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Showing 221 to 240 of 1903 Records
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2015 (11) TMI 1684
Penalty u/s 271(1)(c) - “gift” treated as ‘income from other sources’ u/s 68 - the donor could not be produced by the assessee nor he appeared in response to the summon issued by the AO - also no documentary evidence to prove that the donor had such a huge agricultural income - Held that:- The assessee’s explanation about the genuineness of the “gift” is substantiated by various primary evidences and once these evidences have been filed, then onus shifts upon the AO to show that the assessee’s explanation and evidences are false or not bona fide. Here there has been no enquiry by the AO to rebut these evidences albeit the AO has disbelieved on the basis of certain hypothesis and premise that such a conduct of giving the gift is improbable. This hypothesis or premise, howsoever strong may be for the quantum proceedings or may have a probative value but certainly they are not sufficient so far as penalty proceedings are concerned. Once the donor has furnished his bank statement from where the amount of gift has been given, the copy of his income tax return before the AO, then without any rebuttal of such evidences by any specific enquiry, the penalty cannot be sustained. Accordingly, we delete the levy of penalty - Decided in favour of assessee.
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2015 (11) TMI 1683
TPA - selection of comparable - Can the DR argue for the exclusion of some companies, which were treated by the AO/TPO as comparable’? - Held that:- The answer to this question can be given in negative alone. It is understandable that when CIT(A) has decided some point in favour of the assessee and against the Revenue, the AO is fully empowered to assail the correctness of such a decision in an appeal before the tribunal. Similarly, when an assessment order is passed u/s 143(3) read with section 144C of the Act, the AO can be aggrieved against the direction given by the DRP. In such cases of grudge, the AO can approach the tribunal for an appropriate relief, wherever and to the extent the law permits.
The underlying idea behind these situations is that the AO is dissatisfied with reversal of his view either by the CIT(A) or the DRP, as the case may be, which he wants to be restored. But, the AO in our considered opinion, can under no circumstance be aggrieved with his own view taken in the assessment order independent of any external influence of the DRP etc. It goes without saying that in all the appeals filed by the assessee against the final order passed by the AO u/s 143(3) read with section 144C of the Act, the respondent is always the AO. In other words, the DR represents the AO in an appeal before the tribunal. Taking up an issue for argument by the DR before the tribunal means taking up the issue by the AO through the DR. If we allow the DR to argue that the decision taken by the AO/TPO was wrong and certain companies included by the TPO himself should be deleted, it would mean that the AO is challenging the correctness of his own decision through the DR before the tribunal, which is illogical.
Department right to file appeal against the independent free decision of the AO/TPO - Held that:- AO was without any remedy to challenge the unconvincing adverse direction given by the DRP, given effect to in his own order, in respect of any objections filed before this cut-off date of 1.7.2012. Now with this amendment, the Revenue has been given a liberty to file appeal before the tribunal if the CIT objects to any direction issued by the Dispute Resolution Panel, that has been given effect to by the AO. The point to be underscored is that such power of filing appeal is restricted only to the cases where `objection is to the direction of the DRP’ and not to the voluntary action of the AO himself. In other words, if the AO/TPO has chosen a company as comparable, which has been directed to the excluded by the DRP, then an appeal can be filed against the assessment order on such exclusion. The power to file appeal does not extend to the selection of a company as comparable by the AO/TPO himself which has remained intact even after the direction given by the DRP.
No hesitation in holding that albeit the tribunal has the power to voluntarily direct the AO/TPO to reconsider the correctness of the companies included by him in the list of comparables, but in no case, can the DR argue, as a matter of right, against such inclusion.
Set aside the impugned order and restore the matter to the file of AO/TPO for recalculating the ALP of the international transaction of ‘Rendering of services’ afresh in conformity with our above discussion
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2015 (11) TMI 1682
Reopening of assessment - whether the reasons recorded for forming the belief of escapement of income on the basis of material seized are justified or vague to take recourse of section 147? - Held that:- The ld. Counsel for the assessee has not placed before us any judicial pronouncement for the proposition that the material belonging to the person other than the person search, found and seized in the search and seizure operation, cannot be used against such person for the purpose of assessment u/s. 147. Accordingly, the first limb of assessee’s stand challenging the validity of action u/s. 147 is rejected.
