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Showing 61 to 80 of 1394 Records
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2017 (6) TMI 1334 - GUJARAT HIGH COURT
Direction to respondents to act in accordance with the guidelines in respondent No.1-Bar Council of India's letter dated 21st September, 2013 - non-enrolment of petitioner as an advocate despite the decision of respondent No.1-Bar Council of India - whether the engagement of the petitioner with the Corporation as Legal Consultant would violate the Rule or not?
HELD THAT:- Exercising powers under sub-section (2) of Section 26 of the Advocates Act, 1961, respondent No.2-Bar Council of Gujarat solicited opinion of respondent No.1-Bar Council of India. Respondent No.1 adopted an objective procedure of appointing a Committee of Retired Judge of the High Court, obtained report. The final decision was taken on the basis of such report to refuse the enrolment to the petitioner on the ground that it would be in contravention of Rule 49 of the Rules. Thus the expert committee went into the issue and answered it. At this stage contention of party-in-person about constitution of the committee may be dealt with, Bar Council of India had on the contrary required personal presence of the petitioner for giving opportunity to her for hearing. As the party-in-person was not able to remain present, in the fairness, the committee was constituted headed by the Retired Honourable Judge of this Court to have a proper decision on the issue. No illegality was committed by the Bar Council of India in constituting the committee. It was rather just, fair and reasonable stand to have an objective view.
Looking at Rule 49 of the Bar Council Rules, it provides that an advocate shall not be a full-time salaried employee. The conditions attached to the contract of service of the petitioner with the Corporation are reflective of the nature of the employment. The employment envisages that services are required to be rendered during the standard hours of service as per condition No.2. Condition Nos.9 and 7 show that service as legal assistant rendered by the petitioner is a full-time job and attaches with it monthly payable amount of ₹ 25,000/- - The mode of payment of TDS cannot determine the nature of employment for the purpose of Rule 29 of the Rules.
Nothing could be propounded to persuade the Court to take a different view. From the totality of operation of the facts and considering the nature of the service contract of the petitioner with the Corporation, there is no gainsaying that the petitioner incurs debility in terms of Rule 49 as her employment could be characterised as a full-time salaried employment. As a result, refusal by the respondents to grant the petitioner enrolment and the certificate to practice law could be said to be eminently proper and legal - Petition dismissed.
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2017 (6) TMI 1333 - GUJARAT HIGH COURT
Levy of the import fee - import of Denatured Spirit from outside the State - It is the case on behalf of the petitioners that once the spirit is Denatured after it being subjected to a process, the Denatured Spirit is Ethanol and therefore, the same is rendered unfit for human consumption and the same cannot be renatured again so as to divert the same again for potable use and the same is thereafter used only for industrial purpose, the State has no legislative competence to levy fee / import fee on Denatured Spirit / industrial alcohol manufactured and used for industrial purpose because the said subject does not fall under any of the Entries of List II of Schedule 7 of the Constitution of India.
HELD THAT:- Considering the pith and substance of the levy of fees on import of Denatured Spirit / Ethanol on import of the same from other States and considering the fact that there is a Prohibition Act in the State of Gujarat and therefore, considering Article 47 of the Constitution of India and Entry 33 of List II of Schedule 7 of the Constitution of India read with Entry Nos. 6, 8, 24, 51 and 68 of List II and Entry 33 of List III of Schedule 7 of the Constitution of India and the purpose and object for which the import fee is levied, it cannot be said that such a levy is beyond the legislative competence of the State as contended on behalf of the petitioners.
While the impugned levy of fees on import of Denatured Spirit / Ethanol though is held to be within the legislative competence of the State, does it pass the test of quid pro quo or not? - HELD THAT:- The State Government has not undertaken any supervisory activity which will constitute quid pro quo for the imposition of the import fees. As observed by the Hon’ble Supreme Court in catena of decisions more particularly decisions referred to hereinabove, there is a distinction between a “fee” and a “tax”. A tax is levied as part of a common exaction, whereas a fee is payment towards services rendered. The purpose for which the fee is being collected (so stated in the affidavits in reply) viz. to protect the interest of the Distelleries in the State of Gujarat, has no nexus with the import fees to be collected on import of Ethanol from outside Gujarat. Thus, there is no element of quid pro quo. A “fee” is generally defined to be a charge for special services rendered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the government in rendering the service. In the present case there is a total absence of any corelation between the expenses incurred by the government and the amount raised by collection of import fee on import of Ethanol from outside Gujarat. Thus, quid pro quo cannot have any possible application in the present case.
The impugned levy of import fee on import of Denatured Ethanol from outside Gujarat and the purpose and object for which the fee is sought to be levied, we are of the opinion that the impugned levy fails the test of quid pro quo. Under the circumstances, the impugned levy of import fee on import of Denatured Ethanol from outside Gujarat as per Rule 52 of the Gujarat Bombay Denatured Spirit Rules, 1959 is invalid in law and is illegal - Petition allowed.
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2017 (6) TMI 1332 - CHHATTISGARH HIGH COURT
Validity of demand-cum- show cause notice - SCN assailed on the ground that the respondent authorities have erred in law inasmuch as the said amount which the Petitioner has received is by virtue of a settlement out of Court in an arbitration dispute - HELD THAT:- The impugned demand- cum-show cause notice is one which was issued on 25.10.2016. The present writ petition was filed by the Petitioner on 22.5.2017, that is to say that there is a gap of almost about 7 months from the date of issuance of the impugned show cause notice. Further, from the perusal of the show cause notice it also reflects that at the time of the audit the Petitioner had been repeatedly asked to submit certain details on the basis of which audit could be done, but from the contents of show cause notice it reflects that there was a certain element of non-cooperation at the hands of the Petitioner. Thereafter, the authorities of the Respondents have discussed the entire factual matrix of the case and the legal provisions also and then the show cause notice has been issued.
Considering the submissions made by the learned Counsel for the Petitioner particularly the fact that the amount that they have received whether is non-taxable, this aspect is one which would require consideration by the competent authority after considering the various documents which the Petitioner might be having in their possession like - nature of dispute that was before the International Court of Arbitration and the nature of award that they have received. Whether this would be taxable or not would have to be assessed and determined by the assessing authority based upon the evidence produced before it.
This Court is of the opinion that it would not be proper at this juncture to interfere with the impugned show cause notice - Petition dismissed.
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2017 (6) TMI 1331 - ITAT CHENNAI
Assessment of trust - Determinate trust or indeterminate trust - Assessment in hands of the beneficiaries - Whether income from deposit was not correctly admitted in the hands of the beneficiaries or not admitted, it has to be assessed in the hands of the assessee trust? - DR argued that the assessee is a registered Venture Capital Fund and is a pass through Trust and can be extended only to the extent of income earned on VCU investments since the assessee being a SEBI registered VCU is squarely covered by the provisions of Sec.10(23FB) r/w Sec.115(U) - Whether the income is from investment in Venture Capital Undertaking or not makes no difference in the case of determinate trust? - HELD THAT:- In the instant case, the assessee has created a trust which was registered and the beneficiaries have been identified by the contribution agreement(PPM) and their shares are also ascertainable with respect to contributions and the units.
