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Showing 221 to 240 of 1320 Records
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2020 (9) TMI 1101
TP Adjustment - adjustment arising out of performance guarantee provided by assessee to an entity - HELD THAT:- The bank guarantee was given by Bank of India. The bank utilized the guarantee facility sanctioned to assessee while sanctioning aforesaid bank guarantee to assessee’s AE. The assessee, based on letter obtained from the bank, charged guarantee commission of 0.60% from its subsidiary. The Ld. TPO estimated the same @1%. We find that this issue is contained in assessee’s own case for AY 2010-11. [2019 (9) TMI 437 - ITAT MUMBAI] as concluded that internal CUP in the shape of commission charged by the bank, would be most direct and reliable way to apply Arm’s Length Principle. Further, when there was absolutely no loss to the assessee and entire cost was recovered from the AE, no further adjustment would be required.
Applying the said principle to year under consideration, we find that the assessee has charged commission in accordance with the bank’s sanction letter and therefore, no further adjustment, as proposed by Ld. TPO, would be justified. Accordingly, these grounds stand dismissed.
Adjustment arising out of guarantee for advance payment provided by assessee to Chadian Company for Water & Electricity (CCWE) - HELD THAT:- As decided in own case for AY 2010-11 . [2019 (9) TMI 437 - ITAT MUMBAI] Tribunal has concluded that the rate as applicable to performance guarantee would apply to this guarantee also. Following the same principle, we hold that the rate of 0.60% as adopted for performance guarantee to CCWE would apply to this guarantee also. Since, the assessee has already charged a rate of 0.60%, no further adjustment would be required. Accordingly, these grounds stand dismissed.
Adjustment arising out of performance guarantee - The transaction is in the form of indemnity provided by the assessee to BEC with a view to secure the performance of the contract entered into by BEC with assessee’s AE. The assessee did not charge any commission by submitting that the assessee was entirely compensated and therefore, no further charge was called for. TPO estimated the same @1%. - HELD THAT:- In assessee’s own case for AY 2010-11 [2019 (9) TMI 437 - ITAT MUMBAI]Tribunal has concurred with assessee’s submissions that the contract which was awarded to its AE would get assigned in assessee’s favor wherein the assessee would be obligated to execute the contract on its own by using its own infrastructure, which would in turn, result in assessee deriving the entire contractual revenue and huge profits therefrom. There would be no need to make any adjustment on Arm’s Length principles. Facts being pari-materia the same, respectfully following the same, we hold that the assessee was justified in not charging any fees against the same. These grounds stand dismissed.
Corporate guarantees provided on behalf of its 2 AEs namely KEC Transmission LLC, USA and KEC US LLC, USA - International tarnsaction or not? - HELD THAT:- It is quite discernible that the assessee had definite obligation under the corporate guarantee and to say that that the same shall have no bearing on profits, incomes, losses or assets of the assessee would not be a correct proposition. Even as per assessee’s own submissions, if the said guarantee was not provided, the assessee would have been obligated to infuse equity capital in its wholly owned SPV AEs with a view to enable downstream acquisition of SAE Towers Ltd. USA which would have entailed assessee’s resources. This is further fortified by the fact that fact that guarantees have specifically been brought within the ambit of term international transactions by way of amendment to explanation (i)(c) to Sec.92B by Finance Act, 2012 w.e.f. 01/04/2002.
Arguments that the said transactions could not be considered to be international transaction do not convince us and therefore, we hold that the same was to be benchmarked on ALP principles.
Benchmarking rate of 2% as adopted by Ld. TPO - assessee’s risk in such a case would be very low since both the AEs were assessee’s subsidiaries only. Therefore, considering the fact that it was a corporate guarantee for which no fees was paid by the assessee and going by the ratio of the decision of coordinate bench of the Tribunal in Everest Kanto Cylinders Ltd. Vs. DCIT [2012 (11) TMI 1099 - ITAT MUMBAI] as affirmed by Hon’ble Bombay High Court [2015 (5) TMI 395 - BOMBAY HIGH COURT] we estimate the TP adjustments against both these transactions @0.20%. The Ld. TPO / Ld. AO is directed to recompute the same in terms of our above order. The grounds stand partly allowed.
Mark-to-market losses arising on the foreign exchange contracts which were outstanding at the year-end - HELD THAT:- As evident from factual matrix itself, the issue is covered in assessee’s favor by the decision of this Tribunal for AY 2009-10 and held that MTM losses on hedging contracts would be accrued losses and hence, an allowable expenditure.
Additional ground - Education cess and higher and secondary education cess paid by the assessee - allowable as deduction while computing business income of the assessee - HELD THAT:- We admit the additional ground of appeal and direct Ld. AO to bring the relevant facts qua the same on record and re-adjudicate the same after affording reasonable opportunity of hearing to the assessee. This ground is admitted and allowed for statistical purposes.