The reasons have been recorded by the AO after drawing the inference from the seized documents that trend of payment of interest on PDCs by the group companies stood depicted and the assessee being a group company of BPTP Ltd., might have also paid interest on such PDCs. This approach of the authorities below, to our mind, is not tenable at all being based on fake inferences drawn. The assessee is a separate and distinct assessee under the Act and is to be assessed on the basis of material which belongs to it or specifically relevant for its assessment. In the instant case no specific document is pointed out belonging to the assessee nor any evidence or material, whatsoever, has been demonstrated by the authorities below to show that the assessee had paid interest on PDCs. Therefore, there being no definite material belonging to the assessee, in our opinion, the reasons recorded for initiation of proceedings u/s. 147 against the assessee, are not in consonance with law, having been based on mere suppositions and surmises and extrapolation of material seized. The fact that the assessee is a group company of BPTP Ltd. and overall management is controlled by one person cannot be equated with the existence of incriminating material belonging to the assessee for drawing the adverse inference. - Decided in favour of assessee.
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2015 (11) TMI 1681
Claim of exemption/deduction u/s 54B - acquisition of possession of purchased land - Held that:- In the present case, although the assessee could not get the sale deed executed in his name and also could not get possession of the purchased land but it was beyond control and powers of the assessee as there was a requirement of permission of court because the land was purchased from a public trust.
We cannot ignore the conduct and intention of the assessee wherein he pays entire sale consideration, makes payment for purchase of stamps for execution of sale deed and also pays brokerage and from this, we can safely and firmly infer that in fact the assessee had a bonafide and true intention to purchase agriculture land within prescribed period of two years and he used ₹ 26,84,000/- towards this intention of purchase and if the sale deed could not be executed in his name and he could not get possession of the purchased land due to the reason beyond his control, then he cannot be debarred from claiming deduction u/s 54B of the Act. Hence, we are inclined to held that the assessee is entitled for claim of deduction u/s 54B of the Act pertaining to ₹ 26,84,000/- which was used / invested towards purchase of agriculture land within prescribed time limit of two years from the date of sale of agriculture land out of which capital gain accrued to the assessee. Accordingly the appeal of the assessee is allowed.
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2015 (11) TMI 1680
Claim for applying the provisions of section 44AF - Held that:- As observed from the Trading and Profit & Loss A/c. of the assessee that although the amount of ₹ 39.82 lakhs is credited on account of sales, the same is a net amount after deducting expenditure incurred by the assesese on turnover tax and VAT. Since what has to be taken into consideration for applicability of section 44AF is gross turnover and the same is more than ₹ 40 lakhs, as is evident from the Profit & Loss A/c., it is of the view that the provisions of section 44AF are not applicable in the case of the assessee, as rightly held by the authorities below. - Decided against assessee.
Addition on account of under-valuation of stock - Held that:- As observed that the last purchase of aluminium, as pointed out by the Assessing Officer, was made by the assessee on 27.02.2006 @ ₹ 181/- per kg. Moreover, the assessee by his own admission was dealing with wide variety of aluminium products and in the absence of any product wise details maintained by him, it is difficult to apply the rate of one product to value the closing stock of the assessee. It is also worthwhile to note here that the rate of ₹ 99.65 per Kg. was indicated by the assessee himself as the scrap value of products and it is, therefore, difficult to accept the claim of the assessee that the market value of the aluminium products dealt with by him was only ₹ 111/- per kg. On the other hand, the method followed by the Assessing Officer for valuation of closing stock, in my opinion, is more scientific as he has taken into consideration the average cost of opening stock as well as the average cost of products purchased by the assessee during the year under consideration and by following FIFO method, he has determined the value of closing stock of the assessee, which in the facts and circumstances of the case cannot be found with any fault. - Decided against assessee.
Deduction claimed by the assessee on account of expenses incurred on reconstruction of house/godown - Held that:- As submitted by the the assessee, a similar deduction claimed by the assessee, however, is allowed by the Assessing Officer himself in the earlier years as well as in the subsequent years even in the assessment completed under section 143(3) and since the ld. D.R. has not been able to dispute this position, we decide this issue in favour of the assessee.
