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2018 (6) TMI 1823
Disallowance of depreciation on the amount of cost of plant & machinery incurred as reimbursement to Gulbrandsen Chemicals Inc., USA - as alleged that the assessee has neither reduced the amount form the cost of asset nor disallowed the depreciation - HELD THAT:- We find that the expenditure were pertaining to professional fees for setting-up of the Plant and the travelling cost of the Architects etc. which were incurred by Gulbrandsen Chemicals Inc., USA, and were paid by it on behalf of the appellant to external third parties during the period from 2000 to 2002. We noticed that before the AO that it had set-up its Plants during the period of 2000 to 2002 in India.
As per the appellant in this phase, it had very limited organizational and functional resources and therefore Gulbrandsen Chemicals Inc., USA assisted it in Plant set up phase engaging external service providers (such as Plant Consultant, Architect etc.). We hold that any expenditure incurred in relation to creation of a capital asset should be capitalized to the relevant asset. Appellant accordingly it also capitalized the amount of Rs. 1,42,66,483/- spent for setting up of the Plants to the respective plants account in FY 2006-07 when it received debit notes from Gulbrandsen Chemicals Inc., USA for such reimbursement. They made the payment.
A.O. has invoked Section 43A on the basis of misconception in as much as receipt was for reimbursement from the company and same was the debit to the company and this aspect is not disputed. On account of aforesaid discussion, we allow the appeal of the appellant and direct the A.O. to allow excess depreciation - We allow this ground of appeal.
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2018 (6) TMI 1822
TP Adjustment - Comparable selection - HELD THAT:- Assessee is engaged in the business of providing non-binding investment advisory services pertaining to investment opportunity available in India to its Associated Enterprises (AE) named Apax Partners UK Ltd., located in UK, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
Computation of RPT transactions - The co-ordinate bench in the case of Goldstar Jewellery Design P Ltd [2014 (11) TMI 904 - ITAT MUMBAI] has observed that “the term “related party transaction” cannot be considered in its generic sense. It will encompass only such transactions between the related parties which directly affect the overall profitability in one way or the other”. A.R submitted that the reimbursements do not affect profitability and hence the same has to be excluded. We find merit in the said submissions. The reimbursement of expenses does not result in any profitability, i.e., it is mere compensation for the expenses incurred by one party on behalf of another party. Accordingly we direct the AO/TPO to exclude the reimbursements and accordingly compute RPT transactions. Accordingly we restore this comparable to the file of AO/TPO for considering it afresh.
Assessee has opted for Advance Pricing Agreement (APA) for AY 2010-11, wherein the assessee has accepted determination of higher margins - We notice that Rule 10MA provides for the methodologies of Roll back of the APA and clause (iv) of sub rule (2) of Rule 10MA states that there should be a request from the assessee for roll back of APA. In the instant case, admittedly, there is no request from the assessee for roll back. Hence we do not agree with the submissions made by the Ld D.R.
Accordingly we restore the issue of determination of ALP to the file of AO/TPO by considering the comparables approved by us in the preceding paragraphs by adopting single year data in terms of Rule 10B(4) of IT Rules. In the result, the appeal of the assessee is treated as allowed and the appeal of the revenue is dismissed.
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2018 (6) TMI 1821
TP Adjustment - comparable selection - high percentage of related party transactions entered - HELD THAT:-Crisil Limited (Research Segment) - It is now almost settled by various judicial precedents that for carrying out comparability analysis RPT filter should be around 25%. Since this issue has not been examined from this perspective, therefore, we are of the opinion that for examining the percentage of related party transactions matter should be remanded back to the file of TPO, who shall examine this point and in case the RPT is more than 25%, then this comparable cannot be included in the comparability list and hence should be excluded. With this direction issue of Crisil Limited (Research Segment) is remanded back to the file of the TPO.
Brescon Corporate Advisors Ltd. are not only into advisory services but also into merchant banking, financial restructuring and syndication of debt. Whereas the assessee company as discussed above is purely providing investment advisory services and none of its activities are into merchant banking. Brescon Corporate Advisory is also assisting company in special situations through recapitalisation, mergers and acquisition, infusion of private equity or direct investment etc. The company which is mainly carrying out merchant banking, restructuring and syndication of debt cannot be held to be functionally comparable with a company which is purely into investment advisory services.