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2020 (9) TMI 1100
Addition u/s 40(a)(ia) - Non-deduction of TDS u/s 194H - discount versus commission - Held that:- the assessee was not required to deduct TDS on the amounts of discount on sale of Set-top box and hardware, discount on sale of recharge coupon and vouchers, bonus or credit provided by assessee to subscribers, sales promotion expenses and distribution channel support expenses. - transaction between the company and distributor is on principal to principal basis and all the risk, loss, damages are transferred to distributor on delivery.
Distributors are free to sale at any price below maximum retail price. In this regard, the assesse has filed the sample copy of invoices for sale of Set Top Box (STB) and other recharge coupons to prove that it is a sale but not services to come within the ambit of the definition of commission as defined under section 194H - Assessee is not required to deduct TDS on discount allowed on sale of Set Top Box and hardware, recharge coupons vouchers and disallowance of bonus or credit provided to subscribers including sales promotion expenses.
Disallowance of year end provisions was made by assessee in respect of expenses - whether TDS is deducted in the subsequent years pursuant to bills received and payments made - HELD THAT:- No merit in the argument of the assessee that TDS provisions are not applicable when year-end provisions are made without crediting to respective parties account. To this extent, we are fully subscribed to the findings recorded by the learned AO as well as learned CIT(A).
As regards to the claim of the assessee that in subsequent Financial Year year-end provisions have been either reversed or paid subject to deduction of TDS, does not alter the legal position in so far as disallowance of expenses under section 40(a)(ia) for non-deduction of Tax at source. The law is very clear as per which TDS is required to be deducted when credit or payment whichever is earlier. There is no error in findings recorded by the lower authorities in disallowing year-end provisions for non-deduction of TDS under respective provisions of the Act. Accordingly, we reject the ground taken by the assessee.
Disallowance of interest expense u/s 36(1)(iii) - AO observed that the assessee had not allocated any interest expenditure against the capital WIP AO held that part of interest was allocable to such capital WIP and accordingly, he has disallowed proportionate interest expenditure - HELD THAT:- It is settled position of law that if own funds are used for acquisition of capital assets, then the question of disallowance of interest does not arise. Further, if there are funds available, both interest free and interest bearing, then a presumption can be made that the investments were made out of interest free funds available with the company, if the interest free funds are sufficient to meet the investment as held in the case of Reliance Utilities and Power [2009 (1) TMI 4 - BOMBAY HIGH COURT] - In this case, on perusal of facts we find that the assessee has filed necessary evidences to prove availability of own funds which is sufficient to cover investment in capital work in progress. AO was erred in disallowing proportionate interest expenses u/s 36(1)(iii) of the Act. Hence, we direct the AO to delete disallowances of interest for both assessment years.
Disallowance u/s 14A - HELD THAT:- Once, there is no exempt income earned for the year, then disallowance contemplated u/s 14A of the Act cannot be pressed into. In this case, the Revenue has not disputed the fact that the assessee has not earned exempt income for the year under consideration. Since, there is no exempt income for the year, the disallowance of expenditure contemplated u/s 14A of the Act cannot be made. CIT(A) after considering relevant facts has rightly deleted the addition made by the AO towards disallowance of expenses u/s 14A.
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2020 (9) TMI 1099
TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Assessee provided investment advisory services, in respect of listed Indian securities to its overseas AE. Investment Advisory Services refer to the support services provided by the Indian firms to the overseas fund managers in equity and general business research. Further, equity research relates to building and maintaining valuation models, ratio analysis, competitor analysis, comparable valuation method etc. Business research includes services, such as study and analysis of the industry of the target company, company profiles and study of the macroeconomic environment of the target country, thus companies functinally dissimilar with that of assessee need to be deselected from final list.
ICRA Management Consulting Services Ltd. (‘IMCSL’), Informed Technologies India Ltd. (‘ITIL’), IDC (India) Ltd., Ladderup Corporate Advisory Pvt. Ltd. to be included as valid comparable and direct the TPO/AO to exclude Ladderup Corporate Advisory Pvt. Ltd. from the list of comparables.
M/s. Motilal Ostwal Investment Pvt. Ltd ('MOAIPL’) is to excluded as it is engaged in diversified activities and that segmental reporting is not available.
New Berry Advisors Ltd. (‘NBAL’) is engaged in the business of marketing and distribution of financial products. Further, the notes to the financial statement mention that the company is in the business of distribution/marketing of financial products under the head ‘Inventories’, thus to be rejected.
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2020 (9) TMI 1098
TP Adjustment - Disallowance of the claim of adjustment for extraordinary expenses relating to recovery of production overheads, selling and administrative overheads, one time technological fee for Chennai metro in the Transport segment - HELD THAT:- Adjustment on account of extraordinary expenses in production overheads and selling and administrative overheads claimed by the assessee are not of any specific distinct expenditure. These are the regular expenses normally incurred by the assessee during the course of business.
As rightly pointed out by the DRP, the assessee has proceeded to make adjustment in its profits despite the assessee being the tested party. There is nothing on record to suggest that in the comparables submitted, whether there was any adjustment for extraordinary and non-recurring items. This was required as evident from the various case laws referred by the DRP.