As in case M/S. P. SEKAR TRUST [2009 (4) TMI 38 - MADRAS HIGH COURT] considered the issue regarding identification of beneficiaries at the time of formation of the Trust and expressed view that even after execution of the trust deed if the beneficiaries are identifiable and their shares are ascertainable it is sufficient compliance to hold the trust as determinate Trust. In the assessee’s case the beneficiaries are identifiable with PPM and their shares are ascertainable as discussed earlier in this order. The facts of the case are similar to that of India advantage Fund [2014 (10) TMI 614 - ITAT BANGALORE] - we hold that the assessee’s Trust is a determinate trust and the appeal of the assessee is on this issue is allowed.
Whether interest income of the trust should be assessed in the hands of the beneficiaries but not in the hands of the assessee? - Section 115U mandates that the nature of income which is received by the VCC or VCF from the Venture Capital undertaking and further distributed to the investor shall be taxable in the hands of the investor by treating the same nature of income like long term capital gain, short term capital gains, dividend or other income such as interest etc., and accordingly be taxed as per the provisions as applicable under different heads of the income. Hence, section 115U prescribes the principle of pass through by treating the VCC or VCF as a pass through vehicle and further, grants some concession in the shape of non-applicability of provisions of Chapter XIV-D, XII E or XVII B.
Assessee is duty to bound to furnish the correct information regarding the income paid or credited to the beneficiary from each source which required to be included by the beneficiary under the same head as if the beneficiary has derived income from investment in venture capital under taking as per Rule 12C and Sec.115U of IT Act.
The assessee in the P&L account did not apportion the expenditure relating to other income and the income relating to venture capital income. It is necessary to bifurcate the expenditure incurred for various sources of income to include in the hands of the beneficiaries to club under the various heads correctly since expenditure relating to exempt income is not allowable.
Entire issue requires further verification from the assessing officer to compute the correct income under the head Interest income which required to be assessed as income from other sources and the dividend income and Long term capital gains. We set aside the entire matter back to the file of the assessing officer to examine the issue in the light of the above discussion and decide the issue afresh on merits. The assessee is also directed to collect information from the beneficiaries regarding the inclusion of income relating to the TSGF and submit the same to the AO for early completion of the assessment. Appeal of the assessee allowed for statistical purposes.
Set off of the proportionate amount of expenditure relating to interest income, in case the pass through status is not allowed with regard to interest income - HELD THAT:- We have set aside the issue of determining the income from other sources and allocation of expenses with regard to venture capital income in the earlier paragraphs. Therefore this issue also stands remitted to be file of the Assessing Officer to decide the correct income under the head Income from other sources to be passed on to the beneficiaries or to assessee in the hands of the assessee in the representative capacity. Therefore, this ground of appeal is allowed for statistical purposes.
Grant of credit for taxes deducted at source - HELD THAT:- It is the duty of the AO to allow the credit for taxes paid or collected by the Department. In this case, it appears that the AO has not allowed the credit for the taxes deducted at source. We direct the AO to allow the credit for taxes paid. This ground of appeal is allowed.
Rectification u/s 154 - CIT(A) has changed the determinate trust to indeterminate trust by u/s.154 - HELD THAT:- The debatable issues which require verification and legal interpretation are not permissible to decide under section 154 and only the mistakes apparent from the record are permitted to decide under section 154. The issue on hand is not mistake apparent from record and the issue of law which require verification of several aspects both on law and facts. Therefore, we set aside the order of the Ld CIT(A) and allow the assessee’s appeal. However, the issue relating to pass through of correct income is stands remitted to the file of the AO as discussed in earlier paragraphs.
Disallowance u/s 40A - assessee is a trust carrying on the business of Venture Capital Fund and appointed the TVS Investments Capital Funds Ltd. as the manager, and paid the above amount to TVS Capital Fund Investment, which is a sister concern of the assessee - HELD THAT:- In the assessee’s case, the income is only from three segments income from other sources, dividend income and capital gains. There is no income to be computed under the head profits and gains of business or provision. Therefore, we are of the considered opinion that the CIT(A) rightly held that the disallowance contemplated under Chapter-III of IT Act cannot be under taken while computing the income under Chapter-IV of the IT Act. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld.
Disallowance u/s.40(a)(i) - legal and professional fee for non-deduction of tax at source - HELD THAT:- As decided by us in the earlier paragraph, the AO cannot make disallowances contemplated by the Chapter-III of IT Act while computing the income under Chapter–IV of IT Act or in the income which does not form part of total income. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The appeal of the Revenue on this ground is dismissed.
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2017 (6) TMI 1330 - ITAT CHENNAI
Disallowance being the premium paid on forward contracts to cover the exchange fluctuations on the repayment of loan - assessee admittedly borrowed loan in Indian currency from State Bank of India for the purpose of setting up of plant / project, namely, Surajbari I Project - HELD THAT:- The said loan was converted into foreign currency loan and the assessee has paid premium. The assessee amortized the premium paid over a period of three years and 1/3rd of premium has been claimed as revenue expenditure, during the year under consideration. Both the authorities below concurrently found that the premium paid by the assessee was in the course of setting up of project Surajbari I Project, therefore, the loss, if any, is on the capital field and it cannot be allowed as revenue loss.
Assessee now claims alternatively that if it is capital loss, it will definitely go to increase the cost of the project, hence, the assessee shall be given depreciation on the enhanced value of asset.
Admittedly, the loan was borrowed for setting up of plant for generation of wind energy, therefore, the loss suffered in foreign exchange fluctuation would definitely go to increase the cost of the project to the extent of loss suffered by the assessee. As rightly found in JSW Steel Ltd. [2010 (5) TMI 716 - ITAT BANGALORE] the assessee is entitled for depreciation on the enhanced value. Accordingly, while confirming the orders of the lower authorities that the loss suffered by the assessee is capital loss, the Assessing Officer is directed to grant depreciation to the assessee as applicable on the enhanced value of the project after commencement of its business.
Disallowance u/s 14A - HELD THAT:- It is not in dispute that the investments were made in subsidiary companies. When the investments were made in wholly owned subsidiary companies, this Tribunal M. BASKARAN [2015 (3) TMI 192 - ITAT CHENNAI] consistently taking a view that it cannot be construed that investment is made for earning exempt income. Investment made in wholly owned company is only for the purpose of business. Moreover in Redington [2017 (1) TMI 318 - MADRAS HIGH COURT] held that when there was no exempt income, there cannot be any disallowance under Section 14A - This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2017 (6) TMI 1329 - ITAT CHENNAI
Computation of deduction u/s 10A - exclusion of expenditure incurred by the assessee in foreign currency towards communication expenses, project travel, software development charges, etc. - HELD THAT:- As carefully gone through the provisions of Section 10A. For the purpose of maintaining parity, the factors which were excluded from the export turnover should also be excluded from total turnover. Since, admittedly, the expenses incurred in foreign currency towards communication expenses, project travel cost, software development charges, overseas project expenses were excluded from export turnover, the same shall also be excluded from total turnover. CIT(Appeals) has rightly directed the AO to exclude the same from total turnover. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - HELD THAT:- Whenever the Assessing Officer is not satisfied that the claim made by the assessee towards expenditure for earning the income is not correct, he can recompute the same by applying Rule 8D. This Tribunal is of the considered opinion that computation of expenditure under Rule 8D is mandatory. The method of computation by applying Rule 8D is not in dispute. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Exclusion of expenditure incurred in foreign currency while computing deduction u/s 10A - HELD THAT:- This Tribunal specifically found that both export turnover and total turnover shall be of the same factor, therefore, when the expenditure incurred in foreign currency is not included in the total turnover, the same cannot also be included in the export turnover. There should be a parity between export turnover and total turnover. Hence, whatever expenditure incurred is not included in the export turnover, the same cannot form part of total turnover also.