There is no segmental information with regard to various streams of fees, i.e., financial restructuring and re-capitalisation, syndication of debt equity related advisory, M & A Advisory, etc. In the absence of such segment information, it would be very difficult to carry out in benchmarking analysis with the assessee, because none of such activities are carried out by the assessee. Accordingly, we direct exclusion of said comparable from the list of the comparables.
Khandwala Securities Ltd. - Only few activities undertaken by it under the corporate advisory services which can said to have some similarity with those carried out by the assessee. However in totality if we take the overall streams of revenue and function carried out by this company then it would be very difficult to include such a company into a basket of comparability list and therefore, at entity level and in absence of any overall segment of corporate advisory services, we do not find that it should be included in the comparables. Accordingly, we direct the exclusion of such comparable.
India Venture Capital - We find that the principal products of this company are software product and services, whereas the assessee company is purely into ITeS which is in the nature of business and investment research services. When a company is into Software development companies then ostensibly it cannot be held to be comparable with ITeS Company and on this ground alone we direct the exclusion of the said company.
Disallowance on account of provision made during the year for leave encashment by the assessee u/s 43B (f) - HELD THAT:- We do not find any merits in the contentions raised by the assessee that since the entire income of the assesses is exempt and, therefore, corresponding expenses are also exempt, because from the perusal of the assessment order it is seen that no deduction u/s 10A has been claimed by the assessee and if the provision of leave encashment has not been paid, then in terms of section 43B(f) such amount cannot be allowed as deduction. Accordingly, the addition as confirmed by the AO in pursuance of the DRP direction is upheld. Thus, on this issue the assessee’s ground is dismissed.
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2018 (6) TMI 1820
Seeking permission for withdrawal of petition - HELD THAT:- Writ petitions are disposed of as withdrawn. Liberty is granted to the petitioner to urge all the grounds including the grounds urged in the writ petitions and also permitted to raise counter claim, if any.
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2018 (6) TMI 1819
Unexplained investment - non reliance on additional evidences by CIT-A - procedure prescribed by law - Denial of natural justice - necessity of passing speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard - As per assessee property was purchased by the assessee and his other co-owner and taken bank loan and balance was paid by his brother - HELD THAT:- CIT(A) being aware of the procedures should have provided the assessee a specific opportunity to place its evidences by way of a proper application under Rule 46A. Opportunity to do so in all fairness should have been provided. CIT(A) in the discharge of his responsibilities is not visualized to function in a mechanical manner.
Merely because the assessee’s counsel apparently ignorant about the procedure relies upon evidences without following the due procedure does not entitle the First Appellate Authority to function mechanically. The Ld. CIT(A) is expected to act fairly and responsibly utilizing the powers with which he is endowed with the single minded aim that justice is done and not to frustrate a valid claim of the assessee on a hyper technical ground. The Appellate Forum provided under law must perform by ensuring that only just and due taxes for the state are only collected. The orders passed should not rely on the ignorances of the tax payers. The claims of the assessee must succeed or fail on merits, facts and evidences and not on account of the ignorance of the assessee or his counsel.
Admittedly where the assesse’s Counsel himself is ignorant about the procedures, the occasion to castigate the assessee for not being conversant with the legal requirements is, in the least, unfortunate. It is further seen that qua the specific property there were three other co-owners. The loan as per the claim put forth was from Nainital Bank as per the finding in the impugned order which also has been taken by these persons apart from the assessee. The purpose of referring to the co-sharers is relevant as exercise of administrative and quasai judicial orders passed by the authorities is legitimatized only if it is seen to be fair, equal and impartial. If identically situated persons are differently taxed, such orders of Quasi Judicial Authority strike at the very root of the principles of legitimate expectation of the tax payers and thus is open to the challenge of being whimsical, arbitrary and perverse. Such an approach cannot be given legal sanction.
In the interest of substantial justice, the impugned order is set aside and remanded back to the file of the CIT(A) with a direction to admit the fresh evidences - Appeal of assessee is allowed for statistical purpose
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2018 (6) TMI 1818
Assessment u/s 153A - Necessity of incriminating documents found in search - HELD THAT:- As it is a settled law that without any incriminating documents no adjustment to finally assessed income in completed assessment year can be tinkered with. The Ld. departmental tentative amount was any error in the order of the Ld. CIT – A. In view of this, we do not have any other option but to dismiss the appeal of the revenue.