Assessee itself being the tested party cannot adjust its profits without ensuring corresponding adjustment in the result of comparables.
As regards the one-time technical assistance fee for Chennai Metrorail project is concerned, we find ourselves in agreement with the TPO that it is very much normal business expenditure of the assessee and same cannot be said to be extraordinary. Assessee’s submission that it was Assessing Officer’s duty to bring the details of adjustment required in comparables is totally unsustainable as the initial duty in this regard is cast on the assessee. The assessee has miserably failed in discharging this initial duty. Accordingly, in our considered opinion, the adjustment sought by the assessee in this regard has rightly been disallowed by the authorities below.
Adjustment, if any, must be made only in respect of international transactions pertaining to Transport segment of the assessee and not the segment as a whole. In our considered opinion, the above is also a sound and consistent proposition and we are of the considered opinion that the same should be applied for the current year also - TPO is directed to make the computation by making the adjustment to AE transaction to Transport segment.
Determination of arm’s-length price for royalty paid - disallowance of Royalty payment in the Power segment - royalty paid for trademark is 1% as per DRP - HELD THAT:- Determination of arm’s length price as Nil by the TPO is not at all sustainable. For the Royalty for technology license, the DRP contradicted itself and did exactly what the TPO has done with a difference that after holding that the comparable agreement submitted in this regard by the assessee are different, it proceeded to fix the rate of royalty in this regard the rate of 1% of net sales to AE by simply observing that the assessee has already paid royalty rate of 1% with regard to trademark.
DRP having agreed with the TPO that comparables and agreements submitted by the assessee are different and are not comparable, the DRP cannot wash his hands by picking up an arbitrary rate that since the royalty paid for trademark is 1%, the same rate is to be applied for royalty rate for technology license. The same is not at all based upon cogent reasoning and due analysis
Law does not permit the TPO or DRP to determine the arm’s length price on estimation or adhoc basis.See M/S. JOHNSON & JOHNSON LTD. [2017 (3) TMI 1520 - BOMBAY HIGH COURT]
Departmental Representative’s plea in this regard is that since the authorities below have failed to follow the prescription of the Act and law, the matter should be remanded to them is not at all sustainable as we find that assessee has duly submitted the comparables and agreements and if the authorities below rejected the same, but failed to follow the prescription of Act, the duty cast upon them, the assessee cannot be put through the rigours of 2nd round of litigation without any fault of its own. In this regard we draw support from the above decision from Hon'ble Jurisdiction High Court which confirmed the order by ITAT similar to this case.
Accordingly assessee’s grievance of ad hoc determination of arm’s-length price for royalty paid by the TPO and the DRP succeeds. Accordingly, the ground raised by the assessee in this regard is allowed.
As already upheld the DRP action of sustaining the 1% rate of royalty for Assessment Year 2013-14 for the trademark, the Revenue’s grounds against the DRP direction, in this regard to uphold the computation at Nil by the TPO fails in view of our discussion herein above.
Addition of unpaid service tax payable on the receivables not collected by GEPIL as on 31 March 2010 - whether AO erred not allowing deduction of service tax paid till 30 September 2010 i.e. due date of filing ROI? - HELD THAT:-This issue is covered in favour of the assessee by the ITAT decision in the case of G.E. Power India Ltd.[2019 (6) TMI 1526 - ITAT MUMBAI] wherein a delete the disallowance made by the assessee under section 43B.
Addition of TPA to the book profits for the purposes of section 115JB - Whether book profits of a company cannot be adjusted except as provided in Explanation 1 of Section 115JB(2), and transfer pricing adjustment is not one of the classes of adjustments provided in that Explanation? - HELD THAT:- We find that this issue is to be decided in favour of the assessee on the touchstone of Hon’ble SC decision in Appollo Tyres [2002 (5) TMI 5 - SUPREME COURT]and several decisions of Hon’ble Bombay High Court, following the same, wherein it is held that no adjustment in book profit is to be done unless mandated in the Act. Since, the Act in Explanation (1) of section 115JB(2) does not provide for any such adjustment, this issue is decided in favour of the assessee.
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2020 (9) TMI 1097
Late fees payable u/s 234E - intimation issued under section 200A(3) - default in not filing TDS returns in time - Rectification u/s 154 - Assessee stressed that no fee can be levied under section 234E of the Act for the periods prior to 01.06.2015, when the intimation under section 200A of the Act was issued - Scope of amendment - HELD THAT:- The machinery provisions of charging the said fee as per clause (c) of Section 200A(1) of the Act was inserted by legislature with effect from 01.06.2015. We find that the said issue has been decided in the case of Fateh Raj Singhvi & Ors. vs UOI [2016 (9) TMI 964 - KARNATAKA HIGH COURT] and it is held that section 200A of the Act inserted with effect from 01.06.2015 had prospective effect and was not applicable for different quarters of assessment years prior to 01.06.2015.