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2017 (6) TMI 1328 - ITAT CUTTACK
Reopening of assessment u/s.147 - payment of freight charges addition - HELD THAT:- There was no new material which has come to the knowledge of the AO to show after passing of the order u/s.143(3) of the Act on 21.12.2011 that income chargeable to tax has escaped assessment so as to trigger the reopening of assessment made u/s.147.
In the case of CIT vs. Jet Speed Audio Pvt Ltd. [2015 (2) TMI 766 - BOMBAY HIGH COURT] has held that the power to reopen is not a power to review an assessment order. At the time of passing assessment order, it is expected of the Assessing Officer that he will apply mind and pass an order. If the AO had considered and formed an opinion on the material in the original assessment itself then he would be powerless to start the proceedings for reassessment.
Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] has held that he concept of “change of opinion” must be treated as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.
Reopening in the instant case has been made on the basis of very same set of material to hold that freight charges was paid in cash by the assessee and hence was to be disallowed u/s.40A(3) of the Act which is clearly a change of opinion and in view of the decision in the case of Jet Speed Audio Pvt Ltd [2015 (2) TMI 766 - BOMBAY HIGH COURT] and in the case of Kelvinator of India Ltd (supra), reassessment is not permissible in law. - Decided in favour of assessee.
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2017 (6) TMI 1327 - CALCUTTA HIGH COURT
Undisclosed purchase - unexplained expenditure - assessment made u/s 144 - addition was directed by the AO on the basis of a document in the form of a sheet found in course of a search and seizure operation under Section 132 of the Act, which contained certain figures scribbled on it - HELD THAT:- No question about the said document was put to the Director of the assessee in course of search. This factor was also taken into consideration by the aforesaid Appellate bodies. The two Statutory Appellate Authorities doubted the inherent probative value or quality of the above-referred document upon applying their mind on it. In substance, the said authorities found no reason to draw presumption against the assessee on the basis of scribbled figures appearing on the document in question. This is how two fact finding bodies chose to deal with that document.
Even without proper explanation from the assessee, when the mandate of law is that authorities may presume certain facts under Section 292C of the Act to come to a conclusion in favour of Revenue, the nature of information contained in or revealed by such document would have to be examined to link such document to undisclosed income of the assessee. Both the Commissioner and the Tribunal found no linking factor. Both these authorities rejected the reasoning of the Assessing Officer on this basis of which the latter came to his finding that the figures appearing on the said document could be computed to arrive at undisclosed income of the assessee.
The findings of the Statutory Appellate Authorities cannot be held to be perverse or based on no evidence in this case. The Statutory Appellate Authorities had examined the said document and found that the same could not be connected with assessee's transactions for the relevant assessment year.
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2017 (6) TMI 1326 - NATIONAL COMPANY LAW TRIBUNAL, PRINCIPAL BENCH, NEW DELHI
Winding up petition - initiation of CIRP - HELD THAT:- The petition is disposed off with the observation that this petition may be forwarded to Hon'ble Delhi High Court as insolvency process under the Insolvency and Bankruptcy Code, 2016 cannot be triggered in the face of the winding up proceeding pending before the Hon'ble Delhi High Court - the winding up proceedings which are in progress in the Hon'ble Delhi High Court may constitute a better basis for adjudication being earlier in point of time and the claim having been made there by other Operational Creditors as well.
This matter is referred to Hon'ble Delhi High Court which may be considered along with Co.PET. No. 961/2015 (Meera Nayar v. ABW Infrastructure Ltd.). The Registry is directed to send all the papers at the earliest.
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2017 (6) TMI 1325 - ITAT MUMBAI
Estimation of income - bogus purchases - AO in applying the profit rate i.e. gross profit rate @ 12.5% - CIT(A) confirming the addition @ 7.50% - HELD THAT:- Admittedly, these are bogus purchases but assessee has already disclosed a profit rate of 5.05% and qua that reduction should have been allowed to the assessee. Application of profit rate at 12.5% is perfectly but assessee has already disclosed profit rate of 5.05%, which should have been reduced. Accordingly, profit rate to the bogus purchases should be estimated at the rate of 7.45% and disallowance should be made. Direct the AO accordingly. The appeal of assessee is partly allowed.
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2017 (6) TMI 1324 - CESTAT NEW DELHI
Levy of Service Tax - gross value of spare parts used for servicing of the vehicles by authorized service station - Board’s Circular No. 96/7/2007-ST dated 23.08.2007 - HELD THAT:- When the subject transactions involve sale of spare parts on which sales tax/ VAT has been levied, there is no question of charging service tax on the gross value of the subject spare parts used in servicing of motor vehicles by the authorized service station.
The Tribunal in the case of M/S. SAMTECH INDUSTRIES AND OTHERS VERSUS CCE. KANPUR AND OTHERS [2014 (4) TMI 995 - CESTAT NEW DELHI] has held that on the cost of items supplied/ sold for providing the service, service tax cannot be demanded.
There is no merit in the impugned orders confirming the demand of service tax - Appeal allowed - decided in favor of appellant.
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2017 (6) TMI 1323 - ITAT AHMEDABAD
Addition on account of interest on share application money advanced to Sun Pharma Global Inc. - TPO/AO noted that the assessee has given share application money towards subscription of shares in its associated enterprise - TPO was of the opinion that the assessee should have charged interest at LIBOR plus basis and that arm's length price would be the LIBOR charged by the assessee + 200 basis points - HELD THAT:- Adjustment on account of notional interest on share application money which is not disputed be to be so are not liable to be re-characterized as loans only because there was a delay in allotment of share is not justifiable, more so when assessee has given plausible reason for such delay to avoid repetitive documentation and other regulatory exigencies. There is no dispute that the AE is a 100% subsidiary of the appellant company and the appellant company in its capacity as sole owner of the subsidiary my subscribing to share capital is beneficiary of all the gains of the subsidiary company. Merely, because allotment of shares is delayed and in books share application money is reflected as advance for share application money till the allotment would not alter the characterization to the prejudice of assessee's position anyway. In our considered view, the percentage of ownership is the only material factor which remains at 100% prior to allotment and also post allotment. As the assessee is the only shareholder in it's 100% owned subsidiary company SPG BVI it should not make any difference merely because part of the share application money is converted into equity shares and the balance were allotted in subsequent assessment years. We, therefore, do not find any merit in the submissions of revenue in this behalf.