Addition on account of rent - disallowance made by the authorities as the building being under construction, the same could not have been used by the assessee for the purpose of business - Held that:- As rightly contended by the assessee, the expenditure in question was undoubtedly incurred by the assessee for the purpose of his business in order to retain his right over the building for use of the same in future for the purpose of business. Accordingly, we delete the disallowance. - Decided in favour of the assessee.
Addition on account of expenses incurred by the assessee for maintenance of elevators - Held that:- As it is observed that the said expenses were incurred by the assessee in respect of his residential house and in the absence of any evidence produced by the assessee to show that his residential house was used for the purpose of business, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on this issue.- Decided in favour of the revenue.
Disallowance of 10% made out of car expenses and depreciation claimed by the assessee - Held that:- In the absence of any record maintained by the assessee to show that the car was exclusively used for the purpose of business, disallowance to the extent of 20% out of the car expenses and depreciation was made by the Assessing Officer for involvement of personal element. On appeal, ld. CIT(Appeals) found the same to be excessive and restricted the same to 10%. The disallowance sustained by the ld. CIT(Appeals) to the extent of 10% of the car expenses and depreciation is fair and reasonable and upholding his impugned order on this issue, I dismiss Ground of the assessee’s appeal.
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2015 (11) TMI 1679
Addition of discrepancy found in stock during the course of survey - Held that:-
The difference in stock thus was worked out by the Assessing Officer without taking into consideration the movement of stock during the period from 01.09.2007 to 14.09.2007 and in our opinion, there was thus basic infirmity in the order of the Assessing Officer, inasmuch as the Oil Mills of the assessee being in operation during the said period, the movement of stock should have been taken into consideration by him. In this regard, it is also observed that although such working was stated to be filed by the assessee showing the relevant transactions for the period 01.09.2007 to 14.09.2007 before the ld. CIT(Appeals), there is no such specific mention in the order of the Assessing Officer about the said working having been filed by the assessee. Although the ld. CIT(Appeals) has brushed aside the said working by treating the same as an after-thought, we are of the view that the said working prepared and furnished by the assessee to reconcile the difference in stock as taken by the Assessing Officer of different dates, i.e. 01.09.2007 and 14.09.2007 is relevant and it should be considered and verified before making any addition on account of the alleged shortage of stock. We, therefore, consider it just and proper and in the interest of justice to set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the same to the file of the Assessing Officer for deciding the same afresh.
Addition on the basis of entries found recorded in the diary during the course of survey - Held that:- As rightly submitted by the assessee, both the entries in question dated 18.03.2007 and 20.03.2007 are falling in the financial year 2006-07 relevant to the assessment year 2007-08 and, therefore, the amount reflected therein aggregating to ₹ 3,00,000/- cannot be added to the total income of the assessee for the year under consideration, i.e. A.Y. 2008-09. Ld. D.R. has not been able to raise any contention to dispute this position. We, therefore, delete the addition made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue holding that both the entries found recorded in the diary being dated 18.03.2007 and 20.03.2007, the addition for the same could be made only in assessment year 2007-08 and not in the year under consideration, i.e. A.Y. 2008-09.
Disallowance out of various expenses - Held that:- The assessee has not been able to raise any material contention except stating that the disallowance of 10% made by the Assessing Officer and confirmed by the ld. CIT(Appeals) out of various expenses is excessive and unreasonable. We are unable to accept the contention of the ld. Counsel for the assessee. Having regard to all the facts of the case including the type of expenses claimed by the assessee, the nature of business of the assessee and the quantum of expenses, we are of the view that the disallowance of 10% made by the Assessing Officer and confirmed by the ld. CIT(Appeals) for want of supporting vouchers and bills is quite fair and reasonable. We, therefore, uphold the impugned order of ld. CIT(Appeals) on this issue and dismiss the Ground of the appeal of assessee.
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2015 (11) TMI 1678
Unexplained cash deposits - need based cash withdrawals from his bank account - Held that:- According to CIT(A), merely because cash was withdrawn on a particular date also does not imply that the cash already withdrawn on earlier dates had been utilized. We fully endorse the above view of the CIT(A). The Assessing officer has made the observation that in the case the assessee was actually having cash in hand of ₹ 13,48,638/- as on 1.4.2007, there was hardly any reason for making further cash withdrawals.