Power is being enshrined upon the AO to charge late fees while processing the TDS returns w.e.f. 01.06.2015, such provision cannot have retrospective effect as it would be detrimental to the case of tax payer. Provision under which a new enabling power is being given to charge fees under section 234E of the Act while processing TDS returns / statements and such power is to be applied prospectively. Parliament itself has recognized its operation to be prospective in nature while introducing clause (c) to section 200A(1) of the Act and hence, cannot be applied retrospectively.
Amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E - intimation issued by the AO u/s 200A in all these appeals does not stand and the demand raised by way of charging the fees under section 234E of the Act is not valid and the same is deleted. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law.
The case of the assessee before us was that all original intimation/orders were issued by the AO before 01.06.2015. He pointed out that for the Assessment Year 2013-14, the orders were issued in year 2014 and for the balance appeals, orders were issued before June 2015. However, in all the cases, the AO has passed order under section 154 which are all dated 05.01.2019. Admittedly, the Revenue is not in appeal against the first finding of the CIT(A) that AO has no power to levy the fees for the period while processing the TDS returns before 01.06.2015.
Once, the AO has no power to levy any late filing fee for the return processed prior to 01.06.2015, then no such power can be exercised by the AO while passing rectification order/s under section 154 of the Act for the respective periods prior to 01.06.2015. On this ground also, the assessee succeeds and there is no merit in the levy of late filing fees for the period prior to 01.06.2015. - Decided in favour of assessee.
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2020 (9) TMI 1096
TP Adjustment - inclusion/exclusion of TCS-e-Serve Ltd. by the TPO - HELD THAT:- One of the key reason why the TCS-e-serve Ltd. cannot be held to be comparable with the assessee company which is providing back office support services, i.e., ITeS/BPO services, because TCS-e-Serve in addition to ITeS/BPO services also render technical services like software testing and validation of software which falls under software development services activity.
Admittedly, the assessee is a low risk captive unit involved in provision of back office support service to it’s group companies for which it is remunerated at cost plus basis and is not exposed to any kind of risk. Whereas, the TCS-e-serve Ltd. bears significant risk such a macro economic risk, regulatory risk, financial risk and risks from operations etc. which clearly indicates that the TCS-e-serve Ltd is a full risk bearing company. On risk analysis also it cannot compared with the assessee.
Besides this, TCS-e-serve Ltd is not comparable on account of intangible held by this company and has large scale of operation and huge brand value. As in the case Avaya India Ltd. vs. ACIT [2019 (7) TMI 1279 - DELHI HIGH COURT] has upheld the exclusion of TCS-e-Serve on account of large scale of operations, huge brand value, lack of segmental information with the comparables who are simply involved ITeS/BPO services which are captive services provider.
Accordingly, we direct the TPO to exclude the TCS-e- Serve Ltd. from the comparability list and determine the Arms Length Price. Accordingly, the appeal of the assessee is treated as allowed.
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2020 (9) TMI 1095
Exemption u/s 11 - charitable or commercial activities - assessee was earning huge profits by providing data connectivity to its subscribers in lieu of consideration as per its objects and nowhere, charity can be seen in the whole process - charitable or commercial activities - assessee is an autonomous society established under the aegis of Department of Information Technology, Ministry of Communications and Information Technology, Government of India, as a non-profit organization - HELD THAT:- As decided in own case [2018 (1) TMI 189 - ITAT DELHI] activity of the petitioner involves promotion, propagation and spreading awareness and knowledge about global coding identification system GS1. The entire expenditure of the petitioner has to be taken into consideration and cannot be ignored. There are stipulations in sections 11, 13, etc., of the Act to prevent misuse of or siphoning of funds, bar/prohibit gains to related persons, stipulations of time limits for use of funds, which are effective checks and curtail and deny benefit in cases of abuse. There is no such allegation or contention of the Revenue in the present case.
Fee charged and the quantum of income earned can be indicative of the fact that the person is carrying on the business or commerce and not charity, but we must keep in mind that charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run.
The petitioner has to be substantially self-sustaining in long-term and should not depend upon the Government, in other words, taxpayers should not subsidize the said activities, which nevertheless are charitable and fall under the residuary clause "general public utility". The impugned order does not refer to any statutory mandate that a charitable institution falling under the last clause should be wholly, substantially or in part must be funded by voluntary contributions.
No such requirement has been pointed out or argued. A practical and pragmatic view is required when we examine the data, which should be analyzed objectively and a narrow and coloured view will be counter-productive and contrary to the language of section 2(15) - Decided in favour of assessee.
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2020 (9) TMI 1094
Assessment u/s 153A - additions/disallowances made in the assessments of the appellant and M/s IQCIPL which were unabated [since assessment of AY 2013-14 was non-pending] on the date of search, could be held to be sustainable on facts and in law? - HELD THAT:- Additions/disallowances made by the AO on account of alleged on-monies/cash received on sale of flats & car parks in the Shiromani Project was clearly beyond the scope of authority vested under section 153A owing to absence of any incriminating material or evidence deduced as a result of search conducted at the premises of the assessee in so far as unabated assessment for AY 2013- 14 is concerned.