As relying on STERLING OIL RESOURCES (P.) LTD [2016 (4) TMI 163 - ITAT MUMBAI] direct the A.O. to delete the addition - Decided in favour of assessee.
Addition on account of interest on Optional Fully Convertible Debentures (OFGD) subscribed to in Sun Pharma Global Inc.- HELD THAT:- As decided in own case CIT (A) while deleting the addition has noted that as per the agreement, the interest was payable only if the conversion option was not exercised on the expiry of 5 year period. If at any time during the 5 year period conversion option was exercised and the loan was converted into equity, no interest accrued or become payable. He further noted that the funds were provided by the Assessee as per RBI guidelines and in the immediately next year, the entire loan given to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since the Assessee has converted the loan into equity in the immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not granted interest free loan but invested in Optionally convertible loan with a clause of interest in case, Conversion option was not exercised and further field the Assessee's transaction with subsidiary was at arms length. Before us, the Revenue could not controvert the findings of CIT (A) by bringing any contrary material on record. In view of these facts, we find no reason to interfere with the order of CIT (A).
Addition on account of Corporate Guarantee provided to associated enterprises Sun Pharmaceutical Bangladesh Ltd. - HELD THAT:- When the bench has already taken a considered view in assessee's own case in the A.Y. 2007-08 [2017 (4) TMI 1434 - ITAT AHMEDABAD] and set aside the matter to follow Hon'ble High Court judgment in assessee's own case, we see no convincing reason not to follow our own order.
Addition on account of Sale of Pantoprazole to Sun Pharma Global - TPO was of the belief that the TNMM method applied by the assessee was not the most appropriate method and Profit Split Method (PSM) was the most appropriate method - main reason taken by ld. TPO to for rejecting assessee's TP working was view that it was not a contract manufacturer - HELD THAT:- No basis whatsoever to carry out any enhancement on account of profits on Sale of Pantoprazole for the detailed submissions made above and further as no profit has been earned on it after claim of infringement payment. Rather, we once again pray that the relief sought by the appellant in the appeal be granted and the entire addition made by the TPO / Assessing Officer be deleted. To that extent we request your good self to either delete the addition or reduce/ reallocate the profit allocation made to the Appellant and oblige.
PSM can offer a solution for highly integrated operations for which a one-sided method would not be appropriate. PSM may also found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions to the transaction - Considering the functions performed by the appellant company to SPG BVI, it is clear that SPIL has performed only one simple function and that is manufacturing of Pantoprazole Tablets. Except for this, there is no significant unique contribution by SPIL. For such simple functions as per OECD guidelines for transaction profit split method typically would not be appropriate of the functional analysis of that party.
By the order of the Hon'ble High Court Innovative Research and Development /division of the appellant company was demerged and given to Sun Pharma Advance Research company (SPARC) subsequently SPARC transferred ANDA rights to SPG BVI. SPG BVI has been entered into an agreement with the appellant company SPIL for the manufacturing of Pantoprazole. Pursuant to this agreement assessee manufactured Pantoprazole and sold the same to Caraco Ltd on the directions of SPG BVI. On such sale transaction, the appellant company had shown a net margin of 21.57% benchmark the same on transactional net ,margin method which was dismissed by the revenue authorities questioning firstly, the ANDA rights with SPG BVI and secondly, comparing the contract manufacturing agreement of SPIL with SPG BVI and SPIL with ELI Lily. The revenue authorities ultimately applied profit split method and 'made the upward adjustment.
As demonstrated elsewhere, the IPR/ANDA rights were very much with SPG BVI who entered into an agreement with the appellant company for the manufacturing of the said drug. The application of Transactional Net Margin Method is the most appropriate method in such sale transaction and has been benchmarked by the assessee by showing it to be higher than the margin earned from the sales made to Eli Lily.
Considering the facts in totality in the light of the decision of the Hon'ble Supreme Court In the case of Vodafone International Holdings B.V. [2012 (1) TMI 52 - SUPREME COURT] and on conspectus understanding of the facts as discussed elsewhere, we do not find any merit in the findings of the First Appellate Authority in accepting the application of PSM as the MAM, in our understanding of the facts TNMM is the MAM on the given facts and the same is accepted as such. We set aside the findings of the ld. CIT (A) and direct to delete the addition - Ground of the assessee is allowed.
Denial of weighted deduction u/s. 35(2AB) on trademark charges, overseas product registration charges - HELD THAT:- Basis for upholding the disallowance has been removed. We further find that on identical set of facts, the Mumbai Bench in the case of USV Ltd. [2012 (9) TMI 43 - ITAT MUMBAI] has allowed the claim of the assessee in respect of expenditure incurred in respect of patent application. Respectfully, following the findings of the co-ordinate Bench (supra), we direct the A.O to delete the disallowance.
Deduction of remuneration received from partnership firm for determination of book profit u/s. 115JB - HELD THAT:- Firstly the profit and loss account of the company should be in accordance with the relevant provisions of the Companies Act. Secondly, only specified items have to be added back as provided in various clauses to Explanation 1 and reduced by specific items provided thereon. The only specific amount of income which has to be reduced is the income to which provisions of Sections 10, 11 or 12 apply, if any such amount is credited to the Profit and Loss account and Section 10(2A) defines such income as the share of profit of a partner from the partnership firm, the language is clear and unambiguous and needs no other insertion or deletion. The remuneration to partner may have the colour of appropriation of profit of a partnership firm as held by the Hon'ble Supreme Court and Hon'ble High Courts in various decisions relied upon by the ld. Senior Counsel but as mentioned elsewhere, Section 115JB is a complete code in itself. Therefore, if the remuneration is credited by the appellant company in its Profit and Loss account then the same could be reduced it specifically provided under the Explanation to Section 115JB of the Act which we find missing from the relevant provisions. We, therefore, do not find any merit in this claim of the assessee.
Addition of expense disallowed u/s, 14A for computing book profit u/s. 115JB - HELD THAT:- we direct the A.O. to delete the addition of expense disallowed u/s. 14A for computing book profit u/s. 115JB of the Act.
Addition u/s 40A - HELD THAT:- Provisions of section 40A(2) are applicable only in respect of payments made to related parties mentioned therein. But the transaction before us is of credit in nature i.e. sales so provisions of section 40A(2) are not at all applicable. See [2016 (5) TMI 1306 - ITAT AHMEDABAD]
Addition on account of re-characterizing remuneration as alleged royalty income from the partnership firm SPI for use of Trademark, Brand and Technology - HELD THAT:- The partnership firm SPI has claimed ₹ 40.12 crores as remuneration to the assessee company but at the same time, it did not claim the same as deduction as it was not paid to a whole time partner as provided in the Act. It is true that the appellant company has also not offered the same for taxation taking a shelter behind the provisions of Section 28(v) of the Act. No doubt, the profits of the partnership firm are exempt u/s. 80-IB(4) of the Act, Even, if the partnership firm had not charged ₹ 40.12 crores as remuneration to the appellant company, the profits of the firm would have increased by this amount. Since the assessee is holding 97.5% share in the profits of the partnership firm, this amount of 40.12 crores would have otherwise come to the assessee in the firm of share of profit which again is exempt from taxation u/s. 10{2A) of the Act, Therefore, in our considered opinion, the allegation that it is a case of tax evasion is ill-founded. The fact of the matter is that such payments were never re-characterized as royalty in earlier assessment years and the action of the First Appellate Authority in the year under consideration is nothing but based Upon assumptions and presumptions. No addition can be sustained which are based upon assumptions, surmises or conjectures. We, therefore, set aside the findings of the Id. CIT (A) and direct the A.O. to delete the amount as re-characterized by the First Appellate Authority. Ground allowed.
