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Showing 381 to 400 of 1466 Records
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2023 (1) TMI 1086
Validity of Assessment as notice u/s.143(2) issued being beyond the prescribed time limit of 6 months from the end of the financial year - CIT-A dismissed the appeal of the assessee for non-prosecution - assessee had failed to put up an appearance in the course of hearing of the appeal, therefore, the same was disposed off on an ex-parte basis - HELD THAT:- CIT(Appeals) had disposed off the appeal on the basis of a non-speaking order. As it is not open for the CIT(A) to summarily dismiss appeal on account of non-prosecution of the same by the assessee. Rather a perusal of Sec.251(1)(a) and (b), as well as the “Explanation” to Sec. 251(2) reveals that the CIT(A) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per the mandate of law the CIT(A) is not vested with any power to summarily dismiss an appeal for non-prosecution - See PREMKUMAR ARJUNDAS LUTHRA (HUF) [2016 (5) TMI 290 - BOMBAY HIGH COURT]
We are not being able to persuade to subscribe to the dismissal of the appeal by the CIT(A) for non-prosecution, therefore, “set-aside” the same to his file with a direction to dispose off the same on merits. CIT(A) shall afford a reasonable opportunity of being heard to the assessee in the course of the de- novo appellate proceedings. Additional ground of appeal raised by the assessee are allowed for statistical purpose.
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2023 (1) TMI 1085
Deduction u/s 54F - CIT-A deleted the addition - whether CIT(A) erred admitted additional evidence without confronting with the AO is in violation of Rule 46A of the Income Tax Rules, 1962 and wrongly allowed the claim of deduction - HELD THAT:- We find that the assessee has furnished various details and produced documents before the ld. CIT(A) for the first time and the ld. CIT(A) should have called for remand report from the Assessing Officer. However, by considering the details furnished by the assessee, the ld. CIT(A) has deleted the addition made by the Assessing Officer appears to be in violation of Rule 46A of the Income Tax Rules, 1962.
Accordingly, we set aside the appellate order and remit the matter back to the file of the AO to reconsider the entire facts and material evidences as may be furnished by the assessee and decide the issue afresh in accordance with law by affording sufficient opportunities of being heard to the assessee. Assessee is also directed to furnish complete details before the Assessing Officer as was filed before the ld. CIT(A). Appeal filed by the Revenue is allowed for statistical purposes.
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2023 (1) TMI 1084
Assessment u/s 144C - AO passed the final assessment order without giving effect to the directions of the Ld. DRP - limitation period specified U/s. 144C(13) - HELD THAT:- In the instant case the assessee has accepted the final assessment order passed by the Ld. AO on 21/7/2022. The assessee has neither raised objections nor challenged the order dated 21/7/2022 but has preferred to file a rectification petition U/s. 154 - As pointed out by the Ld. DR, any order passed by the Ld. AO can be rectified U/s. 154 and the Ld. AO has rightly rectified the order on 13/10/2022.
Therefore, we are of the considered view that the original assessment order passed by the Ld. AO on 21/7/2022 is valid in law as it has been rectified by the order dated 13/10/2022 which is deemed to be considered within the limitation period specified U/s. 144C(13) of the Act. We therefore dismiss this plea raised by the assessee and proceed to adjudicate the other grounds. Thus, Grounds No. 2 & 3 raised by the assessee are dismissed.
TP Adjustment - Comparable selection - HELD THAT:- We find merit in the argument of the Ld. AR that the fundamentally dissimilar companies rejected by the DRP during the AY 2017-18 and 2018-19 and M/s. Orbit Exports Limited, shall be removed from the comparables and accordingly the (Arms Length Price) ALP of the assessee be recomputed after removing the above dissimilar companies. We therefore direct the Ld. TPO to compute the ALP as directed above. Fundamentally, in the absence of similarity between the comparables selected by Ld TPO and the assessee either during the current or any other previous or subsequent assessment year as held by LD DRP, should not be considered for the impugned assessment year also. Accordingly, this ground raised by the assessee is allowed for statistical purposes.
Disallowance of Technical Support Service Fee paid to Teejay Lanka PLC - assessee submitted the Technical Services Agreement before the Ld. TPO - AR vehemently argued that the Technical Support Service Fee was incurred wholly and exclusively for the purpose of business operations of the assessee - HELD THAT:- We find merit in the argument of the Ld. AR and we are of the considered view that it would be deemed fit to remit the matter back to the Ld. TPO to decide the case on merits subject to final outcome of the Advance Pricing Agreement (APA) with CBDT by the assessee. We therefore allow these Grounds No.6 raised by the assessee for statistical purposes.