At the time of hearing before us, neither the Ld. CIT DR was able to controvert this contention of the Ld. AR nor the grounds of appeal preferred by the revenue assails the aforesaid finding of fact by the Ld CIT(A). Therefore we find that the aforesaid factual finding of the Ld. CIT(A) crystallizes and therefore we do not see any reason to interfere with the order of the Ld. CIT(A) on this matter and confirm the finding of Ld. CIT(A) and accordingly hold that the documents ID marked MSL/23 Pages 1 to 3, MSL/8 Page 13, SJ/MHD/MZ Page 2 and MSL/21 Page 32 to 36 also did not constitute incriminating material or evidence qua the assessee.
Additions made u/s 68 & 69C in the hands of the assessee and M/s IQCIPL (since merged into the appellant company) - addition had referred to the statements of so-called entry operators recorded by different officers of Income-tax Department between the years 2013 to 2015 - HELD THAT:- Third party statements referred by the AO to justify additions without being tested by cross examination cannot be the basis for making addition u/s 68 & 69C both in the case of M/s. IQCIPL and the appellant/assessee and we hold that these statements with the legal infirmities pointed out does not constitute as an ‘incriminating material’ unearthed in the course of search conducted upon the assessee and in that view of the matter, the aforesaid additions made by the AO were unsustainable in law and on facts.
Addition of cash payments made towards professional fees and purchases - HELD THAT:- Seized documents referred by the AO for justifying the various addition/s made in the assessment orders passed in the name of the appellant/assessee and M/s IQCIPL, which has since merged with the assessee, did not constitute incriminating material and therefore no additions were legally permissible in the assessments framed u/s 153A for the AY 2013-14 for which the assessments did not abate when the search was conducted on 22-06-2016. Decided in favour of the assessee and against the Revenue.
Addition made on account of alleged on monies (cash) received upon the sale of flat and car park(s) to M/s Satyam Bubna (HUF) in the Shiromani Project - HELD THAT:- Statement of Shri Satyam Bubna recorded u/s. 132(4) of the Act (supra at para 20) and the action of AO of the Satyam Bbna HUF not to draw any adverse inference against Satyam Bubna HUF on the very same material discovered in search from their premises and the fact that in the subsequent search in assessee/appellant’s premises did not yield any corroborative material, and in the absence of any other incriminating material to support the view of AO, no addition was warranted. Moreover, we note that assessee had filed corroborative material and evidence which substantiated that the entire sale consideration was received upon sale of flat & car park to M/s Satyam Bubna HUF was through proper banking channel. We accordingly do not find merit in the Ld. CIT(A)’s action of confirming the addition by way of alleged on-monies/cash received upon sale of flat & car park to M/s Satyam Bubna HUF u/s 68.
Addition u/s 68 - extrapolating unaccounted sales across all units sold by the appellant in Shiromani Project - HELD THAT:- AO had made independent enquiries from all the flat purchasers in the ‘Shiromani’ Project and despite such enquiries, the AO did not find any statement/material or transaction which would in any manner suggest let alone prove that the other flat purchasers had paid any part of the consideration in cash/ onmonies over and above the declared sale consideration. In absence of any such material (oral or documentary) therefore, we find merit in the Ld. CIT(A)’s conclusion that the extrapolation made by the AO was per-se arbitrary and un-reasonable, therefore he rightly deleted the addition made. On this score, these grounds of the Revenue fail. Additionally, we also find merit in the Ld. CIT(A)’s reliance on the following decisions holding that the theory of extrapolation cannot be applied on mere theoretical or hypothetical basis in absence of any incriminating & corroborative evidence or material brought on record by the AO to warrant the same.
Unsecured loans and interest paid thereon u/s 68 & 69C - HELD THAT:- We note that no addition u/s 68 of the Act in respect of the loans brought forward from the earlier years was made in the past assessments. In the circumstances therefore we find that if in the past assessments, the Revenue did not draw adverse inference in respect of the principal loan amounts received from these 27 parties, then there was no apparent reason for the AO to dispute and disbelieve the genuineness of the transaction involving only the interest payment. We also note that in respect of interest paid during the relevant year, the appellant had complied with relevant provisions of Section 194A of the Act [TDS] and necessary evidence in respect thereof was also furnished. In the circumstances we find that in respect of payment of interest to these 27 parties, provisions of Section 69C of the Act had no application. Accordingly the addition made u/s 69C is hereby deleted.
Loans taken from eight parties - disallowance u/s 69C being interest paid by the appellant on these loans - HELD THAT:- in the proceedings before the Settlement Commission for the past years, identity and creditworthiness of loan creditors were questioned by the Revenue but the Settlement Commission accepted the genuineness of the appellant’s loan transactions with the loan creditors. In the circumstances since the loans aggregating to ₹ 11,97,00,000/- were received from the bodies corporate, who had also advanced loans in the earlier years, and there being no change in the factual matrix and the nature of documentation produced in support of the loan transactions being same, we do not see any reason to take contrary view - addition made under Section 68 of the Act in respect of these loan creditors is hereby deleted. Consequent to our said finding, we also direct the AO to delete the disallowance u/s 69C being interest paid by the appellant on these loans.