CIT(A) has correctly held that this observation of the Assessing officer is without any basis. The Ld. CIT(A) further observed that assessee had explained during the course of assessment proceedings that cash was withdrawn with the intention to buy some properly. The Ld. CIT(A) has categorically observed that actual amount of cash required in these circumstances would be known to the assessee only. He has also stated that there is no bar in keeping the cash at home according to requirements. Thus, observations of the Ld. CIT(A) are correct and, therefore, we do not see any infirmity in the order of the CIT(A). The question involved in this case is of facts and the Ld. CIT(A) has correctly appreciated the facts of the case and decided the issue correctly. - Appeal of the Revenue dismissed.
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2015 (11) TMI 1677
Revision u/s 263 - deduction under section 80IC - Held that:- AO raised specific queries on this issue and assessee filed complete details before Assessing Officer. AO was satisfied with the explanation of the assessee therefore, his order could not be said to be erroneous in so far as prejudicial to the interest of revenue. Simply, CIT did not agree with the view of Assessing Officer cannot be said to be the order erroneous in so far as prejudicial to the interest of revenue. AO adopted one of the possible view with regard to deduction under section 80IC and the view taken by the AO was sustainable in law. It may also be noted here that in earlier assessment year, the ITAT has confirmed the orders of authorities below in granting deduction under section 80-IB of the Act. Therefore, the facts being similar, there was no justification for Ld. CIT to initiate proceedings under section 263. Assessee, therefore, on the basis of the evidences and material on record has been able to demonstrate that this issue of deduction under section 80IC was examined in detail by the Assessing Officer before granting part relief under section 80IC of the Income Tax Act. Therefore, there was no justification to initiate the proceedings under section 263 of the Income Tax Act on this issue.
Addition u/s 14A - Held that:- CIT did not point out any error or defect in the calculation made by the Assessing Officer under section 14A read with Rule 8D of the IT Rules for the purpose of making part disallowance under section 14A. The CIT merely referring to the audit report noted in the impugned order that disallowance was lesser/below the required figure. The assessment order, however, shows that Assessing Officer considered the balance sheet of the assessee and raised specific query on the issue of disallowance u/s 14A, therefore, Assessing Officer has gone through the audited account referred to by CIT in the impugned order. It, therefore, appears that CIT in the proceedings under section 263 of the Act, did not agree with the finding of fact recorded by the Assessing Officer in assessment order without any justification. Therefore, initiation of proceedings under section 263 of the Act on this issue is wholly unjustified.
Allowing depreciation and additional depreciation - Held that:- The assessee explained that on electronic installation which are part of the plant and machinery, depreciation has been claimed at the same rate which is applicable to plant and machinery. The Ld. CIT, instead of examining this issue in proper perspective, merely stated that this issue was not examined by the Assessing Officer at assessment stage. It, therefore, appears that reply of the assessee is not examined by the Ld. CIT, therefore, the order of the CIT could not be sustained in law.
Assessee appeal allowed.
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2015 (11) TMI 1676
Transfer of cases - Held that:- Learned counsel on both sides agreed that the proceedings in which the order impugned in the Special Leave Petition namely, Civil Writ Petition No. 4063 of 2015 came to be passed can be transferred to the Delhi High Court. In fact, we appreciate the said stand of the counsel on either sides as we have suggested that the said course would ensure sub-serving the interest of justice and would also save the institution from any embarrassment.
Accordingly, we transfer the proceedings pending before the High Court of Himachal Pradesh with all the Miscellaneous Petitions in exercise of our powers under Article 139A(2) of the Constitution of India, to the High Court of Delhi.
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2015 (11) TMI 1675
Reopening of assessment - Held that:- Assessing Officer is empowered to reopen the assessment if he has reasons to believe that the income has escaped from the assessment. It is not required by the Revenue to show that income which has escaped assessment was due to the failure on the part of the appellant to disclose fully and truly all the materials relevant to the assessment.
In the case before us, the Assessing Officer has reopened the assessment because he had information due to the survey conducted u/s. 133A in the business premises of Smt. Leela Surana that the assessee had made cash payment during the relevant assessment year i.e. on 17.09.2008 and 24.09.2008 of ₹ 6,80,000/- and ₹ 30,000/- respectively against which he had obtained back dated contract note for the purchase of ₹ 4700 shares of “Shyam Star”. Therefore, Assessing Officer has rightly invoked the provisions of section 147 & 148 of the Act. Accordingly we uphold the order of the Revenue on this issue.