Payment of interest on ECB - AR submitted that the ALP should be considered as LIBOR + 300 basis points as per the RBI Master Circular - HELD THAT:- We find from the Master Circular relied on by Ld AR, that RBI prescribed the maximum cap interest on ECBs with different tenures. Therefore, the Ld. DRP has rightly determined the ALP as LIBOR + 200 basis points considering it rational based on several judicial decisions while directing the Ld TPO to adopt the interest rate @ LIBOR + 200 basis points. We are therefore not inclined to interfere with the order of the Ld. DRP and hence this ground raised by the assessee is dismissed.
Notional interest on outstanding receivables - AR submitted that the notional interest is subsumed in the working capital and no further adjustment is required as proposed by the Ld. DRP - assessee contested that the receivables is not an international transaction under the provisions of section 92B of the Act - HELD THAT:- While deciding on the identical issue the ITAT in the case of M/s. Devi Sea Foods Limited. [2022 (9) TMI 587 - ITAT VISAKHAPATNAM] there is no dispute with regard to the fact that receivables is included under the definition of international transaction consequent to the amendments made by the Finance Act, 2012 w.e.f 1/4/2002. Therefore we are of the considered view that there is no merit in the argument of Ld AR that receivables is not an international transaction.
Working capital adjustment - HELD THAT:- In the decision of M/s. Devi Sea Foods Limited [2022 (9) TMI 587 - ITAT VISAKHAPATNAM] Tribunal has held that when TNM method is considered as the most appropriate method which was also not disputed by the Revenue the net margin thereunder would take care of such notional interest cost.
We also direct the Ld. TPO to consider the working capital adjustment and its impact on the profits of the assessee vis-à-vis its comparables. We are therefore of a considered view that no upward adjustment on the outstanding receivables is required and therefore we direct the Ld. AO to delete the upward adjustment made towards overdue receivables from AE. The contention of the Ld. AR that the assessee does not pay interest in relation to outstanding payable to AEs is of no relevance. Further, the Ld. DRP has provided a notional credit period of 30 days which is reasonable in the instant case. Accordingly this ground raised by the assessee is partly allowed for statistical purposes.
Reworking charges carried out by the AE in relation to export - AE incurred certain expenses for reworking on behalf of the assessee on the fabric sold by the assessee to third party customers in Sri Lanka - HELD THAT:- We find that the assessee has not provided any details as reworking charges carried out by the AE in relation to export with supporting evidences either before the Ld. Revenue Authorities or before us. We therefore concur with the decision of the Ld. DRP and upheld the TP adjustment made by the TPO in this regard. Thus, the Grounds No. 9 & 10 grounds raised by the assessee are dismissed.
Nature of expenses - Disallowance of leasehold amortization charges - HELD THAT:- Admittedly the assessee has paid a sum of Rs. 5.40 Crs for a period of 23 years for taking the land on lease. It is the case of the Ld. AO that it is one time lumpsum payment and a prior period expenditure which cannot be apportioned during the impugned assessment year as revenue expenditure.
Assessee has claimed proportionate share of amortization of leasehold charges for the relevant assessment year. There are various judicial pronouncements as submitted by Ld AR, with respect to amortization of the leasehold charges over the lease period, and therefore we are of the considered view that the leasehold charges paid by the assessee shall be proportionately claimed as revenue expenditure, over the lease period and hence the amortization of leasehold charges claimed by the assessee for the relevant assessment year shall be allowed as revenue expenditure during the impugned assessment year. We therefore allow this ground raised by the assessee.
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2023 (1) TMI 1083
Addition of Sundry creditors and unsecured loans - re-payment of impugned sundry credit - non-submission of the relevant details and evidences in respect of the sundry creditors and unsecured loans - HELD THAT:- Hon’ble Jurisdictional High Court in CIT Vs Ayachi Chandrashekhar Narsangji [2013 (12) TMI 372 - GUJARAT HIGH COURT] held that where department has accepted repayment of loan in subsequent financial year, no addition was to be made in the current year on account of cash loan. Further, in case of CIT Vs Ranchod Jivabhai Nakhava [2012 (5) TMI 186 - GUJARAT HIGH COURT] held that where the lenders of the assessee are income tax assessee whose PAN have been disclosed, the assessing officer cannot not ask assessee to further prove genuineness of the transaction without first verifying such facts from income tax returns of lenders.