Unaccounted transactions - CIT(A) deleted the disallowance after noting that the entries were recorded in the regular books of accounts and therefore could not be considered to be unaccounted transactions of the appellant/assessee - HELD THAT:- We note that the persons to whom the payments were made in cash were staff of the appellant/assessee through whom the payments were made for meeting expenses of the appellant. The Ld. CIT, DR was unable to controvert this factual finding of the Ld. CIT(A). We note that since the payments were made to staff members which facts were duly recorded in the regular books of accounts, the additions on the ground of being unaccounted payments was rightly deleted by the Ld. CIT(A).
Validity of assessment - scheme of amalgamation conceived - notice u/s 143(2) of the Act was issued in the name of non-existent entity, it rendered the entire proceedings and consequent order to be nullity in the eyes of law.
Addition on account of undisclosed expenses (from the seized material-MSL-8, page-15) - AO has made the addition based on this fact that from a perusal of MSL-8 page 15 it reveals that the assessee has received sale consideration of ₹ 10 lacs on the sale of servant quarter to a customer Manoj Rathi without entering it in the regular books of account - CIT-A deleted addition - HELD THAT:- The conclusion of the Ld. CIT(A) on the facts discussed cannot be termed perverse and is a plausible view for the reason that the AO has assumed facts from a perusal of MSL-8 page 15 that the assessee has received sale consideration ₹ 10 lacs from Manoj Rathi in respect of Swarnamani project. We note that the AO has not made any attempt to summon Shri Manoj Rathi and confront him with MSL-8 page 15 and recorded his statement as to whether he has given ₹ 10 lacs to assessee on 21.06.2016 for the servant quarter in the said Swarnamani project. In the absence of any enquiry whatsoever, the hand written ‘parchi/loose sheet’ cannot be the basis for the assumption of adverse facts against the assessee and, therefore, the Ld. CIT(A) rightly deleted the addition and, therefore, we confirm the action of the Ld. CIT(A).
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2020 (9) TMI 1093
TP Adjustment - comparable selection - HELD THAT:- Assessee which is a captive software development service provider and renders software development and solutions and ITES to support the global contracts negotiated by Aspect US and other affiliates, thus companies functionally dissimilar with that of assessee need to be deselected.
Information Technology Enables service segment - Exclusion of company functionally dissimilar and who fails the TPO’s own filter of export turnover in excess of 75% of total sales.
Determining a negative working capital adjustment in both the SWD services Segment and ITeS segment - HELD THAT:- The Assessee is running the business without any working capital risk as compared to the comparables. Therefore, requirement for adjustment of negative working capital does not arise. negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis - Ground of Assessee is allowed.
Re-computation of deduction under Section 10A by reducing travel expenses incurred in foreign currency and communication charges only from export turnover - HELD THAT:- Although the DRP rejected the primary contention of the Assessee that neither the telecommunication charges nor the travel expenses ought to be reduced from its export turnover, it accepted its alternate contention that they should also be reduced from its total turnover by following the decision of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] upheld by the Hon’ble Supreme Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] . Accordingly, it directed the AO to exclude the above expenses from both its export and total turnovers while computing the deduction allowable under Section 10A. Thus, on the basis of the DRP’s above directions, the disallowance under Section 10A came to be deleted in toto in the final assessment order. - Decided against revenue.
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2020 (9) TMI 1092
Penalty u/s 272A(2)(k) r.w.s. 200(3) - failure on part of assessee to file quarterly returns of TDS in Form 24Q and 26Q for the years under consideration within the stipulated time - HELD THAT:- Penalty u/s 272A(2)(k) r.w.s. 200(3) - failure on part of assessee to file quarterly returns of TDS in Form 24Q and 26Q for the years under consideration within the stipulated time -
Non-Availability of accountant - New accountant took charge with assessee’s office on 15/08/2010. Therefore, reasoning that, assessee was unable to file returns, due to non availability of accountant cannot be accepted atleast for assessment year 2011-12.
Delay due to illness of MD - Considering the illness of Managing Director, during relevant period, alternate submission of Ld.AR to restrict penalty to be computed from date of payment of TDS amount to the credit of Government could be accepted.
AR was directed to file a chart by computing penalty from the date of making payment for both years. AO is directed to verify the same and restrict Penalty u/s.272(k)(2) to such amount as computed from date of deposit of TDS with Government. - Decided partly in favour of assessee.