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2018 (6) TMI 1817
Revision u/s 263 by CIT - declaration which was in the nature of unexplained nature was erroneously claimed by the assessee in addition to WIP and allowed by AO wrongly - as per CIT declaration made against WIP ould have been treated as unexplained expenditure u/s 69C and needed to be reduced from closing WIP - HELD THAT:- In the present case we find that in the assessment order AO has noted about the survey conducted on 02.02.2012, the statement of assessee was recorded on oath incurring of cash expenses. He has further noted that the details about the sources of business expenses and other expenses were called for by the assessee and the admission of additional income was also examined by him. He also noted that in the revised return, the additional income admitted was included by the assessee. We find that AO has examined the issue and after application of mind has passed the order.
Before us no material has been placed by the Revenue to demonstrate that the view taken by the AO while passing the order u/s 143(3) of the Act was unsustainable in law. In the present case, Ld.PCIT was not justified in invoking the provisions of Sec.263 - We, therefore, set aside the order of Ld.PCIT, whereby he has set aside the assessment order passed by the AO u/s 143(3) of the Act. Thus, the grounds of the assessee are allowed.
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2018 (6) TMI 1816
Unexplained cash deposits - HELD THAT:- CIT (Appeals) has proceeded on this basis that the entry regarding withdrawal is by way of clearing of cheque but when examined the bank statement available in the Paper Book, find that the clearing of cheque is mentioned by the bank against the entry of deposit of same amount and against withdrawal the narration given is "by self". It comes out that there is cash withdrawal of Rs.25.85 lakhs on 10.01.2011 and the deposit of cash in the bank account of Rs.10.01 lakhs is on 13.01.2011 and therefore, in my considered opinion, the source of deposit stands explained. Hence this addition is deleted.
Cash deposit in bank account - addition was made by the AO on this basis that this amount was received from the father-in-law and the assessee has not produced any evidence and therefore, the addition was made by the Assessing Officer - HELD THAT:- This is not the case of AO or CIT (Appeals) that this cash received from Ms. Swati is used by the assessee for some other investment or for some other cash deposit in bank account. In the absence of any such allegation, the source of Rs.2 lakhs stands explained and hence,delete this addition. This decision is further supported by these facts that as per the entry in the bank statement there is a deposit of cheque of Rs.2 lakhs on 15.2.2011 and there is reversal of such entry on the same date on this basis that cheque returned because of insufficient funds and assessee's submission is this that cheque of Rs.2 lakhs was received from Ms. Swati and it was deposited and the same was dishonored and cash was received against such dishonor of cheque. Accordingly Ground Nos.5, 6 & 7 are also allowed.
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2018 (6) TMI 1815
Disallowance relating to the part of the monthly lease rentals - HELD THAT:- We deem it proper to restore this issue to the file of the AO with direction to adjudicate this issue a fresh in light of the decision in case of IndusInd Bank Ltd. [2012 (3) TMI 212 - ITAT MUMBAI] and accordance with law. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, Ground No. 2 and 2.1 are partly allowed for statistical purpose.
Disallowing the revenue expenditure incurred on leasehold improvements - HELD THAT:- Decision of the Hon’ble Delhi High Court in the case of CIT vs. Amway India Enterprises [2011 (11) TMI 4 - DELHI HIGH COURT] held that in respect of the premises expenses which are incurred by the assessee on flooring, partition, wiring, fall ceiling, roofing, Air conditioner unit and duct, electrical wiring, laying network for setting up computer and for purchase of computer the same are in the nature of Revenue expenditure. The Hon’ble High Court has given the finding that whether an expenditure incurred is made on Revenue account or otherwise one would have to bear in mind the nature of the expenditure that is was it incurred for maintenance or preservation of an asset or was it expanded otherwise. If the expenditure was of the formal kind it would be in the nature of Revenue expenditure. In the light of the Hon’ble Delhi High Court decision it will be appropriate to remand this issue to the file of the Assessing Officer and after taking into cognizance the provisions of the Act the Assessing Officer may take a call for a proper justification.
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2018 (6) TMI 1814
Disallowance u/s 14A r.w.r. 8D - stay petition - HELD THAT:- We find from the decision under appeal that the assessing officer had failed to establish that the borrowed funds were utilised for the purpose of acquiring shares and in view of availability of own funds with the assessee, the expenditure ought to have been disallowed. This is a finding of fact. We do not find any perversity in such finding. As such, we do not admit the appeal on this point.