We also find that in the present case, the assessee furnished all such details of the lenders/ depositors. We further find that there is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions.
Now again adverting to the primary submissions of ld AR for the assessee that the assessing officer in fact has not made any addition either on account of disallowance of sundry creditors or unsecured loan, in fact such observation was the basis of rejection of books of account. As we have noted that the ld CIT(A) clearly held that the basis of rejection of books of account was not justified.
We find that books of account of assessee was duly audited and no reference or whisper about the audited books were made no adverse remarks was made by auditor of assessee. no specific defect was pointed in the books of assessee as required under section 145(3) of the Act, thus, such rejection lacks the statutory conditions, which we do not approve. Hence, we do not find any infirmity or illegality in the order passed by ld CIT(A), which we affirms, with our additional observations. Thus, in view of the aforesaid discussions, we do not find any merit in the ground No.1 to 3 of appeal raised by the revenue.
Whether CIT(Appeals) has erred in not enhancing the assessmen by adding the unsecured loan and sundry creditor to the returned loss which the AO had disallowed and determined at Rs. NIL only? - HELD THAT:- The assessing officer filed three remand report and no such plea was raised nor any basis of such enhancement was raised. Moreover, the assessing officer himself accepted the transaction of sundry creditors and accepted the repayment in next assessment year in the assessment order passed under section 143(3). As recorded above the assessee also fully discharged its onus on unsecured loan. It is settled position under law that after passing the assessment order the assessing officer become functus officio and if any material or information comes to his notice subsequently, then he is required to follow the course of action prescribed under Income Tax Act and not otherwise. The assessing officer has neither initiated action under section 154 or 147, if he was of the view that assessment was required to be enhance or reopened, within the time period prescribed under Act. Even otherwise, we find that once, the contention of the assessee was accepted, after receiving remand report from assessing officer, and no such plea was raised by assessing officer, hence, there was no scope left for enhancement. Therefore, we do not find any merit in the ground of appeal raised by the revenue. In the result, the ground No. 4 of appeal raised by the Revenue is dismissed.
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2023 (1) TMI 1082
Validity of reopening of assessment - three reasons so recorded, the subject matter of income escaped assessment, and quantum of income escaped - Accommodation entry pertaining to bogus purchases - HELD THAT:- Assessing Officer may reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148 of the Act. Therefore, there is no restriction on the number of reasons to be recorded, that is, reasons may be recorded twice, thrice etc. as per the circumstances, hence we do not agree with the ld Counsel to the effect that reasons cannot be recorded three times.
Assessment was reopened after a period of four years and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for making original assessment - We do not agree with the ld Counsel, as in assessee`s case the original assessment was framed under section 143(3) of the Act, wherein the assessing officer had never discussed the issue of bogus purchases. The issue pertaining to bogus purchases was fresh issue before the Assessing Officer and it is a fresh and new information therefore assessing officer has rightly reopened the assessment.
We note that reasons were recorded by the Assessing Officer within the legal framework of provisions of section 147 of the Act therefore, second objection/question raised by the ld Counsel is hereby rejected.
As observed earlier not only there existed new information with the Assessing Officer from the credible sources, but also he had applied his mind and recorded the conclusion that the purchases claimed were non-genuine and therefore bogus, (clearly meaning that what was disclosed was false and untruthful). The requirements of section 147 r.w.s. 148 have clearly been met; and the reopening is held justified and legal. Therefore, we dismiss the additional ground raised by the assessee.
Estimation of income - bogus purchases - Since, the issue under consideration is squarely covered by the judgment of the Co-ordinate Bench of ITAT, Surat in the case of Pankaj K. Chaudhary [2021 (10) TMI 653 - ITAT SURAT] - There is no change in facts and law and the Revenue, as well as Assessee are unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra), wherein the Tribunal considering overall facts and circumstances held that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. Therefore, respectfully following the binding judgment of Co-ordinate Bench, the appeal of the Revenue is partly allowed and cross objection filed by the assessee are dismissed.