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2020 (9) TMI 1091
Validity of reopening of assessment u/s 147 - notice after the period of four years from the end of the relevant assessment year - Capital gain computation invoking the provisions of section 50C - HELD THAT:- Just because there were few mistakes committed on the unregistered notarized sale deed, the fact that the amount received by the assessee towards the sale consideration of the property and the handing over the possession of the property cannot be disputed. Section 2(47)(v) of the Act clearly stipulates that transfer of the immovable property comes into effect when possession of the property is handed over coupled with part performance of the contract of the nature referred to in section 53A of the Transfer of Property Act, 1882.
In the instant case, it is apparent that on 27/12/2003 the assessee had received the part consideration of ₹ 5 lakhs and the possession of the property was also handed over as evident from the bank statement of the assessee and the unregistered notarized sale deed.
Assessee would be exigible towards capital gain tax only for the AY 2004-05 and not for the relevant AY 2007-08. It is also pertinent to mention that just because capital gain accrued to the assessee has escaped tax in the AY 2004-05, the same cannot be brought to tax subsequently in the AY 2007-08 as per the provisions of the Act. Therefore, hereby set aside the order of the CIT (A) and further direct the Ld. AO to delete the addition made and enhanced in the hands of the assessee towards LTCG. - Decided in favour of assessee.
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2020 (9) TMI 1090
Reopening of assessment u/s 147 - Validity of reason to believe - overstatement of capital fund of assessee trust - HELD THAT:- As noticed from the documents submitted by the assessee that this issue was already been questioned by the AO at the time of making original assessment u/s.143(3). In response to this, the assessee submitted his reply and financial statement before the AO and the notes of account were also appended with the financial statements.
Documents available before us that this case has been reopened by the AO on the basis of audit objection in regard to capital funds. The assessee had also duly replied of the audit objections as per his letter which is placed on record. Details of capital funds were also submitted before the AO, which means this issue was already been examined by the AO at the time of framing original assessment.
In absence of any new material pointed out by the assessee in the reasons recorded, the reassessment u/s.147 of the Act is null and void and we quash the reassessment order passed by the AO on legal ground. Since we have already quashed the reassessment order passed by the AO on legal ground, other grounds on merits need no adjudication. Thus, the appeal of the assessee is allowed on legal ground.
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2020 (9) TMI 1089
Benefit of ‘LLP Settlement Scheme, 2020’ dated 04.03.2020 read with the subsequent modification thereto vide Circular dated 30.03.2020 - Section 460 of the Companies Act, 2013 - plea of the petitioner(s) in the present applications is that they have been denied the benefit of the Scheme only on the ground that they uploaded the forms pursuant to the order dated 06.12.2018 of this Court - HELD THAT:- This, in my opinion, cannot be a valid ground for denying the benefit of the Scheme to the petitioners. The petitioner(s) cannot be denied the benefit of the Scheme as such denial would be totally arbitrary and unreasonable. The petitioner(s) cannot be put in a position worse than those who never challenged the position prevailing before the announcement of the Scheme, before this Court.
It is held that the petitioner(s) are entitled to the benefit of the Scheme and they shall not be denied the same only on the ground that their documents were uploaded pursuant to the order passed by this Court in the present petitions, prior to 31.10.2019 - Petition disposed off.
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2020 (9) TMI 1088
Companies Fresh Start Scheme (CFSS) 2020 - Defaulting company - Publication of the name of the Petitioner in the list of disqualified directors - Disqualification as a director under Section 164 of the Companies Act, 2013 - alleged non-compliance by DCDPL in filing its returns from 2014-2017.
Whether the DIN of the Petitioner is liable to be activated for the two companies ABMR and DCD Grand? - HELD THAT:- The DIN of the Petitioner herein was deactivated and he was disqualified prior to the proviso to Section 167(1)(a) taking effect. Thus, qua ABMR and DCD Grand, the Petitioner’s disqualification is not sustainable.
Whether the Petitioner can be considered as a Director of DCDPL? - HELD THAT:- The ROC’s stand that the shareholders can nominate a new director and approval for the same can be sought, would not be an answer, as the same could in effect result in dummy directors being appointed to Companies, which is exactly what the new provisions may have intended to avoid. In any event, so long as the present case is covered by the Mukut Pathak [2019 (11) TMI 319 - DELHI HIGH COURT] decision, the Petitioner does not demit office and would be entitled to act as a Director in DCDPL.
Whether the Petitioner can file the Returns on behalf of the defaulting company DCDPL, which wishes to avail of the Scheme? - HELD THAT:- The answer to the same would be in the affirmative. As held by this Court recently, vide order dated 2nd September 2020, in Sandeep Agarwal & Anr. Vs. Union of India & Anr [2020 (9) TMI 175 - DELHI HIGH COURT] the purpose of the Scheme is to provide an opportunity for active companies, who may have defaulted in filing of documents, to put their affairs in order.
The Scheme is a fresh lease of life given to defaulting companies, which are not yet declared `Inactive’, to file their returns and do their businesses in accordance with law - The scheme is an ENABLER and not a DISABLER for defaulting but active companies.
The Petitioner would be entitled to avail of the Scheme to file documents of the defaulting company, which is still an active company whose name has not been struck off.