We do not find any utility in keeping the stay petition alive as there is no scope of passing any interim order. We accordingly dispose of the stay petition - we shall hear the appeal on the basis of the stay petition as we are apprised by the learned counsel for the parties that the stay petition contains all the relevant materials necessary for adjudicating the appeal.
On consent of the learned counsel for the respondent, service of the notice of appeal is waived and filing of paper book is also dispensed with. The appeal shall be listed in the monthly list of July 2018.
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2018 (6) TMI 1813
Refund of CENVAT Credit - input services - nexus with the output services or not - HELD THAT:- The appellant have described the nature of services and use thereof, it is prima facie found that in respect of all the services this Tribunal held that these subject services are input service, particularly in respect of identical placed assesse as appellant are engaged in providing output service which are exported. It is also observed that the lower authority denied the Cenvat credit/refund either on the basis of nexus or wanting of documentary evidence. The lower authority have not considered catena of judgments relied upon by the appellant.
Thus, entire case has to be re-considered by verifying documents and analysis of judgments which are directly in respect of subject input services - the appeals are allowed by way of remand to the adjudicating authority to re-consider the issue of Cenvat credit as well as refund after considering the submissions made by the appellant.
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2018 (6) TMI 1812
TDS u/s 194C - disallowance under Section 40(a) (ia) - HELD THAT:- We admit the appeal on the following point, which in our opinion involves substantial question of law.
"Whether on the facts and I the circumstances of the case the Tribunal was justified in law by holding that Section 194C(6) and Section 194C(7) are independent of each other and cannot be read together to attract disallowance under Section 40(a) (ia) of the Income Tax Act, 1961"
We dispose of the stay petition as there is no scope of passing any interim order. Let paper books be filed within eight weeks. All other formalities including service of notice of appeal be complied with within the aforesaid period.
The appeal shall be listed on 9th August,2018.
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2018 (6) TMI 1811
Estimation of commission of the sales turnover - CIT-A directed to work out it @ 0.1% as against 2% made by AO - HELD THAT:- The assessee is an employee of one Asia Group. There is an uncontroverted finding in the impugned order that the amount of sale and purchases are exactly same and no profit or loss resulted from such purchase/sale. The assessee has admitted that the transaction of sale and purchases were within the group companies only and were made at the instance of the employer to increase the turnover of the group company. It was also further admitted that there was no movement of goods and the transactions were shown of doing circular trading within the group merely to increase the turnover.
CIT (Appeal) has mentioned the case of Smt. Kalawati Negi, who was also an employee of the same group and showed similar transaction to jack up the turnover, wherein, the Ld. Assessing Officer itself made the addition on such account @ 0.1%. No contrary decision was brought to our notice. Thus, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), resultantly, the appeal of the Revenue is dismissed.
Appeal of the Revenue is dismissed.
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2018 (6) TMI 1810
Seeking grant of default bail - time limitation - statutory period for filing the charge sheet or Challan expired or not - HELD THAT:- The law is fairly settled at least from the Constitution Bench expression of the Apex Court in SANJAY DUTT VERSUS STATE THRU. C.B.I. BOMBAY [1994 (9) TMI 351 - SUPREME COURT]. Undisputedly, in these cases, the punishment provided for any of the offences is only up to 10 years and for one of the offences upto life and thus the charge-sheet must be filed from the very wording of Section 167 of Cr.P.C. within 90 days from the date of respective remand and, if not filed, for that default, in non-compliance with the statutory period to file the final report under Section 173 Cr.P.C. read with 167(2) Cr.P.C, the accused are entitled to the 'default bail', which is an indefeasible right to avail. Even there is no any controversy as to the default bail is to be granted is not from the date of default till filing of charge-sheet as a default bail once granted will enure till end of trial, that cloud is also cleared by the Apex Court.
It is the duty of the Court if charge-sheet not filed within the statutory period, to release the detenu on bail. For that even an oral application is enough if at all accused wants to apply. There are some expressions saying even default bail granted when there is a subsequent filing of charge-sheet, the procedure contemplated if at all to cancel the bail and to take custody is as per Cr.P.C. It is crystal clear therefrom of only the bail sought to be cancelled as contemplated by Section 439(2) and 437(4) Cr.P.C. once the default bail is availed by the accused for non submission of the charge-sheet.