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2023 (1) TMI 1081
Special audit u/s. 142(2C) - Special Auditor’s Report submitted by the Special Auditor beyond the due date prescribed u/s. 142(2A) - time limit for submission of Special Audit Report as required u/s. 142(2C) - HELD THAT:- In the instant case, the Ld. AO failed to pass such order in both the circumstances to extend the time limit. AO merely communicated the decision of the Ld. Pr. CIT (Central), Visakhapatnam on 6/6/2019 which is beyond the limitation period of the second extended time. Even assuming a moment that it is a valid extension, we find that the extension as per the Limitation Act should have been granted before the expiry of the time limit permitted in the earlier extension ie., on 25/5/2019.
We find force in the arguments of the Ld. AR that mere communication of extension by the Ld. AO instead of passing an order U/s. 142(2C) is not valid in law. The case law relied on by the Ld. AR, the judgment of the Hon’ble Supreme Court in the case of State of Punjab & Ors vs. M/s. Shreyans Indus Ltd i[2016 (3) TMI 331 - SUPREME COURT] is pertinent to mention here with respect to grant /order of extension of time limit should be given before the time for passing any order expires as prescribed under the Act or before the expiry of the original period of limitation prescribed in the original order. On this issue, the Hon’ble Apex Court observed that once the period of limitation expires, the immunity against being subject to assessment sets in and the right to make assessment gets extinguished. Therefore in our considered opinion, the ratio laid down by the Hon’ble Supreme Court squarely applies to the instant case also. In the instant case on hand, the Ld. AO ought to have passed an order U/s. 142(2C) of the Act on or before 25/5/2019 ie., expiry of the first extension.
Therefore in our considered opinion, the ratio laid down by the Hon’ble Supreme Court squarely applies to the instant case also. In the instant case on hand, the Ld. AO ought to have pass an order U/s. 142(2C) of the Act on or before 25/5/2019 ie., expiry of the first extension. The case law relied on by the Ld. AR in ACIT Vs Soul Space projects Limited [2020 (6) TMI 696 - ITAT DELHI] is relevant to the issue which was also considered by the Ld. CIT(A).
We find that the Ld. CIT(A) has discussed the issue at length and rightly concluded the matter and therefore we are of the considered view that no interference is required in the order of the Ld. CIT(A) on this issue.
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2023 (1) TMI 1080
Penalty levied u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT:- As relying on BIJOY KUMAR AGARWAL [2019 (6) TMI 721 - CALCUTTA HIGH COURT]and MANJUNATHA COTTON AND GINNING FACTORY [2013 (7) TMI 620 - KARNATAKA HIGH COURT] and AMRIT FOODS [2005 (10) TMI 96 - SUPREME COURT]notice issued under section 271(1)(c) without specifying which of the two contraventions, the assessee is guilty of was defective and the penalty imposed in pursuance of such defective notice was not sustainable.
we cancel the penalty imposed upon the assessee under section 271(1)(c) by the ld. AO and sustained the order passed by the ld. CIT(A). - Decided in favour of assessee.
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2023 (1) TMI 1079
Deduction U/s. 54F - period of holding of the asset(land) - considering Long Term Capital Gain as Short Term Capital Gain - Whether CIT(appeals) erred confirming action of the AO in treating the sale of land as Short Term Capital Gain by considering purchase deed dated 14.09.2009 & not considering notarized Banakhat dated 19.12.2007 for calculating period of holding of the asset(land), though actual possessing of land was obtained by the Appellant from the date of the Banakhat i.e. 19.12.2007 and payment have been made thereafter? - HELD THAT:- The transfer of property cannot take place on simple agreement. The transfer of the property only takes place when either the possession of the property is transferred or sale deed is executed. Documents like unregistered Banakhat, power of attorney are not the substitute of sale deed. So in present case the land has been sold and sale deed is executed on 14.09.2009 only. The sale of the piece of land within 36 months resulted in short term gain to the assessee.
Even in the sale deed there is no mentioned of Banakhat. The issue of invoking the exemption under sec 54F was also held invalid by the lower authorities. The onus to proof the findings of the authorities below as not justified lies upon the assessee. However, the assessee has not brought anything contrary to the findings of the authorities below. As such, it seems that the assessee is not interested in pursuing his claims as he failed to appear despite giving so many opportunities by the Tribunal. Therefore, we are not inclined to interfere in the finding given by the Ld. CIT(A). Hence, the ground of appeal raised by the assessee is dismissed.