Disallowance of expenditure treating them as capital expenditure - HELD THAT:- First Appellate Authority after considering the bills/vouchers has given a categorical finding that the extruder purchased by the assessee was an asset independently capable of producing article or thing. Even, it is accepted that the extruder was in replacement of old extruder yet it was a new asset and cannot be considered as repairs. We, therefore, decline to interfere with the findings of the ld. CIT (A). The A.O. has already allowed depreciation as per the provisions of the law. Therefore, no interference is called for addition to the extent of ₹ 10,17,500/- is confirmed, Ground No.15 is dismissed.
Payment to Nile Ltd. is concerned, we find that the First Appellate Authority has given a categorical finding after verifying the purchase order that this item has replaced damaged bottom body which is also supported by the Excise Challah. Such categorical finding cannot be brushed aside lightly. We, therefore, do not find any error or infirmity in the findings of the First Appellate Authority.
Items purchased for effluent treatment systems - First Appellate Authority have given a categorical finding that the effluent treatment systems after regular intervals requires maintenance and upgradation and the expenditure incurred during the year is on existing machines and did not bring into existence any new asset or added advantage to the assessee. As this factual finding has not been controverted before us, we do not find any reason to interfere with the findings of the First Appellate Authority.
Disallowance of provision for leave encashment u/s 43B - HELD THAT:- Restore the issue to the files of the A.O. with a direction to decide the issue afresh after decision of M/S EXIDE INDUSTRIES LTD. & ANR. [2009 (5) TMI 894 - SC ORDER]
Addition u/s 14A r.w.r. 8D - HELD THAT:- The only distinguishing fact for the year under consideration is that Rule 8D in fact is applicable for the year under consideration and therefore, We direct the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D.
Diisallowance of depreciation on motor car @ 30% claimed by the assessee and allowed by the A.O. @ 15%. - HELD THAT:- It is true that the main business of the assessee is manufacturing of bulk drugs as well as formulation products. It is equally true that the assessee is also in the business of leasing and finance activity. There is no dispute that the Hire charges have been assessed as business income. Therefore, we do not find any reason why the higher rate of depreciation should not be allowed. In our considered opinion, once the basic conditions are duly satisfied, there is no bar for claiming higher depreciation. Moreover, this issue is now well settled in favour of the assessee and against the revenue by the Hon'ble Supreme Court in the case of ICDS Ltd. [2013 (1) TMI 344 - SUPREME COURT]
Addition of provision of Wealth Tax u/s. 115JB - HELD THAT:- There is no dispute that Wealth Tax Act, 1957 imposes the charge of Wealth Tax on the 'net wealth' of every individual, HUF/company as on the valuation date. While Income-tax is tax on income. Both Income-tax and Wealth Tax are governed by separate and distinct legislated laws. It is true that under the Explanation to Section 115JB of the Act, certain items have been mentioned which have to be added back for the computation of book profit. It is equally true that there is no mention of Wealth Tax provision. The provisions of the Act are clear and unambiguous and require no addition/deletion of any items other than those mentioned in the provisions.
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2017 (6) TMI 1322 - BOMBAY HIGH COURT
Service of Summons - appellant assailed the impugned order with contention that order is not sustainable in law for the sole reason that powers under section 256 of the Code of Criminal Procedure could not have been exercised by the learned Magistrate as the summons was not served upon the accused - HELD THAT:- On the face of record the impugned order is not sustainable in law for the sole reason that stage has not reached to exercise power under section 256 of the Code of Criminal Procedure to dismiss the complaint and acquit the accused. The order of the dismissal of the complaint and acquittal of accused u/sec. 256 of the Cr.P.C can be passed only after the process was issued and the accused had appeared in the matter but the complainant failed to appear on the date listed for hearing of the case. In the instant case respondent/accused has not served nor appeared before the Court. So also the case was not listed for hearing.
The case was lying at the stage of the service of the summons. In default of taking steps at the most the complaint could have been dismissed by exercising the powers under section 204(4) of the Code of Criminal Procedure & not in exercise of powers under section 256 of the Code of Criminal Procedure. Therefore, the impugned orders is not sustainable in law. Since the impugned order could not have been passed in exercise of the powers under section 256 of the Code of Criminal Procedure the order deserves to be set-aside.
The case is restored to its original number. II. The case is remanded to the trial court. The appellant is directed to appear before the trial court on 1 st day of August, 2017.
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2017 (6) TMI 1321 - ITAT AHMEDABAD
Surplus earned from functioning of PDS [Public distribution system] on behalf of Government - Taxability as income in the hands of assessee - HELD THAT:- Assessee company was set up by the Government of Gujarat under the companies Act, 1956. The assessee company manage the public distribution system and other public welfare scheme on behalf of the Government of Gujarat. The Government of Gujarat has been providing handling commission as per the Government of Gujarat (GR) Government Resolution - the surplus which was earned by the assessee for the activities carried out on behalf of the Government of Gujarat belonged to the Government and payable to the Government along with interest after deducting of commission earned by the assessee. We further observed that the commission income earned by the assessee on the activities carried on behalf of the Government and other income from its own activities are taxable in the hand of the assessee.
In the earlier assessment year the assessing officer has accepted the similar accounting practices followed in the case of the assessee. We considered that surplus earned on behalf of the Government for carrying out function of Public Distribution System as agent of Government is not taxable in the hand of the assessee.
As elaborated in the order of the Ld.CIT(A) and considered that the Ld.CIT(A) is justified in deleting the addition made by the Assessing Officer by stating that surplus earned from functioning of PDS on behalf of Government cannot be taxed in the hand of the assessee. In view of the above stated facts and findings we uphold the order of the Ld.CIT(A).
Deduction not found to be justified as the assessee failed to substantiate with relevant supporting evidence that the said amount was offered to tax in the earlier years - We have also gone through the paper book filed by the assessee and noticed that hand-written entry as per page no.126 was not sufficient to prove that such amount was offered to tax in the earlier year, therefore, we do not find any reason to interfere in the decision of the Ld.CIT(A) on this issue.
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2017 (6) TMI 1320 - ITAT DELHI
Reopening of assessment u/s 147 - as argued reasons recorded are vague and scanty, without application of mind by the AO, and without necessary approval of the Joint Commissioner of Income-tax - HELD THAT:- We agree with the contention of the Ld. Senior DR about the practice of discussing the matters with higher authorities. Further, the decisions relied upon by the Ld. counsel of the assessee are distinguishable on facts as in the present case there was statements of the person looking after the affairs of the assessee company, admitted of having engaged in accommodation entry.