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2015 (11) TMI 1674
TPA - selection of comparable - Held that:- Assessee is engaged in the business of provision of software development services of electronic integrated circuits and firmware development of integrated circuits to its parent company and also provides marketing support services to its parent company, thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable.
Risk adjustment - Held that:- Risk adjustment must be granted, if warranted in the facts of the case, for bringing the comparables on par with the assessee company. In principle, the assessee must be granted risk adjustment, if so required in the peculiar facts of the case for bringing the comparable companies on par with the assessee. However, the quantum of risk adjustment to be granted, if any, is remanded back to the file of the TPO. The TPO is directed to examine the details of the quantitative computation of risk adjustment and attendant details submitted by the assessee justifying its claim for risk adjustment and to take into account the same along with all the relevant material and to decide the percentage of risk adjustment in accordance with law.
Interest under Section 234B - Held that:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H Ghaswala (2001 (10) TMI 4 - SUPREME Court) and we, therefore, uphold the action of the Assessing Officer in charging the said interest.
Additional Ground on Depreciation Adjustment - Held that:- Admit the additional ground raised for grant of depreciation adjustment and remit the matter to the file of the TPO to consider and examine the assessee's claim for adjustment towards depreciation as relying on case of 24/7 Customer.com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE]
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2015 (11) TMI 1673
Addition of trading result - assessee has not maintained stock register and the entire purchase and sale bills were not produced - Held that:- AO looking to the huge volume of bills and details could have asked for purchase and sale bills on test check basis i.e., on sample basis to tally as per the entries in the books of accounts, which he has not done; secondly, the AO has applied the Gross Profit Rate of 25% without considering the assessee’s past history or any other material or comparability; before the CIT(A) and before us, it has been submitted that the gross profit ratio was 19.99% as compared to 18% in the earlier years and overall net profit has also increased. Thus, there may not be any prima facie inference that assessee’s profit is not in commensurate with the earlier years’ so as to doubt the correctness of the profit shown by the assessee; and lastly, the manner in which the AO has worked out the gross profit on the basis of selected samples is also not a correct approach and if going by the trading result and gross profit of various items, it can be very well held that assessee’s profit and trading results are much better this year, hence, the observation and the finding of the CIT(A) cannot be deviated from and accordingly, the same is affirmed - Decided against revenue
Disallowance of commission - Held that:- AO has made an ad-hoc disallowance on this score on the ground that firstly, there is enhancement of rate of commission from 2.5% to the rate of 3.25%; secondly, some of the commission agents are also the relatives of the assessee. Such a basis drawn by the AO for making the disallowance cannot be sustained for the reason that, the Ld. CIT(A) has clarified that overall rate of commission paid is @ 3% on the total turnover and not 3.25% and the commission has been paid uniformly to all the parties including the relatives. Out of 11 party, only 2 are relatives, therefore, it cannot be held that any unreasonable payment have been made to the relatives as compared to the outsiders. Such an ad-hoc disallowance of payment of commission made by the AO cannot be sustained.
Disallowance as part of interest claimed - Held that:- The reason given by the CIT(A) for deleting the disallowance of interest is absolutely correct, because the rate of interest paid by the assessee on unsecured loan during the year @ 12% is still quite less as compared to the interest paid to the bank @13.25% which was on hypothecation of stocks. Thus, the reasoning of the CIT(A) on this score is affirmed.
Addition u/s 40(a)(ia) - retrospectivity - Held that:- We find that out of disallowance of ₹ 21,95,605/- the same has been reduced to ₹ 9,43,446/- on the ground that in the case, five such party’s the income was above taxable limit. Before us, the Ld. Counsel made a statement that these recipient have included the said amount on interest in the return of income, therefore, such a disallowance cannot be made in view of the newly inserted Proviso to section 40(a)(ia) w.e.f. 1.4.2013. The Hon’ble Delhi High Court in the case of Landmark Townships Pvt Ltd (2015 (9) TMI 79 - DELHI HIGH COURT) has held that such a Proviso has to be given retrospective effect. Thus, respectfully following the decision of Delhi High Court, we hold that in case recipients have included ‘interest income’ in their return of income then ‘no disallowance should be made’. Accordingly, we direct the AO to verify the contention of the assessee and give consequential relief. Accordingly, ground raised by the assessee is treated as partly allowed.
