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Showing 61 to 80 of 1434 Records
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2021 (8) TMI 1376
Seeking stay on proceedings - settlement already arrived at (or not) - Intervenor is opposing the settlement claiming that the Corporate Debtor cannot settle merely with one of the Creditors - HELD THAT:- The 'Interim Resolution Professional' will place this order before the banks, in which accounts of 'Corporate Debtor' are maintained. The Bank Account(s) of the 'Corporate Debtor' be allowed to be operated through IRP/RP for day-to-day functioning of the company such as for payment of current bills of the Suppliers, salaries and Wages of the employees/workmen, electricity bills etc.
On 10th August, 2021, the IRP are stayed from issuing publication. That order is recalled - The IRP may proceed further with CIRP but, however may not constitute Committee of Creditors till this matter comes up on next date. This time till next date the Appellant and Respondents are given so that if they want to take opportunity before the Adjudicating Authority to settle in terms of Section 12-A of IBC read with Rule 11 of NCLT Rules they may try to settle if they want to do that. If by the next date, Section 12-A of IBC Proceeding is not completed, the Interim Orders may or may not be continued.
It is stated that Application under Section 12-A of IBC is already filed. If the parties have filed or if the parties file Application under Section 12-A of IBC read with Rule 11 of NCLT Rules through IRP or directly to the Adjudicating Authority, the Adjudicating Authority is requested to take up the same at the earliest and decide the same one way or the other as per law.
List the Appeal 'For Admission (After notice)' Hearing on 13th September, 2021.
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2021 (8) TMI 1375
TDS u/s 195 - Royalty payments as defined under Explanation II to Section 9(1)(vi) - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - HELD THAT:- This issue involved in the present case is no longer res integra as in the case of Engineering Analysis Centre of Excellence[2021 (3) TMI 138 - SUPREME COURT] has decided the issue amounts paid by resident Indian end-users/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 were not liable to deduct any TDS u/s 195 - Appeal is allowed.
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2021 (8) TMI 1374
TP Adjustment - determination of Arm’s Length Price of SDT - proceedings commenced under the omitted provision under clause (i) of Section 92BA - HELD THAT:- The Finance Act 2017 has omitted SDT whereby any expenditure in respect of which payment has been made or has to be made to a person referred to in clause (b) of sub-Section (ii) of Section 40. It has been omitted w.e.f. 01.04.2017. This precise issue had come up for consideration before the Hon’ble Karnataka High Court in Textport Overseas Pvt. Ltd [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] wherein held that when clause (i) of Section 92BA have been omitted by the Finance Act, 2017 w.e.f. 01.04.2017 from the statute, the resultant effect is that, it had never been passed and to be considered as a law never been existed and therefore order of TPO u/s.92BA could be invalid and bad in law, While coming to this conclusion the Hon’ble High Court has referred and relied upon the judgment in the case of Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors.[2000 (2) TMI 823 - SUPREME COURT]
Rule of interpretation of statutes that where a provision of an Act is omitted by an Act and the said Act simultaneously re-enacts a new provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment coming into force with effect from the date enforcement of the re-enacted provision.
The issue for consideration before us is clause (i) of Section 92BA which has been omitted from 01.04.2017 and there is no re-enactment with modification or any Saving Clause in any other Sections of the Act. Thus, without any Saving Clause or similar enactment, then it has to be held that Clause (i) of Section 92BA did not come into operation whenever any action has been taken especially after such omission. Accordingly, we hold that no Transfer Pricing Adjustment can be made on a domestic transaction which has been referred to by the Assessing Officer after the omission of the said clause by the Finance Act, 2017 even though transaction has undertaken in the Assessment Year 2016-17.
Our decision is equally fortified by the judgment of M/s. Raipur Steel Casting India (P) Ltd. [2020 (6) TMI 629 - ITAT KOLKATA] which pertained to the Assessment Year 2014-15, and catena of other judgments as relied upon by the Ld. Counsel of the assessee cited extenso in the foregoing paragraphs. Appeal of the assessee is allowed.
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2021 (8) TMI 1373
MAT application u/s 115JB on Banking companies - assessee bank eligibility for deduction u/s 36(1)(vii) when the assessee has not debited any bad debts write off in the profit and loss account and only the provision for bad debts (prudential write off) has been claimed as deduction in the computation of income as bad debt write off - as per HC [2020 (12) TMI 402 - KARNATAKA HIGH COURT] for the reasons assigned in the judgment [2020 (11) TMI 486 - KARNATAKA HIGH COURT], the substantial questions of law involved in this appeal are answered against the revenue and in favour of the assessee - HELD THAT:- Leave granted.