Thus, in our opinion, in the instant case, the Addl. CIT has applied his mind to the material and then arrived at a conclusion.
Reasons recorded by the Assessing Officer are neither scanty nor vague nor recorded in mechanical manner and Reasons recorded are with due application of mind AND Reasons recorded are with necessary approval of the Additional CIT
We hold that the reassessment proceeding are in terms of section 147 to 151 of the Act. Accordingly, ground No. 1 challenging the validity of reassessment is dismissed.
Objections raised by the assessee agitating the jurisdiction were not disposed off by the Assessing Officer, before passing the impugned order - HELD THAT:- Assessing Officer issued notice u/s. 143(2) & 142(1) on 14.08.2007, after a gap of almost one year from issue of notice u/s 148 of the Act, but the assessee didn’t comply said notice. The Assessing Officer issued a final show cause notice on 04.12.2007 proposing to assessee the income as mentioned in the notice. The assessment was to be completed on 31.12.2007 and the assessee asked reasons recorded on 20.12.2007, which were provided. The assessee vide letter dt. 24.12.2007 furnished reply of the queries raised about income of the assessee and in that letter the assessee raised the issue that reason were not acceptable. In the facts & circumstances, we find that the assessee raised objections not as per the decision of the Hon’ble Supreme Court in GKN Driveshaft India Ltd. [2002 (11) TMI 7 - SUPREME COURT] . Since in the year under consideration, no objections have been filed effectively by the assessee, therefore, disposing off such objections specifically also does not arise. Accordingly, the ground of the assessee is dismissed.
Incriminating material was not made available for rebuttal of show cause notice issued proposing the addition and no crosss-examination was provided, which is in violation of natural Justice and thus the order of the Assessing Officer is a nullity - HELD THAT:- No letter retracting that statement was filed either before the Assessing Officer or before the appellate authorities. Moreover, the statements relied upon by the Assessing Officer are the statements of the directors and authorized signatory of the assessee company, no question of providing cross-examination arises as they are not third-party witnesses. Further, the Assessing Officer has made addition under section 68 of the Act not only on the basis of the statements but due to failure on the part of the assessee in discharging its onus of establishing identity and creditworthiness of the persons who paid money and genuineness of the transaction carried out. The assessment proceedings are to be completed by the Assessing Officer in limited time period but the assessee sought adjournment again and again & delayed in replying to queries of the Assessing Officer. In view of the circumstances, the ground of the assessee that it is deprived of natural Justice for not providing cross-examination and proper show cause notice is not sustainable in law. Accordingly, the ground No. 3 of the appeal is dismissed.
Addition u/s 68 - HELD THAT:- Contradictory claims regarding the filing of the documentary evidences in support of identity and creditworthiness of the payer and genuineness of the transaction, in the interest of Justice, we feel it appropriate to restore the issue to the file of the Assessing Officer for deciding the merit of the issue of addition under section 68 of the Act, afresh with the direction to the assessee to produce all the above documents, before the Assessing Officer. The Assessing Officer may carry out the enquiries which deemed fit in the facts and circumstances of the case including enquiries from the banks of parties transacted. The assessee shall be afforded sufficient opportunity of hearing. Accordingly the ground No. 4 of the appeal is allowed for statistical purposes.
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2017 (6) TMI 1319 - NATIONAL COMPANY LAW TRIBUNAL, KOLKATA
Oppression and mismanagement - valuation of shares - validity of valuer's report - Can the valuer's report be contested and be set aside on the allegations put forth by the Petitioner? - HELD THAT:- The valuation of the shares was to take place on the basis of paid-up capital as on 31st March, 2010, and it was to take into consideration bad debts, doubtful advances, expenses and customer claims provided for in the books of R1 Company during 2010-11 which pertained to earlier years including unrecovered debtors above 730 days. Thereafter the Petitioner objected to Clause 2.3 of Grant Thornton's engagement letter and filed C.A. No. 511 of 2014 praying for a direction on Grant Thornton to conduct the valuation of the shares of the Company in terms of prescribed auditing standards and to independently investigate and verify the information provided by the Company before arriving at the valuation - However, no direction whatsoever was passed on the valuer to independently verify the information provided by the Company as had been prayed for by the Petitioner. Eventually Grant Thornton submitted its final valuation report on 8th April, 2015 which was subsequently challenged by the Petitioner by filing C.A. No. 923/2015, which is the present company application, where the principal contention of the Petitioner was that the valuer was required to value the shares of the company as on 31st March, 2010 and that it had taken into consideration figures beyond 31st March, 2010 which was allegedly not permitted and that the valuer had taken the actual figures from the audited balance sheets instead of the projected figures as is required under the Discounted Cash Flows method.
There was no specific direction by the Company Law Board at any point of time regarding the use of a specific auditing standard to be employed by the valuer during valuation of the shares of R1 Company. The valuer's final valuation report could be challenged on the grounds of patent illegality, fraud, collusion or partiality, which has not been proven in the present case. The valuer's report under such circumstances cannot be contested and be set aside if either of the parties is not satisfied with the valuation.
There is no reason to set aside the valuation report as has been submitted by the valuer - application dismissed.
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2017 (6) TMI 1318 - ITAT DELHI
TP Adjustment - comparable selection - Accentia Technologies is selected by the ld TPO but is challenged now by the assessee submitting that it has an extra ordinary event during the year, functionally dis-comparable as it is engaged in medical transcription, has significant intangibles and abnormally high profit margin - HELD THAT:- Medical transcription is a service which requires employment of medical professional also. However, the medical coding the billing may not require higher technical skill. In annual report the company has mentioned that it has only one segment and therefore it does not have segmental results pertaining to medical transcription vis-à-vis coding and billing activity. According to us the medical transcription itself cannot be said to be comparable with the functions performed by the assessee. However, the medical coding and billing activities are similar to the functions performed by the assessee. But , in absence of the segmental accounts with respect to medical coding and billing activities this comparable cannot be included. Hence, TPO is directed to exclude it.
E-Clerx Services Ltd - nature of business carried on by e- Clerx Services Ltd., it is patent that the same being a KPO company, is quite different from the assessee, providing only IT enabled services to its AE, which fall in the realm of BPO services. Apart from that, it is further observed that this company has significant intangibles which it uses in rendering KPO services, against which the assessee does not have any intangibles. A s such, e-Clerx Services Ltd. cannot be considered as comparable.
Igate Global Solutions Ltd - As the functional profile of amalgamating company and amalgamated company are similar the mere fact of amalgamation during the year does not make a company otherwise comparable on FAR as non-comparable. On looking of the functional profile of Igate Global Solution it is found that it is engaged in provision of contract sample services and IT enables services. On the income revenue stream of the assessee is also with respect to ITES services. It is also engaged in BPO activities. In view of this we do not find that the functional profile of this company differs from assessee. In view of this we do not find any merit in the argument of ld AR for exclusion of this comparable. Hence, the order of the ld TPO in retaining this comparable is upheld.