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2015 (11) TMI 1672
Refund claim - unjust enrichment - rejection on the ground that the claimant had already charged and collected the duty amount from its customers and as such, it was not entitled to claim the said amount and accordingly the amount refundable was transferred to Consumer Welfare Fund - Held that: - there being no transfer and an admitted destruction of the goods in question the doctrine of unjust enrichment is not attracted - the appellant is entitled to refund - appeal allowed - decided in favor of appellant.
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2015 (11) TMI 1671
G.P. addition - bogus purchases - Held that:- Purchases made from three parties were added by the AO on the plea that assessee has just taken a purchase bill. The CIT(A) after verifying the records observed that as per the monthly quantitative details of purchase and sales, the assessee had sold goods so purchased, when the sale is not disputed, the addition on entire alleged purchase is also not justified. The CIT(A) also observed that as per elementary rule of accountancy as well as taxation loss/profit from business cannot be ascertained without deducting cost of purchase from the sales.
Since the department has accepted the sales, the CIT(A) deleted the addition after sustaining the GP addition of 10% to plug the possible leakage of revenue. Hence, the addition was restricted to 10% of the alleged bogus purchases. Detailed finding recorded by CIT(A) had not been controverted by department and assessee by brining any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A) for sustaining addition of 10% of such purchases. - Decided against assessee.
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2015 (11) TMI 1670
Addition of loss of foreclosure of loan assets - whether the loss on foreclosure of loan assets is akin to the loss was on account of loss on sale of repossessed assets? - Held that:- Admittedly the assessee is a non banking fiancé company and engaged in the business of money lending and therefore the amount of debt represents the money lent in the ordinary course of business of money lending. Further according to section 36(1) (vii) of the act any bad debt or part of the bad debt if written off in the books of accounts as irrecoverable, same shall be allowed to the assessee as deduction. It is admittedly written off in the book of accounts of the assessee as “ loss on foreclosure of loan assets” .
Thus the assessee satisfies all the conditions of allowabaility of this sum as deduction u/s 36(1) (vii) rws 36(2) of the Income Tax Act. As the sum is written off in the books of accounts by writing of the loan amount of the borrower on negotiation cannot be called a future or probable loss but ascertained and accrued loss in the business of financing. Though the cases relied up on by the assessee relates to the issues of loss on sale of repossessed vehicle, Honourable Delhi High court in case of CIT V CITI CORP Maruti Finance Limited [2010 (11) TMI 802 - Delhi High Court] has held that even loss on repossessed vehicle sold is also allowable to the assessee u/s 36(1) rws 36 (2) of the act. Honourable Delhi High court also held that such deduction was also covered in favour of the assessee by the decision of Honourable Calcutta High court in case of A W Figgies & Co Pvt Limited [2001 (9) TMI 46 - CALCUTTA High Court ]. - Decided in favour of assessee.
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2015 (11) TMI 1669
Request for adjournment - Clandestine removal - Held that: - the Adjudicating Authority had not considered the evidences in proper manner - matter remanded to the Adjudicating authority to decide afresh on the grounds of appeal raised by the Revenue - appeal allowed by way of remand.
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2015 (11) TMI 1668
Disallowance u/s 14A read with Rule 8D - Held that:- We do not find ourselves in agreement with the proposition that the Rule 8D of the Rules being mandatory, disallowance as per Rule 8D has to be made even in cases where no tax free income has earned or where tax free income earned is lesser than the amount computed as per Rule 8D of the Rules. In view of this, we direct the Assessing Officer to limit the disallowance made under section 14A of the Act read with Rule 8D of the Rules to the amount of tax free income earned by the assessee. This ground of appeal raised by the assessee is allowed.
Addition of interest under section 36(1)(iii) - Held that:- This is an admitted fact in the present case that no specific loan was raised by the assessee for the purposes of purchase of this land. This is also a finding of fact recorded by the lower authorities that there were mixed funds available for this purpose with the assessee. On availability of mixed funds, it cannot be presumed by the Revenue that the borrowed funds have been used for the purposes of acquisition of said land. See DCIT Vs. Samrat Forging Ltd. [2012 (5) TMI 760 - ITAT CHANDIGARH] - Decided in favour of assessee.