Thus, once an application is made by the accused, after expiry of the statutory period of remand from non-filing of the charge sheet, he is entitled to the default bail and such a right cannot even be defeated by filing of charge sheet thereafter. So, the filing of the application either orally or in writing is a prerequisite, if not the Court chosen to grant the default bail, and once such an application is there, in recognition of his indefeasible right, he is entitled to the default bail, and that can no way be delayed even in its disposal - the petitioners/accused Nos. 5, 6, 8, 9, 10 and 12 respectively are entitled to the default bail. Thereby, the dismissal of the applications by the trial Court despite the petitioners-accused have chosen in filing written applications to avail the default bail is un-sustainable
Petition allowed.
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2018 (6) TMI 1809
Exemption u/s 11 - Admission of additional grounds as well as additional evidence - addition on account of interest income treated the same as revenue receipts - Assessee submitted that the assessee company is non-profit organization established with substantial government grant of establishing Auto cluster to promote competitive capabilities of Auto sector related small, medium & large enterprises in Marathwada region of Maharashtra State and the company is now enjoying the benefit of registration u/s.12AA(1)(b)(i) of the Act and therefore, assessee raised additional grounds stating that the computation of income of the assessee should be done u/s. 11 and 12
HELD THAT:- We find that registration u/s. 12AA (1)(b)(i) of the Act was granted to the assessee company in the month of February, 2017 whereas, order of CIT(A) was passed on 29.07.2016. Considering the effect of the said registration order as well as considering the facts that the provision to proviso of sub section (2) of section 12A of the Act , we find the same constitutes an important paper relating to assessment year i.e. A.Y. 2012-13 which is under consideration.
Considering the connectivity of issue to the additional evidences, we are of the opinion that admission of additional grounds as well as additional evidence is justified considering the set principles of natural justice. We, accordingly, admit the said additional grounds as well as additional evidences.
We find relevant to remit the issue back to the file of Assessing Officer for fresh adjudication after granting reasonable opportunity of being heard to the assessee. The Assessing Officer shall pass a speaking order after considering additional evidence. Assessing Officer shall consider all the judgments cited by the assessee before us on the issue of nature of the interest receipts .Grounds raised by assessee are allowed for statistical purposes.
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2018 (6) TMI 1808
Deemed approval of the entity under section 10(23C)(vi) - Tribunal upheld the order of AO in treating the assessee as AOP instead of an institution solely existing for imparting education - HELD THAT:- As there is merit in the miscellaneous application filed by assessee for assessment year 2007-08 wherein the assessee had filed application before the Commissioner for granting approval under section 10(23C) (vi) of the Act on 31.03.2006. In view of the dictate of the Hon'ble Supreme Court in CIT Vs. Society for The Promotion of Education [2016 (2) TMI 672 - SC ORDER] which is in respect of application made under section 12AA of the Act which is parameteria to provisions of section 10(23C)(vi) of the Act, we hold that since the Commissioner has not disposed off application dated 31.03.2006 within period of six months, the registration is deemed to be granted to the assessee w.e.f. 30.09.2006 i.e. after expiry of six months from the date of making application. Hence, applicant is entitled to grant deduction under section 10(23C)(vi) of the Act w.e.f 30.09.2006 which falls within assessment year 2007-08.
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2018 (6) TMI 1807
Slump sale - sale of entire undertaking of a tea estate - as per AO sale of a tea estate by the assessee the land and the agricultural part of the business was given a particular value and all other assets of the tea estate were given another combined value and the AO perceived the sale to be a slump sale where the entire undertaking was perceived to have been sold without any itemization - HELD THAT:- In course of the assessee’s appeal before the Commissioner (Appeals), the Commissioner (Appeals) not only discovered that some of the liabilities pertaining to the tea estate had not been transferred to the transferee, but also that the sale consideration was reduced from the written down value of the block of depreciable assets and disclosed as deemed short-term capital gain under Section 50.
Commissioner (Appeals) also found that in the valuation report and the books of accounts, specific values were consciously assigned to specific classes of assets by the parties to the transfer and the quantum of profit was also separately worked out on the transfer of agricultural land and plantation. The assessee disclosed the profits separately because plantation land was not a depreciable asset.
The valuer found the value of the land and plantation to be about Rs.12.20 crore. The cost of such land and plantation in the assessee’s books was about Rs.6.97 crore. A profit of about Rs.5.23 crore was disclosed on the transfer which was separately provided for in the balance-sheet as agricultural development reserve. On the Commissioner’s detailed inquiry as to the manner in which the sale was conducted, Commissioner (Appeals) was satisfied that it was not a slump sale.
