facts and circumstances during the assessment year 2007-08 are pari material, therefore, following the above reasoning, we direct the AO to delete the disallowance of interest while computing disallowance u/s.14A r.w.rule 8D.- Decided in favour of assessee.
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