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2015 (11) TMI 1667
Disallowance under section 14A computation - total exempt income earned by the present assessee is ₹ 13,35,040 against which an addition of ₹ 21,87,713 has been made by AO u/s 14A - Held that:- As noted in the case of Joint Investment (P) Ltd. vs CIT (2015 (3) TMI 155 - DELHI HIGH COURT) the disallowance u/s 14A should not exceed the exempt income. The Tribunal also noted that the Hon’ble Delhi high Court in the case of CIT vs Holcim India Pvt. Ltd. (2014 (9) TMI 434 - DELHI HIGH COURT ) held that there can be no disallowance u/s 14A in the absence of any exempt income.
Thus the disallowance should not exceed the exempt income during the relevant financial period. In the present case, since the total exempt income of the assessee is ₹ 13,35,040 and the assessee had suo moto offered disallowance of ₹ 1,81,388 under Rule 8D(2)(iii) of the Income Tax Rules, 1962 being 0.5% of the average value of the investment in the shares of Apollo Tyres Ltd. on which such dividend income was earned. Hence, we direct the Assessing Officer that the disallowance u/s 14A be restricted to ₹ 11,53,752 (Rs. 13,35,040 – ₹ 1,81,388) and the remaining amount of disallowance is directed to be deleted. - Decided partly in favour of assessee.
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2015 (11) TMI 1666
TPA - selection of comparable - Held that:- Assessee, a company engaged in the business of provision of software development services of electronic integrated circuits and firmware development of integrated circuits to its parent company thus companies functionally dissimilar with that of assessee need to be deselected from final list of comparable.
Risk adjustment - Held that:- In principle, the assessee may be granted risk adjustment, if so required in the peculiar facts of the case for bringing the comparable companies on par with the assessee. However, the quantum of risk adjustment to be granted, if any, is remanded back to the file of the TPO. The TPO is directed to examine the details of the quantitative computation of risk adjustment and attendant details submitted by the assessee justifying its claim for risk adjustment and to take into account the same along with all the relevant material before deciding on the percentage of risk adjustment to be allowed, if any, in accordance with law.
TDS u/s 195 - Disallowance of Project Specific Costs under section 40(a)(ia) - Held that:- In the course of hearings before us, the learned Authorised Representative for the assessee fairly conceded that this issue is covered against the assessee and in favour of Revenue by the decision of the Hon'ble High Court of Karnataka in the case of Samsung Electronics Co. Ltd. (2011 (10) TMI 195 - KARNATAKA HIGH COURT), relied on by the A.O./DRP wherein held , in view of the provisions of Section 90 of the Act, agreements with foreign countries DTAA would override the provisions of the Act. In view of the said finding, it is clear that there is obligation on the part of the respondents to deduct tax at source under Section 195 of the Act, and also to which case the assessee was also party before the Hon'ble High Court. Respectfully following it we uphold the decision of the Assessing Officer. - Decided against assessee
Advance Tax Credit - Held that:- We find this Ground was raised before the DRP and the DRP had directed the Assessing Officer to examine the claim of the assessee and allow as per the existing system of giving credit for prepaid taxes. In view of the above, the Assessing Officer is directed to comply with the directions of the DRP and give credit for the pre-paid taxes paid by the assessee as per law.
Depreciation Adjustment - Held that:- We admit the additional ground raised for grant of depreciation adjustment and remit the matter to the file of the TPO to consider and examine the assessee's claim for adjustment towards depreciation
Wrong computation of margins and wrong computation of working capital adjustment - assessee submitted that these are computational issues that are to be examined by the TPO and decided on merits - Held that:- We direct the TPO to examine the issues raised on the computation of margin and computation of working capital adjustment and decide the issues on merits after affording the assessee adequate opportunity of being heard and to make submissions and file details in this regard and to duly consider the same while deciding the issue.
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2015 (11) TMI 1665
Deduction under section 80IA(4) - whether assessee was a developer and not contractor - Held that:- After analyzing the major clause of the agreement to determine the scope and nature of work undertaken, we found that assessee was a developer, therefore, eligible for claim of deduction u/s.80IA(4).