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2023 (1) TMI 1078
Addition u/s 69C - Addition on difference between the invoice value and the accessible value of the imports - assessee has failed to produce the Invoices Value- wise of the total figure in question before the assessing officer as well as Ld. CIT(A) - CIT(A) is of the opinion that accessible value of the goods is the value on which the custom duties are calculated and ultimately deleted the addition - HELD THAT:- The transaction value of the goods (invoice values) are accessible value as defined in Section 14 of Customs Act, 1962. If declared invoice value appears to be low terms of Rule 12 of Customs Valuation Rules, 2007, then a new value is re-determined in terms of Rule 4 to 9 of Customs Valuation Rules, 2007 and this determined value becomes accessible value and custom duties collected on the said determined value even though transaction value is different.
Thus, it appears that accessible value which has been considered by the A.O. is not suppression of purchase price or unaccounted purchase. Moreover, the value of the goods assessed/re-determined by the custom authorities as per valuation norms for the purpose of calculation of custom duty on the import. Therefore, the same would not attract the provisions of Section 69C of the Act, since, it has not been established as unexplained expenditure actually incurred by the assessee.
CIT(A) has considered the remand report and pass the order impugned. Therefore, restoring the file back to CIT(A) for fresh adjudication does not arise. A.O. has conducted proper enquiry while preparing the remand report. In our considered opinion, CIT(A) has committed no error in come to such conclusion and deleting the addition made by the Ld. A.O. thus, the grounds of Appeal No. 1 to 8 of the Revenue are devoid disamissed.
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2023 (1) TMI 1077
Exemption u/s 11 - assessee not having registration u/s. 12AA - voluntary donations received for specific purpose - Addition on account of corpus contribution treating the same as revenue receipts - HELD THAT:- In the present case, as is evident from the impugned order that the assessee claimed a fund as donation to the corpus of the assessee. The AO held that the assessee is not eligible for exemption as the assessee not having registration u/s. 12AA of the Act. Admittedly, the voluntary donations received for specific purpose forming the corpus of assessee’s trust for directly made to the Balance sheet as the capital receipt.
Therefore, when the donations forming the corpus of the assessee’s trust received with specific purpose are capital in nature. Thus, we hold the corpus specific voluntary donations are not taxable in the case of unregistered trust also and in view of the same the order of CIT(A) is not justified. Therefore, the denial of exemption for not having registration u/s. 12AA of the Act resulted into disallowance therein is deleted. Thus, the grounds raised by the assessee are allowed.
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2023 (1) TMI 1076
TP Adjustment - functions performed by the assessee and the comparables selected - whether the assessee is in distribution support services or is doing marketing support services as held by the TPO - HELD THAT:- As perused the Reseller agreement between the assessee and its AE and in this agreement the very term the assessee is referred to as “Reseller”. In the recital part clause (B), it states “Company wishes to appoint reseller to market and sell the products in the territory (as defined herein) and reseller desires to accept such appointment. Here, the reseller is MSC Software Corporation India Pvt. Ltd. i.e. the assessee and this clearly signifies that the assessee has to do the marketing activities and sell the products.
Assessee being the reseller is doing only marketing support services. That MSC India is actually performing routine marketing activities in India attracting customers of software products in the Indian market. The marketing material is provided by company to the assessee at no cost and even when assessee prepares localized products, the copyrights are always with the company. The routine marketing activity primarily includes attending conferences, exhibitions, seminars to showcase the product to the targeted customers. When an order is received from the customer by MSC India that would be submitted to AE with specific type quantity of the product name and e-mail address of the customer and the requisite delivery date. However, the AE has the discretion either to accept or reject that order. If accepted, the delivery of the product is the responsibility of AE.
The company will deliver the product directly to the customer and company will provide the assessee just a notification of such delivery. The customer makes payment to the assessee, the assessee retains 3.5% of revenue from the receipts from customers and the remaining amount is passed on to the company i.e. AE. The copy of agreement with customer is done in a format which also to be approved by the AE. AE has right to call for periodic report regarding the activities of the assessee and verify the books of account of assessee as evident from clauses 3.8 and 3.9 of the agreement.
Assessee's main activity is nothing but marketing activity, whereas all the ownership of the product, the power to determine whether to accept / reject the order and the pricing is with the AE. The assessee is only getting 3.5% of the revenue from the receipts of the customers for the marketing function that it is doing. We, therefore, set aside the findings of ld. CIT(A) and restore the order of ld. TPO - grounds of appeal of Revenue are allowed.