Commissioner (Appeals) referred to several judgments; but at the end of the day, it was a pure consideration on facts and it is such factual finding which has been endorsed by the Appellate Tribunal in the judgment and order impugned dated November 6, 2015. Even though the Assessing Officer found that a certain value had been attributed to the land and plantation and another value attributed to the plant, machinery, buildings and non-agricultural assets, the Commissioner (Appeals) found the break-up backed by valuation reports and the like
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2018 (6) TMI 1806
Disallowance u/s 14A - interest expenditure incurred on specific heads is to be excluded for the purposes of Rule 8D - HELD THAT:- We find that the assessee has earned dividend of Rs. 29,018/-. In any case based on the settled position of law, the disallowance cannot exceed the dividend earned. The assessee has fairly submitted before the A.O. that at best 0.5% of the average investment may be considered in relation to indirect expenditure. Keeping in view the facts specific to the instant case and action of the Assessing Officer we direct the Assessing Officer to restrict the disallowance to Rs. 29,000/-.
Disallowance under section 40A(2)(b) - assessee had paid interest on unsecured loans to persons covered u/s 40A(2)(b). The rate of interest paid was @ 12% p.a. - maximum rate of interest on unsecured loans should not be more than 11% and so he restricted the claim of interest to 11% - HELD THAT:- The disallowance of 1% on account of interest paid the outside parties which the assessee categorically explains to be not related as per the Section 40A(2)(b) is against the provisions of the Act. Even so keeping in view the market condition since the monies have to be raised at a faster pace, payment of 1% excess interest cannot be said to be unreasonable and hence the addition made is hereby deleted. - Decided against revenue.
Disallowance of interest on account of diversion of funds to the sister concern - AO questioned the assessee regarding disallowance of interest on diversion of funds to sister concern and the assessee had submitted that it has the same stand on the issue as in the A.Y. 2010-11 - HELD THAT:- On perusal of the fact on record we find that there is no evidence on record except a presumption that interest bearing funds were used for giving loan to the sister concerns. The similar issue has been adjudicated in the case of the assessee for the A.Y’s 2006-07, 2008-09, 2009-10 and 2010-11 on similar facts. We therefore uphold the order of the Ld. CIT(A) and deleting the disallowance.
Disallowance on adhoc lump sum basis - HELD THAT:- As we find that the Assessing Officer has not brought any material on record primarily to disallow the expenditure. Keeping in view the assessee’s argument that the rise in expenditure is due to rise in diesel prices and the fact that advertisement expenses have come down with relation to the overall sales, we find no reason to confirm the disallowance made by the Assessing Officer in the absence of any cogent material brought on record by the Assessing Officer.
Addition on account of subsidy - HELD THAT:- Assessing Officer made addition as documents has not been submitted regarding the receipt of the subsidy.CIT(A) has also deleted the addition on assumption that the earlier Assessing Officers must have satisfied themselves about the correctness of the claim.
We hereby direct the assessee to produce the documents pertaining to receipt of subsidy and also calculation of depreciation. The Assessing Officer is hereby directed to go through the documents submitted, satisfy himself and allow as per the rules in force and in accordance with the provisions of the Income Tax Act,1961.
Disallowance u/s 37(1)/36(1)(iii) - assessee had debited interest of more than Rs. 2.35 crores to the profit & loss account - HELD THAT:- We have gone through the facts on record, placing reliance in the case of Bright Enterprises Pvt. Ltd. [2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT] has observed that if the interest free funds are available a presumption would arise that investment would be out of interest free funds. The commercial expediency is not in doubt as the advance was given for purchase of Shop for the business of the company in the Mandi Area to be set up by the Board.
Disallowance of interest - HELD THAT:- CIT(A) held that the assessee has submitted that this amount was not claimed as an expenditure and it is shown as advance only. An expenditure cannot be disallowed if it has not been debited to the profit & loss account. Therefore, the Assessing Officer is directed to verify as to whether the assessee has claimed this amount and if the assessee has not claimed this amount, then not to make the disallowance.
The revenue shouldn’t have come to higher forums on such clear finding by the Ld.CIT(A) which is purely a matter of factual verification. Hence we decline to interfere in the order of the Ld.CIT(A).