After considering and deliberating on the meanings of the words "developer" and "contractor", scope of the work, responsibilities and risks undertaken by the assessee in each of the contracts the CIT(A) recorded a finding to the effect that the assessee is not a contractor but a developer. In coming to the above finding, in para 6.15, the CIT{A} also considered the clarificatory amendment by way of Explanation below sub section (13) of section 80IA by the Finance Acts 2007 and 2009 and held, after considering various judicial pronouncements, that the amendment does not impact development contracts. CIT(A) noted that for the Koyna and Udhampur projects, the assessee has already been held to be a developer by the Hon'ble ITAT in its own case in the earlier years. Moreover, the Koyna project has also been held to be eligible for deduction in B.T. Patil& Sons Belgaum Construction Pvt. Ltd. After analyzing the terms of the contract, the CIT(A) reiterated that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the assessee is a developer of the respective projects. As regards the issue whether, to be eligible for deduction, the assessee has to develop the entire infrastructure facility and not only a part thereof, the CIT(A) relied on the CBDT circular no. 4/2010, the decisions of the ITAT in the assessee's own case, B.T. Patil& Sons Belgaum Construction Ltd. [2013 (11) TMI 197 - ITAT PUNE ] and the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. [2010 (2) TMI 108 - BOMBAY HIGH COURT ]
We also found that the CIT(A) has dealt in great detail the scope of the work, risk and responsibilities undertaken by the assessee and after applying the proposition of law laid down in the following decisions arrived at the conclusion that assessee was a developer and not only a contractor. We uphold the action of CIT(A) for allowing claim of deduction u/s.80IA(4) in respect of all the projects. - Decided in favour of assessee.
Disallowance under s.14A - Held that:- We have considered rival contentions and found that a clear finding has been given by the CIT(A) to the effect that amount was receivable on account of hire charges on machinery from JV or on account of assessee’s share in the JV firm. The question of disallowance of interest u/s.14A arises only when the funds have been given to JV/sister concern income from which is not liable to tax. The detailed finding recorded by CIT(A) at para 7.3 has not been controverted, accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance made u/s.14A
Income assessable in the hands of the assessee on substantive basis - Held that:- No infirmity in the order of CIT(A) for taxing assessee’s share of income in assessee’s hand on substantive basis rather than on protactive basis. Accordingly, we dismiss the ground of assessee.
Expenses incurred by the assessee to the projects eligible for deduction under s.80IA(4) - Held that:- Certain expenditure incurred by Panvel workshop and the USA office was attributed by the AO to the eligible units, consequently profit claimed as deduction was reduced. The contention of ld. AR was that these expenses were not directly incurred for earning the income which is liable to deduction u/s.80IA(4). However, it has not been brought on record by lower authorities to show that expenses incurred at Panvel workshop and USA office was incurred directly for assessee’s projects eligible for deduction u/s.80IA(4). As relying on M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT ] we do not find any merit for reducing the profit of eligible undertaking by these expenses. Accordingly, we direct the AO not to reduce the profit eligible for deduction u/s.80IA(4). We direct accordingly.
Disallowance of credit of TDS in respect of advances received - Held that:- Where tax is deducted at source on an amount which is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source.In respect of advance against work and material, we found that the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. Thus we direct the AO to allow the credit for TDS in year of deduction itself. We direct accordingly.
Denial of deduction u/s.80IA(4) in respect of NHPC project - Held that:- Resources are earmarked for NHPC in the budgetary allocations of the India budget, more particularly for Teesta Lower Dam project also. NHPC has signed a MOU whereby the commitments/assistance to be received by NHPC from the Government are enumerated. In the Ministry of Power, Government of India work allocation is made for NHPC, including in respect of Jammu & Kashmir; co-ordination, forwarding of returns to Prime Minister's office, Ministry of Home Affairs and other Departments, concerning power issues of J & K. in sum and substance, the objects to be pursued are ordinarily performed by Government Thus, assessee's contract with NHPC fulfills the condition prescribed in section 80IA(4)(i)(b) of the Act as it performs functions akin to state.No reason to disallow assessee’s claim for deduction u/s.80IA(4) in respect of project awarded by NHPC. We found that assessee’s contracts with NHPC fulfills all the conditions prescribed u/s.80IA(4)(1)(b) of the Act as it performs functions akin to estate. Accordingly, the AO is directed to allow deduction u/s.80IA(4) in respect of project awarded by NHPC. See Som Prakash Rekhi Versus Union of India [1980 (11) TMI 113 - SUPREME COURT OF INDIA ]
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