Treat foreign exchange gain as non-operating in nature for the purpose of computation of the PLI of the appellant as well as that of the comparable companies - We find that Pune Bench of Tribunal in several decisions have held that forex gain is operating in nature. See TRANSPERFECT SOLUTIONS INDIA PVT. LTD. VERSUS ACIT, CIRCLE-7 PUNE [2022 (8) TMI 521 - ITAT PUNE] - Thus we hold that forex gain is operating in nature and accordingly, ground of objection No.2 is allowed.
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2023 (1) TMI 1075
Deduction u/s 54F - delay on the part of contractor to complete the construction - CIT(A) allowing partial relief to the assessee in respect of amount spent towards construction of new property - HELD THAT:- Substantial portion of net consideration so received was re-invested within stipulated period from the date of transfer of capital asset. Certain amount was retained for construction of property whereas the remaining portion was offered to tax.
It could also be seen that the assessee entered into construction agreement on 05.03.2012 wherein the contractor was required to complete the construction within a period of 12 months. Considering the same, the construction would have been completed well within the stipulated time - delay in construction is nowhere attributed to the assessee and the assessee could not be penalized for delay on the part of the contractor to complete the construction particularly considering the fact that the provisions of Sec.54F are beneficial provisions to promote investment in housing sector and encourage investments in acquisition of residential property.
Once the assessee is found eligible to claim the same, the benefit should be granted to full extent as held in various judicial pronouncements. Therefore, the deduction could not be denied simply because there was delay on the part of contractor to complete the construction. The decision in CIT vs Sardarmal Kothari and Shanthilal Kothari [2008 (6) TMI 15 - MADRAS HIGH COURT]supports the case of the assessee.
Depositing the unappropriated capital gains in capital gain account scheme before date of filing of return u/s 139(1) - CIT(A) has relied on the binding judicial precedent of Chennai Tribunal in ACIT vs T.S. Arunachalam,[2018 (1) TMI 1572 - ITAT CHENNAI]wherein it was held that it was enough if the assessee had invested substantial portion of net consideration in new asset within the stipulated period. No contrary decision has been placed on record.
Further, from the factual matrix, it could be seen that the assessee has received the sale consideration in installments up-to financial year 2013- 14 and entire funds were not even otherwise available for the assessee to deposit the same into capital account scheme during this year. The assessee is only claiming part exemption. The same is evident from payment and investment schedule as extracted by us in preceding para- 4 of this order. - Decided against revenue.
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2023 (1) TMI 1074
TP Adjustment - Comparable Selection - working capital adjustment - DRP directed for exclusion of 2 out of 9 comparable companies selected by the ld. TPO and upheld the action of the ld. TPO denying working capital adjustment to the assessee - HELD THAT:- It is not in dispute that the claim of working capital adjustment together with its detailed workings were indeed made and submitted by the assessee before the ld. TPO and also before the ld. DRP. This is evident representing submissions made before the TPO and pages representing submissions made before the ld. DRP.
The assessee also stated that working capital adjustment had indeed been granted to the assessee either by the ld. TPO or by the ld. DRP, in the earlier years commencing from A.Y. 2011-12 onwards, as the case may be.
AR before us drew our attention to the relevant pages of the paper book where working capital adjustment has been granted to the assessee in the past commencing from A.Yrs.2011-12 to 2017-18. In fact, we also find that on the final set of comparables chosen by the DRP, the assessee had given the working capital adjustments for the said comparable companies which has been ignored by the lower authorities. Hence, we deem it fit to restore the issue to the file of the ld. TPO with a direction to grant working capital adjustment to the assessee after examining the workings given by the assessee thereon. The computation of ALP should be done accordingly. Hence, the ground No.7.9 raised by the assessee is allowed for statistical purposes.
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2023 (1) TMI 1073
Addition u/s. 68 - difference in the returned income and assessed income - HELD THAT:- It is evident that the assessee was working with M/s. Pfizer Ltd. and had taken voluntary retirement. On a perusal of Form 26AS, the gross total income of the assessee was declared as Rs.63,58,458/- and the assessee has filed his original return of income dated 26.08.2015, declaring net income of Rs.45,39,698/- and revised his return of income declaring Rs.23,26,687/- and Rs.24,26,682/- in his second revised return dated 17.02.2016.