Addition on account of suppression of sales to sister concern - HELD THAT:- As the assessee has cited many cogent reasons like huge volume of sales to these concerns etc. to justify the sales to the sister concerns at lower rates. It may be clarified that while the addition for inflated purchases in respect of purchases made from sister concerns could be made u/s 40A(2)(a), but there is no corresponding provision in respect of sales made to sister concerns. The department cannot compel a person to make profit out of every transaction since the department does not have any authority to, ask a person to maximize its profits. If the assessee chooses to give discount to someone, he is free to do it. The only criteria/condition is that the transaction (sale) should not result in loss.
This principle was enumerated by the Hon'ble Supreme Court in the case of M/s Calcutta Discount Company Ltd. [1973 (4) TMI 6 - SUPREME COURT] in which Their Lordships have held that when a trader transfers his goods to another trader at a price which is less than the market price, so long as the transaction is bona fide, the revenue authorities cannot consider the market price ignoring the real price fetched to compute profits from the transaction. It was also held by the Apex Court in this case that an assessee was at liberty to arrange his affairs so as to minimize his tax burden. In the instant case, the persons to whom sales are made at lower rates are tax payers in the highest marginal tax bracket and so it can not even be viewed as a scheme for tax reduction. In view of this discussion, it is held that the Assessing Officer was not justified in making addition on account of sales made to associated concerns at lower rate and the same is deleted. - Decided in favour of assessee.
Disallowance of commission - CIT(A) confirmed the addition holding that the assessee has merely submitted that the confirmation can be asked for from the respective parties - HELD THAT:- We find that the commission payments have been regularly debited by the assessee to the P&L Account from 2008-09 onwards. We therefore consider it fit in the interest of justice to restore the matter back to the file of the Assessing Officer with directions to the assessee to produce relevant documents and evidences before the Assessing Officer so as to make him eligible for allowance of this expenditure. Assessee ground allowed for statistical purposes.
Disallowance of Travelling expenses - assessee had submitted that this expenditure was incurred for visit to USA towards stay and ticket to explore possibility of export of DOC and import of Soyabean oil and to explore the possibility of efficiencies of process and process improvements - HELD THAT:- We have heard the argument of both the parties and perused the material available on record, and consider it fit in the interest of justice to restore the matter back to the file of the Assessing Officer with directions to the assessee to produce relevant documents and evidences before the Assessing Officer so as to make him eligible for allowance of this expenditure.
Disallowance of Staff Welfare Expenses - HELD THAT:- We find that the expenditure is involved as a part of the Staff Welfare wherein the wards of the employees are benefited by studying in the school which was constructed in the remote area with the collaboration of the State Education Department. Hence, this can be treated as Staff Welfare Expenses and hence the addition made by the Assessing Officer is hereby directed to be deleted. Ground of assessee allowed.
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2018 (6) TMI 1805
TP Adjustment relating to management services and professional consultancy services - HELD THAT:- As decided in own case [2016 (8) TMI 950 - ITAT DELHI] assessee divided its operation in the manufacturing and distribution segment. In the manufacturing segment, the net profit margin (OP/Sales) was disclosed at 9.26%, assessee has selected 5 comparable companies and using three years financial data margin of comparables had been computed at 8.40%. In the distribution segment, the assessee has selected TNMM as most appropriate method and the tested party margin had been computed at 15.21% as compared to average margin of 6 comparables using 3 years financial data at 3.96% and the international transactions were claimed at arm’s length. We, therefore, keeping in view the aforesaid discussion are of the view that the impugned addition made by the AO on account of the adjustment made in the receipt of professional consultancy services and management support services rendered by the employees of the AE, was not justified. In that view of the matter we delete the impugned addition - Decided in favour of assessee.
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2018 (6) TMI 1804
Ownership and possession of property - cheating and forgery - offences under Sections 120(B), 420, 465, 467, 468, 471, 384 and 506(I) IPC - HELD THAT:- This F.I.R has been primarily registered for the offences of cheating and forgery. The offences of cheating will be made out only if it is shown that the accused herein had dishonestly induced the defacto complainant to deliver any property to any person. In this case, the defacto complainant has no where averred that he was cheated and dishonestly induced to do any act. In fact, his case is that he was threatened by the first accused. When his case is that he was threatened, he cannot in the same breath contend that he was cheated. The two allegations simply do not go together.
This Court is of the view that the offences of cheating and forgery are clearly not made out against the petitioners herein - this Court cannot believe that Durai Pandian or his brother would have fell intimidated by the so called threats held out by the first accused. In any event, the long delay in lodging this F.I.R in a case of this nature by itself renders the allegations inherently improbable.
These Criminal Original Petitions are allowed.
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