Petition allowed.
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2020 (9) TMI 1087
Approval of Scheme of Arrangement - approval for their proposal for acquisition of front-end retail pharmacy business of the Transferor Company by the Transferee Company for a total sale consideration - HELD THAT:- After analyzing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemplated between the petitioner companies would be beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Company. In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the Scheme of Arrangement appended as Annexure "4" with the Company Petition as well as the prayer made therein - Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners.
While approving the Scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law. It is further clarified that this approval shall not be construed as an approval for any regulatory compliance required to be done or obtained under the appropriate statutes.
Petition allowed.
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2020 (9) TMI 1086
Approval of the Scheme of Amalgamation and Arrangement - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT:- The objections/observations to the Scheme received from RD, RoC, OL, BSE, NSE, IT Department and the Workers Union have been adequately replied by the Petitioner Company and hence, there is no impediment in the sanction of the Scheme.
The Scheme is approved and we hereby declare the same to be binding on all the shareholders and creditors of the Petitioner Companies and on all concerned. While approving the Scheme, it is clarified that this order should not be construed as an order in any way granting exemption from payment of any stamp duty, taxes, or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law. With the sanction of the Scheme, the Transferor Companies shall stand dissolved without undergoing the process of winding up.
The scheme is approved.
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2020 (9) TMI 1085
Approval of the Scheme of Arrangement - Sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016 - HELD THAT:- The shareholders of the applicant companies are the best Judges of their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by the Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well settled that the Tribunal evaluating the Scheme of which sanction is sought under Section 230-232 of the Companies Act of 2013 will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors - Right to apply for the sanction of the Scheme has been statutorily provided under Section 230-234 of the Companies Act, 2013 and therefore, it is open to the applicant companies to avail the benefits extended by statutory provisions and the Rules.
Upon considering the approval accorded by the members and creditors of the Petitioner companies to the proposed Scheme, and the report filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and no Objections of BSE and NSE and also in the absence of any objection against the Scheme; there appears to be no impediment in sanctioning the present Scheme - Scheme is approved - application allowed.
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2020 (9) TMI 1084
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- The facts and circumstances of the case as detailed, has clearly established that the Petitioner is using the provisions of Code with main object to recover the alleged due rather than to seek to initiate CIRP on justified grounds. It is also relevant to point out here that role of Operational Creditor, who filed case U/s. 9 of the Code, will be nominal during the process of CIRP, and it is dominated by Financial Creditors. Therefore, the settled principle of law that provisions of Code cannot be invoked to recover alleged/disputed due, would be more applicable to the Operational Creditors rather than Financial Creditors, who filed cases U/s. 7 of Code. Therefore, it is to be held that the Petitioner has invoked the provisions of Code with an intention to recover alleged due rather than to justify its case to initiate CIRP in terms of object of the Code.
Principles of Double Jeopardy - HELD THAT:- It is also relevant to point out here that legal principle of double jeopardy would also applicant to the instant case, as the Petitioner has admittedly invoked provisions of N.I Act for dishonour of cheques issued by the Respondent, which is sub-judice. The Adjudicating Authority cannot enter into above disputed issues, in summary proceedings as contemplated under provisions of Code.
The instant Company Petition is filed with an intention to recover the alleged outstanding amount rather than to seek initiation of CIRP in respect of the Corporate Debtor, which is against the object of the Code. The Petitioner cannot be permitted to bargain for settlement of alleged dues, in a case filed under Section 9 of Code and it is for the Parties to settle those issues between them. Therefore, the instant Petition is not maintainable under the provisions of Code.
Petition dismissed as not maintainable.
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2020 (9) TMI 1083
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Settlement of alleged dues - existence of debt and dispute or not - HELD THAT:- The instant Company Petition is filed with an intention to recover the alleged outstanding amount rather than to seek initiation of CIRP in respect of the Corporate Debtor, which is against the object of the Code. The Petitioner cannot be permitted to bargain for settlement of alleged dues, in a case filed under Section 9 of Code.
Petition not maintainable and is dismissed.
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2020 (9) TMI 1082
Rejection of the resolution plan - CIRP process - section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016 - HELD THAT:- A reading of the mail issued by the RP and the copy of minutes produced before us prima facie satisfied that RP placed the documents submitted by the applicant and the Plan before the CoC and from the available document as on 18.06.2020, the applicant was found ineligible as one of the directors of the applicant who is also a director of ISL was in the list of defaulter, fall under section 29-A(b) of the Code. Even according to the applicant he was unable to place all the documents relating to disqualification as the bank has not given proof proving that the bank has removed the Ind Synergy Ltd. (ISL) from the RBI defaulters list and an email dated 22.06.2020, issued by Indian Overseas Bank, placed before us at the time of hearing that the bank has removed the said company from the list of defaulters. So as on 18.6.2020 the applicant was a defaulter as per the list. In view of the above said circumstances we do not find any merit in the application.
Application dismissed.
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