ICRA Techno Analytics Ltd - This company as per its annual accounts placed at Page NO. 1210 shows that it is engaged in the business intelligence and analytics space. It is also engaged in software development and consultancy, engineering services, web development and hosting services. It is also noted that it has two income segments of services and sales and it does not have the complete segmental information with respect to both the segments of services and sales as fixed assets and services are used inter-changeability. In view of this we find that this company is functionally not comparable as well as it does not have complete segmental information with respect to the sales and service segments. In the result we direct the Transfer Pricing Officer to exclude the above comparable.
Infosys BPO Ltd. - In the present case the size of this comparable with the size of the assessee is more than 20 times. Therefore, we direct exclusion of this comparable on the size and scale of its operation.
TCS eServe International Ltd - This company also contributes to Tata Brand Equity from this year and according to Schedule M of the financial statement during the year it has contributed ₹ 37 crores towards the brand. In view of this the functional profile of the assessee as well as the assets employ are not comparable. In view of this ld Transfer Pricing Officer is directed to exclude it.
TCS eServe Ltd. - As perused the annual report of the company for year ended 31.03.2010. The company is mainly engaged in IT enabled services and business process outsourcing. It is also providing technical services which involve software testing, verification and validation. It also contributes similarly to Tata Brand Equity and for this year the contribution was ₹ 42 crores. Therefore, following the same reasoning given by us for exclusion of TCS eserve International Ltd we also direct the ld TPO to exclude this comparable.
e4e Healthcare Ltd - we reject the contention of the assessee of withdrawing of its own comparable for the reason that the assessee could not demonstrate before us that how the original comparable was selected when the same functional profile of the company was available at the time of preparing TP documentation. In view of this, we reject the argument of the assessee for exclusion of this comparable.
R Systems Pvt. Ltd - It is held in several decisions that if the assessee can demonstrate with publicly available authentic information for the remaining period and exclusionary period and further produces the tabulated data for the similar accounting year as followed by the assessee then if the FAR analysis of that company is comparable, it may be included. Therefore, it is now the duty of the assessee to satisfy the Assessing Officer/TPO with such information. Hence, we direct the ld Transfer Pricing Officer to verify the information with respect to this comparable in accordance with the law and then decide inclusion or exclusion.
Omega Healthcare Ltd - This comparable was selected by the assessee but rejected by the ld Transfer Pricing Officer and ld DRP for the reason that the annual report of the relevant year is not available in the public domain. The ld AR stated that same is available in public domain and further same is also produced before us at page No. 1269 to 1284 of the paper Book. In view of this we direct the ld TPO to verify the annual report and decide the issue about inclusion of this comparable.
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2017 (6) TMI 1317 - ITAT KOLKATA
Addition on account of rent receipts shown as “business income” -HELD THAT:- Income in respect of Gadhidham unit was already offered to tax as evident from the financial statement of the assessee which are placed on pages 1 to 21 of the paper book, more particularly from the profit and loss account which is placed on page 9 of the paper book. Moreover, we find that Ld. CIT(A) has merely directed the AO to verify the same whether the income in respect of Gandhidham unit has been included in its books of account, as such, we find no infirmity in the order of Ld. CIT(A). Thus the AO has all the right as provided under the statute to ensure whether income has been included in the income of the assessee and therefore we find no infirmity in the order of ld. CIT(A). Hence, this ground of Revenue’s appeal is dismissed.
Benefit u/s 80-IB(11A) denied - Deduction was denied by AO on the ground that the warehouses in respect of which the deduction was claimed were not ready for commercial activities in the year under consideration - HELD THAT:- On perusal of Section u/s 80IB of the Act we find there is no pre-condition for claiming the deduction that there has to be any completion certificate. Admittedly, the income of assessee has shown the unit located at Gandhidham in its profit and loss account. Thus, in our considered view, the deduction u/s. 80IB(11A) of the Act cannot be denied merely on the ground that completion certificate was furnished at the fag-end of financial year. It is also pertinent to note that the inspector has given the report by stating that the warehouse was rented out to M/s Rishi Shipping Limited since long which proves that the commercial activity started before the completion certificated obtained by the assessee.
Other reason that the requirement of provision of Sec. 80IB(11A) of the Act that the assessee must be engaged in the integrated facilities providing for handling, transportation and storage charges. In this regard, we find that the assessee has not produced any supporting documents other than list of clients which are placed in the record. On perusal of that list, we find that it is internal list maintained by assessee which was duly furnished before Authorities Below. However, in our considered view, the list cannot be a conclusive evidence that the assessee is engaged in providing integrated service.
We disagree with the contention of Ld. DR that there was a storage of DAP (fertilizer) in the warehouse maintained by assessee. it is because, the AO observed that there was a storage of DAP (fertilizer) on the basis of report submitted by Inspector which was furnished in the year 2009-10 and there is no information available with the Revenue what was stored in the year under consideration in the warehouse of the assessee. Therefore, we are of the view that the Revenue has failed to produce necessary evidence suggesting that there was storage of DAP (fertilizer) and not food-grains in the year under consideration.
Whether the assessee is engaged in the integrated service as envisaged under the provision of Section 80IB(11A) ? - AR has furnished a list of 17 pages wherein the income of storage, transportation, and handling charges was shown. However, in our considered view, that the list cannot be treated as conclusive evidence to hold that the assessee is engaged in the integrated services. Besides the above, we also find that the AO has not exercised his power u/s. 143(3) of the Act to ascertain from the parties where they availed integrated services from the assessee. With this view of the matter, we are inclined to give one more opportunity to assessee to justify its claim for deduction u/s. 80IB(1A) of the Act. In the light of above stated discussion, thus, we restore this issue to the file of AO to adjudicate the issue afresh in accordance with law and after giving opportunity of being heard to assessee. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.
Disallowance made by AO for debt redemption reserve in calculating book profit u/s. 115JB - HELD THAT:- Judgment of Hon'ble Bombay High Court in the case of CIT vs. Raymond Ltd. [2012 (4) TMI 127 - BOMBAY HIGH COURT] has held that the debenture redemption reserve is a ascertained liability and therefore allowable deduction u/s. 115JB of the Act. - Decided against revenue.
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2017 (6) TMI 1316 - COMPETITION COMMISSION OF INDIA
Anti-competitive agreements - Price collusion amongst competitors through a series of "hub - and - spoke" arrangements - Refusal to Deal - Discount Control Mechanism - resale price maintenance in contravention of Section 3(4)(e) of the Act - Tie-in arrangements - contravention of the provisions of Section 3 of the Act - HELD THAT:- To analyze the alleged abusive conduct, the Commission is of the opinion that any assessment of competition has to be made in the context of markets and therefore, the Commission would use the terms upstream and downstream markets while analysing the alleged anti-competitive vertical restraints in the present cases.
Upstream Market - HELD THAT:- passenger cars can be purchased across the country, though different state-level road taxes and registrations may be applicable. Further, dealerships and distributions of all passenger cars are prevalent across the territory of India. Accordingly, the upstream geographic market consists of the entire territory of India.