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2021 (8) TMI 1372
Perjury - falsification of statements - respondent-wife supporting the application for maintenance had falsely stated as to her unemployment & lack of income - HELD THAT:- This Court is inclined to grant a limited indulgence in the matter as under and for the following reasons:
a) Petitioner's matrimonial cause for annulment of his marriage with the respondent, is pending before the Court below; respondent-wife who is a medical practitioner with Post Graduation, was then doing her 'Doctorate of Medicines' (ie., DM), is not in dispute; in the narrative affidavit filed by her in support of application for maintenance, she had claimed to be unemployed & incomeless; the said application came to be rejected by the Court below vide order dated 06.02.2015 and the same is put in challenge.
(b) Even before this Court, it is not the case of respondent that the copies of Income Tax Returns produced by the petitioner for opposing the claim for maintenance, do not pertain to her or that their contents are untrue/incorrect; when the Court below has recorded a specific finding as to the income of the respondent from the medical profession that too on the basis of undisputed IT Returns for the relevant period; when it has also recorded a specific finding that the respondent has suppressed the fact that she was earning income; that being the position, the application of petitioner for initiating action for the offence of perjury, could not have been turned down as being premature merely because main matter is still pending; consideration of such an application has nothing to do with the outcome of the main matter at all.
This writ petition succeeds; impugned order is set at naught; matter is remitted for consideration afresh; till such consideration takes place, the main matter shall be parked at a bay.
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2021 (8) TMI 1371
Depreciation at the rate of 60% on computer based equipment, which was restricted to 15% by the AO - HELD THAT:- CIT(A) has allowed the claim of assessee in full after following the order of First Appellate Authority for AY 2011-12. It is further observed that the AO has himself allowed assessee’s claim of depreciation @ 60% on computer based equipment in AY 2014-15
From perusal of the impugned order it is gathered that the issue is perennial. In AY 2005-06, 2007-08 and AYs 2009-10 to 2011-12 the CIT(A) had allowed assessee’s similar claim of depreciation on computer based equipments. In appeal by the Revenue, the Tribunal confirmed the order of First Appellate Authority. No infirmity in the impugned order, the same is upheld and the appeal of Revenue is dismissed, sans merit.
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2021 (8) TMI 1370
Income deemed to accrue or arise in India - sale value of software and provision of ancillary support services as royalty receipts/FTS income - assessee is a company incorporated in the United States of America as engaged in the business of developing, manufacturing and distribution of software products from outside India and also providing ancillary support services from outside India - HELD THAT:- As following the decision rendered in the case of Engineering Analysis Centre for Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] and also following the decision rendered by the co-ordinate bench in AY 2016-17 [2021 (7) TMI 615 - ITAT BANGALORE] we hold that receipts by way of sale of software licenses and provision of ancillary support services connected with the sale of software products cannot be assessed as royalty/FTS income in the hands of the assessee. Accordingly, we set aside the order passed by the AO on this issue. Appeal filed by the assessee is allowed.
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2021 (8) TMI 1369
Income deemed to accrue or arise in India - receipt from Indian customer towards sale of software would constitute royalty within the meaning of section 9(1)(vi) of the Income-tax Act and Article 12 of the DTAA between India and USA - whether the receipts from Indian customers towards annual maintenance service, implementation and consultancy services can be brought to tax as fees for technical services? - HELD THAT:- Issue in question is squarely covered in favour of the assessee by the judgment of Engineering Analysis Centre of Excellence P.Ltd. [2021 (3) TMI 138 - SUPREME COURT] wherein it was categorically held that sale of software would not constitute royalty within the provisions of section 9(1)(vi) of the I.T.Act and Article 12(4)(a) of the DTAA between India and USA.
Amounts received towards annual maintenance services, implementation and consultancy services, as stated that when the receipts on account of sale of software itself not included as royalty. Miscellaneous income on the same such as annual maintenance also cannot be brought to tax as fees for technical services.
Thus we hold that the payment received by the assessee-company towards sale of software would not constitute royalty and cannot be brought to tax. Miscellaneous receipts on account of sale of software also cannot be brought to tax as fees for technical services. Appeal filed by the assessee is allowed.