The allegation by the lower authorities that the assessee has fraudulently claimed higher refund by filing the revised return twice is not controverted by the assessee either by way of return submission or by producing any documentary evidence in support of his stand. The assessee has failed to rebut the addition made by the A.O. and confirmed by the ld. CIT(A).
A.O. had issued notice u/s. 133(6) to M/s. Pfizer Ltd. which had replied stating that the assessee has received Rs.63,75,681/- during the impugned year. The assessee has failed to establish the difference amount specified in Form 26AS and the returns filed by the assessee. Though several opportunities have been given to the assessee, the assessee has failed to furnish any documentary evidence for rebuttal.
Thus assessee has nothing to controvert the view of the lower authorities in making the addition u/s. 68 of the Act as ‘unexplained cash credit’. Appeal filed by the assessee is dismissed.
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2023 (1) TMI 1072
Capital gain on lease hold properties - addition made u/s. 50C - whether the deeming provision of section 50C applies to leasehold rights in land or building? - HELD THAT:- Phraseology in section 50C(1) of the Act only covers exclusively land or building or both and does not refer to any right in land or building. Thus, the expression land or building in its coverage is quite distinct from the expression any right in land or building. The legislature, in its wisdom, for the purpose of section 50C without referring to section 2(14) of the Act, has used the expression land or building or both in section 50C(1) of the Act itself, and without the expression of any right in therein i.e. land or building. Therefore, the precise use of one expression would exclude the other, a legal premise which is supported by the judgment of Hon’ble Apex Court in the case of “GVK Industries Ltd. Vs ITO” [2011 (3) TMI 1 - SUPREME COURT]
In our considered opinion, the point sought to be raised by the Ld. AR deserves to be upheld. Such a distinction also has found approval of “CIT Vs Greenfield Hotels & Estates Pvt. Ltd.” [2016 (12) TMI 353 - BOMBAY HIGH COURT]
We find that the present transaction of transfer of leasehold right in question does not warrant invoking of section 50C(1) of the Act, as the property in question is not of the explicitly covered by section 50C(1) of the Act, for the reason, we set aside the order of the Ld. FAA and direct the Ld. AO to delete the impugned addition. Appeal of assessee allowed.
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2023 (1) TMI 1071
TDS u/s 194C or 194I - payments towards maintenance charges - payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges - HELD THAT:- When the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct, then, the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194I - From the material available on record, it is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C.
We are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of sub-sections (1) and (1A) of section 201 - As respectfully following the order of Nijhawan Travel Service (P) Ltd. [2022 (7) TMI 176 - ITAT DELHI] the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act. Appeal filed by the assessee is allowed.
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2023 (1) TMI 1070
Non-grant of Foreign tax Credit - delay in filing of Form No. 67 - assessee is an individual who is a Resident and Ordinary Resident (ROR) of India - HELD THAT:- As per Rule 128 of the I. T. Rules it is evident that the assessee has to file Form 67 on or before the due date of furnishing the return of income as per section 139(1) of the Act, which the statement specifies as mandatory and not directory as per the word ‘shall’ used in the said provisions. It is evident that the assessee has filed Form 67 belatedly after the due date for filing of return u/s. 139(1) and, hence, the lower authority have rejected the claim of the assessee.
We are inclined to peruse the decisions of the tribunal cited by the assessee in the case of Ms. Brinda Ramakrishna [2022 (2) TMI 752 - ITAT BANGALORE]. On similar facts, the co-ordinate bench has considered the delay in filing of Form No. 67 as only a procedural defects and has also considered the decision of Mangalore Chemicals & Fertilizers Ltd. [1991 (8) TMI 83 - SUPREME COURT] and Sambhaji and Others vs. Gangabai and others [2008 (11) TMI 393 - SUPREME COURT] which laid down the proposition that procedural law should not be construed as mandatory and should only aid the claim of substantive right.
The said decision of the tribunal has also relied on various decisions, which held that provisions of DTAA override the provisions of the Act, as far as it is beneficial to the assessee. The Tribunal has held that delay in filing Form No. 67 should not by, in anyway, deny the claim of FTC enumerated in the DTAA and the intention of the legislation in the said case has to be construed in a manner which benefits the assessee. The A.O. is hereby directed to allow the FTC claim of the assessee and to grant refund in accordance with the law. Appeal of the assessee is allowed.