Downstream Market - HELD THAT:- The downstream geographic market may be taken as the territory of India, as the conditions of competition for the distribution and dealership of Hyundai cars are uniform across the country. Though there may be price differences in terms of road tax and registration, Hyundai has distributorships and dealerships across the country and its cars are sold across the territory of India. Accordingly, the relevant (downstream) geographic market may be defined as territory of India.
Refusal to Deal [Section 3(4)(d)] - HELD THAT:- The Commission is of considered opinion that Clause 5(iii) of the Dealership Agreement has not restricted, in form or in practice, any dealer in any manner from operating other OEM dealerships. The avowed objective of the clause appears to ensure that HMIL dealers do not free ride on facilities and services provided by HMIL. Further, such stipulation ensures that HMIL is kept posted with the financial and investment activities of its dealers to ensure that funds meant for functioning of the dealership business are not diverted elsewhere. No evidence has been adduced by the parties to demonstrate that HMIL restricted its dealers from acquiring dealerships of competing manufacturers - the Commission is of the opinion that Clause 5(iii) does not impose an exclusive supply obligation in contravention of Section 3(4)(b) or a refusal to deal in contravention of Section 3(4)(d) read with Section 3(1) of the Act.
Resale Price Maintenance - HELD THAT:- The Commission is of the view that the OP has sought to impose an arrangement that results in RPM, which includes monitoring of the maximum permissible discount level through a "Discount Control Mechanism" and a penalty punishment mechanism upon non-compliance of the discount scheme. The level of discount was determined by the OP for each model and variant of the passenger cars and the OP had also appointed a Mystery Shopping Agency to collect data from dealers for such monitoring and reporting to the OP. Based on the above, the Commission is of the opinion that the OP has contravened the provisions of Section 3(4)(e), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - CNG Kits - HELD THAT:- The Commission is of the considered opinion that in cases where warranty is cancelled for use of non-CEV CNG kits, the same may be objectively justified. The OP may also have a legitimate interest in ensuring that alternative brands of CNG Kits are not used, as the OP would be bearing the costs of warranty. Accordingly, cancellation of warranty upon use of non-CEV CNG kits does not, as a general rule, amount to a contravention of Section 3(4)(a), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - Lubricants & Oils - HELD THAT:- In so far as the OP mandates its dealers to use particular oil/lubricants and penalises its dealers where non recommended oils are used, it would amount to "tie-in arrangement" in contravention of Section 3(4)(a), read with Section 3(1) of the Act. However, for the reasons given in the context of CNG kits (objective justification and legitimate business interest), cancellation of warranty upon use of non- recommended oils/lubricants does not amount to contravention of Section 3(4)(a), read with Section 3(1) of the Act.
Tie-in arrangement [Section 3(4)(a)] - Car Insurance Services - HELD THAT:- Mere recommendation that the dealers consider/suggest the insurance companies partnered with the OP will not amount to tie-in arrangement. It is opined that the OP has not violated Section 3(4)(a) of the Act with respect to the allegation that the OP has tied the sale of its cars with selected insurance vendors only.
Tie-in arrangement [Section 3(4)(a)] - Tying the sale of premium vehicles to non-premium - HELD THAT:- The DG, did not find contravention of the provisions of Section 3(4)(a) of the Act by HMIL having any arrangement of selling both segment (premium and non-premium) cars. The Commission is in agreement with the conclusion of the DG on this count as the Informants could not adduce any credible evidence to support this allegation.
To conclude, The Commission is of the considered view that HMIL has contravened the provisions of Section 3(4)(e) read with Section 3(1) of the Act through arrangements which resulted into Resale Price Maintenance. Such arrangements also included monitoring of the maximum permissible discount levels through a Discount Control Mechanism - HMIL is directed to cease and desist from indulging in conduct that has been found to be in contravention of the provisions of the Act
Imposition of monetary penalty - HELD THAT:- The starting point of determination of appropriate penalty should be to determine relevant turnover and thereafter, to calculate appropriate percentage of penalty based on facts and circumstances of the case - the Commission notes that the infringing anti-competitive conduct of HMIL in the instant case included putting in place arrangements, which resulted into Resale Price Maintenance by way of monitoring of maximum permissible discount level through a Discount Control Mechanism and a penalty mechanism for non-compliance of the discount scheme. Such conduct pertains to and emanates out of sale of motor vehicles. Hence, for the purposes of determining the relevant turnover for this infringement, revenue from sale of motor vehicles alone has to be taken into account.
The Commission decides to impose penalty on HMIL at the rate of 0.3 % of its average relevant turnover of the last three financial years - Tthe Commission imposes a penalty of ₹ 87 crore on HMIL for the impugned conduct in contravention of the provisions of Section 3(1) read with Section 3(4) of the Act - The Commission directs HMIL to deposit the penalty amount within 60 days of receipt of this order.
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2017 (6) TMI 1315 - ITAT BANGALORE
Deductions u/s. 10A - reduction of the items of expenditure incurred in foreign currency i.e; on communication and travel which are attributable to the delivery of software outside India and in rendering of technical services outside India - HELD THAT:- Jurisdictional High Court of Karnataka in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] has held that when certain expenses are excluded from the, export turnover for the purpose of computing deduction admissible under the Act, like u/s. 10A of the Act, such expenses are also to be excluded from total turnover, as export turnover forms part of total turnover. The decision in the case of Tata Elxsi Ltd. (supra) has also been followed by the Hon'ble Court in the case of CIT v. Motor Industries Co. Ltd. [2015 (7) TMI 876 - KARNATAKA HIGH COURT] , holding that if any expenditure is sought to be reduced from export turnover, then it should also be reduced from total turnover for the purposes of computing the eligible deduction u/s 10A of the Act. In this legal and factual matrix of the case, as discussed above, we find no reason/requirement to interfere with or deviate from the finding rendered by the DRP on this issue and, therefore, uphold the same. - Decided against revenue
Risk adjustment - DRP order in granting the assessee 1% risk adjustment arbitrarily and on an ad hoc basis - HELD THAT:- While the co-ordinate benches of this Tribunal in specific cases have been directing the TPO to grant the assessee risk adjustment, if warranted, based on examination of the working submitted by the assessee; in this case however we find that the DRP has allowed ad hoc risk adjustment of 1%, without any examination of the assessee's working of risk, the facts of the case or assigning reasons for its finding. In these factual circumstances, we are of the opinion that the decision of the DRP in granting the assessee an ad hoc 1% risk adjustment is baseless and bereft of any examination of the assessee's working of risk, if any, the facts of the assessee's, case vis a vis the comparable companies etc. We, therefore, set aside the order of the DRP granting the assessee ad hoc risk adjustment of 1%. Consequently, ground of Revenue's appeal is allowed.
TP Adjustment - comparable selection - HELD THAT:- Exclusion of companies from the list of comparables on account of it failing to satisfy the filter of 75% revenues to be from software technology services revenue.
Companies functionally dissimilar with that of assessee's international transactions in software development services need to de deselected from final list.
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