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2021 (8) TMI 1368
Validity of sale deed - challenge on the ground that KSFC had no authority to put the suit property for sale - rejection of the application Under Order 7 Rule 11 of the Code of Civil Procedure - HELD THAT:- It would be necessary to refer to the decisions that particularly deal with the question whether res judicata can be the basis or ground for rejection of the plaint. In KAMALA AND ORS. VERSUS K.T. ESHWARA SA AND ORS. [2008 (4) TMI 800 - SUPREME COURT], the Trial Judge had allowed an application for rejection of the plaint in a suit for partition and this was affirmed by the High Court. Justice S B Sinha speaking for the two judge bench examined the ambit of Order 7 Rule 11(d) of the Code of Civil Procedure - While holding that "recourse to Order 7 Rule 11" by the Appellant was not appropriate, this Court observed that the Trial Court may, after framing the issues, take up the issues which pertain to the maintainability of the suit and decided them in the first instance. The Court held that this course of action would help the Appellant avoid lengthy proceedings.
In a more recent decision of this Court in SHAKTI BHOG FOOD INDUSTRIES LTD. VERSUS THE CENTRAL BANK OF INDIA & ANR [2020 (6) TMI 823 - SUPREME COURT], a three Judge bench of this Court, speaking though Justice AM Khanwilkar, was dealing with the rejection of a plaint Under Order 7 Rule 11 by the Trial Court, on the ground that it was barred by limitation. The Court referred to the earlier decisions including in SALEEM BHAI AND ORS. VERSUS STATE OF MAHARASHTRA AND ORS. [2002 (12) TMI 640 - SUPREME COURT], and observed that It is clear that in order to consider Order 7 Rule 11, the court has to look into the averments in the plaint and the same can be exercised by the trial court at any stage of the suit. It is also clear that the averments in the written statement are immaterial and it is the duty of the Court to scrutinize the averments/pleas in the plaint. In other words, what needs to be looked into in deciding such an application are the averments in the plaint. At that stage, the pleas taken by the Defendant in the written statement are wholly irrelevant and the matter is to be decided only on the plaint averment.
On a reading of the plaint, it is evident that the first Respondent has not made an attempt to conceal the fact that a suit regarding the property was pending before the civil court at the time. It is also relevant to note that at the time of institution of the suit (OS No. 138/2008) by the first Respondent, no decree had been passed by the civil court in OS No. 103/2007. Thus, the issues raised in OS No. 103/2007, at the time, had not been adjudicated upon. Therefore, the plaint, on the face of it, does not disclose any fact that may lead us to the conclusion that it deserves to be rejected on the ground that it is barred by principles of res judicata. The High Court and the Trial Court were correct in their approach in holding, that to decide on the arguments raised by the Appellant, the court would have to go beyond the averments in the plaint, and peruse the pleadings, and judgment and decree in OS No. 103/2007. An application Under Order 7 Rule 11 must be decided within the four corners of the plaint. The Trial court and High Court were correct in rejecting the application Under Order 7 Rule 11(d).
The plaint was not liable to be rejected Under Order 7 Rule 11(d) and affirm the findings of the Trial Court and the High Court. We clarify however, that we have expressed no opinion on whether the subsequent suit is barred by the principles of res judicata - Appeal dismissed.
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2021 (8) TMI 1367
Income deemed to accrue or arise in India - taxability of software sale by the US entity to Indian entities - PE in India - sale of Novell Software Products as 'Royalties' on substantive basis both under the Income-tax Act as well as the India-USA DTAA - whether the receipts from sale of Novell Software Products being in the nature of business income and in the absence of Permanent Establishment ('PE') of appellant in India, the receipts from sale of Novell Software Products ought to have been considered as not taxable in India - HELD THAT:- So far as taxability of software sale by the US entity to Indian entities is concerned learned representatives fairly agree that the said issue is now covered by case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT].
The transactions in question were at arm’s length price, no taxability survives in the hands of the assessee. Once basic taxability under the DAPE itself comes to an end, all other issues raised in the appeal are rendered academic and infructuous. We, therefore, uphold the plea of the assessee to this extent.
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2021 (8) TMI 1366
CENVAT Credit - input services - Contingent Liability Insurance/Public Product Liability Insurance - Marine Insurance Policy - period from August, 2014 to June, 2016 - HELD THAT:- There are insurance policies which cover the risk on different aspects for manufacturer as well as service provider. Such indemnification is necessary to meet the risk and liability that may arise on the happening of a contingency mentioned in the policy. In the case of an injury caused by the use of product to the public, the appellant is liable to compensate such mishappening. The policy would help the appellant to meet such liability. In case, there is no such insurance policy, the appellant will have to face huge financial loss, which will affect the business of manufacture. Such policies are also required in the interest of the public to safeguard injuries that may occur due to consumption of products manufactured by the appellant - the credit availed on the service tax paid on Contingent Liability Insurance is eligible.