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2023 (1) TMI 1069
TP Adjustment - transfer pricing adjustment suggested by the Transfer Pricing Officer (TPO) on the arm’s length price (ALP) of the international transaction with the overseas Associated Enterprises (AEs) - Comparable selection - HELD THAT:- It is a fact on record that the assessee operates in two segments. While, in one of the segment assessee undertakes international transactions relating to provision of agency support services to AEs, in the other segment, the assessee is engaged in trading of goods to customers in India. Thus, while the provision of agency support services is purely with related parties, the trading in goods domestically is exclusively with unrelated parties.
While, rejecting assessee’s benchmarking of international transactions with AEs, undisputedly, the TPO had aggregated transactions in both the segments at entity level and determined the ALP of the transactions with the AEs. This approach of the TPO is fundamentally wrong and against the statutory provisions. While benchmarking international transactions with AEs, the transactions relating to unrelated parties cannot be clubbed. Therefore, the benchmarking done by the TPO is flawed, hence, unacceptable.
The tinkering of PLI by substituting the denominator with total cost is unacceptable considering that the TPO has included the cost of traded goods with unrelated parties in the total cost. Therefore, we do not find any infirmity in the decision of learned DRP in directing the TPO to recompute the ALP by strictly restricting himself to the international transaction with the AEs.
Inclusion of Besant Raj International as a comparable, it is observed that only reason on which the TPO excluded this company is because it is a persistent loss making company. As per settled legal principles, a company can be considered as a persistent loss making company if it has shown loss in the current year as well as two preceding assessment years. Factually, the assessee has established that Besant Raj International Ltd. has shown profit in assessment year 2004-05. In fact, while giving effect to the directions of learned DRP, the TPO has accepted this fact. Therefore, Besant Raj International Ltd., being otherwise functionally similar to the assessee, has to be treated as comparable. Revenue appeal dismissed.
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2023 (1) TMI 1068
Addition u/s 41(1) - assessee has shown liabilities of sundry creditors - assessee stated that the outstanding liability is against the purchase of machinery from Sabko Emerystone & Engineering Industries - As assessee has not claimed depreciation on this machinery in any of the assessment order. In absence of any claim of expenditure/loss, depreciation in any assessment year, the provision of Section 41(1) cannot be applied - AO held that assessee has not established his claim of sundry creditor is capital in nature - HELD THAT:- Lower authority has not disputed about the purchase of machinery. No adverse evidence is brought on record that the liability is other than purchase of machinery. Thus, the credit in the books is not on account of trading liability. The expenditure incurred and purchases of machinery are certainly a capital expenditure. Further, the assessee has never claimed depreciation on such machinery.
In the case of CIT vs Mahindra & Mahindra [2018 (5) TMI 358 - SUPREME COURT] held on a perusal of section 41(1), it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax u/s 41. The objective behind this section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability.
In absence of any evidence that liability shown by assessee was other than purchase of machinery (capital asset), which was never put to use and the assessee never claimed depreciation thereof. That the consideration under section 41(1) of the Act is not sustainable. Appeal filed by the assessee is allowed.
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2023 (1) TMI 1067
Computation of Capital Gains (Loss) - Determining the cost of acquisition u/s 49(2AA) - Restriction of cost of acquisition in respect of shares sold - assessee had not produced Tax Residency Certificate (TRC) as directed by the DRP - return of income was filed in the capacity of “non-resident” - loss claimed under the head “capital gains” - HELD THAT:- The assessee had furnished the proof that he has paid taxes in USA (as perquisite) and in India.
In the instant case, since, the assessee had produced the TRC as per the directions of the DRP, we refrain from adjudicating whether TRC is mandatory for determining the cost of acquisition u/s 49(2AA) of the I.T.Act. Hence, we affirm the directions of the DRP. In the interest of justice and equity, we restore the issue to the files of the A.O. The A.O. is directed to examine the TRC and the same if it is found to be in order, the cost of acquisition shall be taken at Rs.2,13,73,563 as claimed by the assessee in his return of income. With these observations, we restore the matter to the files of the A.O. The A.O. is directed to afford a reasonable opportunity of hearing to the assessee and decide the issue in accordance with law - Appeal filed by the assessee is allowed for statistical purposes.
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