Marine Insurance Policy - only ground alleged for denying the credit is that there is no nexus between the input services and the manufacturing activity - HELD THAT:- The refund under Rule 5 can be claimed on the input services used for exports made under a particular quarter. In the present case, the period covered by the Marine Insurance Policy is from 1-7-2016 to 30-6-2017. The policy covers the risk of goods under transit for a period of one year. Usually carrier may hold a transit policy, which covers each consignment. The Marine Insurance Policy in the present case intends to indemnify the risk of the goods under transit belonging to the appellant. The discussion made by the Commissioner (Appeals) for denying the credit on this input service, is legally misplaced - the credit on Marine Policy is eligible.
Thus, the disallowance of credit on Contingent Liability Insurance and Marine Insurance Policy cannot sustain. The impugned order to this extend is set aside - appeal allowed.
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2021 (8) TMI 1365
Validity of reassessment proceedings u/s 147 - Addition u/s 68 - Independent application of mind v/s borrowed satisfaction - argument submitted that the reassessment proceedings in the instant case is based on borrowed satisfaction based on the conclusion drawn by Investigation Wing - HELD THAT:- When there is non-application of mind by the AO to the report of the Investigation Wing, such reassessment proceedings are not in accordance with law and such reopening proceedings have been quashed. Since, in the instant case, the AO has not applied his mind as there is non-identification of the deponents, non-mentioning of middleman if any, absence of details in the form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the considered opinion that there is complete nonapplication of mind by the AO to the information received from the Investigation Wing. Therefore, in view of the decision of Meenkashi Overseas Pvt. Ltd. (2017 (5) TMI 1428 - DELHI HIGH COURT the reassessment proceedings are not in accordance with law.
We further find in the case of Sh Rajiv Agarwal [2016 (3) TMI 972 - DELHI HIGH COURT][has held that even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment.
We further find in the instant case, the assessee in response to notice u/s 148 stated that return of income filed u/s 139 of the Act be treated as return of income filed in response to notice u/s 148 and also requested for supply of the copy of reasons. We find the AO after more than four months directed the assessee to e-file the return of income which was done on 13.10.2018. We find the AO thereafter issued notice dated 16.10.2018 u/s 143(2)/142(1) of the Act and supplied reasons recorded on 22.10.2018 against which the assessee submitted objection to assumption to jurisdiction on 05.11.2018 and same were disposed of by AO on 09.11.2018. From the above facts, it is evident that the AO assumed jurisdiction to make assessment by issuing notice u/s 143(2) of the Act on 16.10.2018 before supplying reason which means that the AO assumed jurisdiction before allowing assessee to file objection to assumption to jurisdiction.
We are of the considered opinion that reassessment proceeding initiated by the AO in the instant case and upheld by the learned CIT(A) is not in accordance with law. Therefore, we quash the reassessment proceeding - Decided in favour of assessee.
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2021 (8) TMI 1364
Validity of order passed TPO u/s 92CA(3) - non follow the earlier decision of the Tribunal in the assessee's own case - as argued though the assessee had placed reliance on the decision of the Tribunal in the assessee's own case, wherein, identical issue was considered in [2018 (5) TMI 2069 - ITAT CHENNAI] TPO did not even refer to the said decision and mechanically passed the order - HELD THAT:- TPO has passed the order, dated 30.10.2018, pertaining to Assessment Year 2015-16, wherein, certain observations have been made with regard to the Arms Length Price. Whether the said adjustment suggestion made in the order dated 30.10.2018 is sustainable on facts can very well be examined by the DRP, which has been conferred with sufficient jurisdiction in terms of Section 144-C of the Act. Therefore, in our considered view, the appellant should not bypass the said remedy. That apart, we note that, as against the order passed by the Tribunal, which was referred to by the assessee before the TPO, which according to the assessee covers the issue, the Revenue has filed a Tax Case Appeal before this Court and the said appeal has been entertained and is pending since the year 2018.
Since each of the Assessment Year is separate by itself, the assessee can very well agitate all issues before the DRP. It is true that, if identical transactions have been considered for the earlier Assessment Years or for the subsequent Assessment Years, unless there are cogent reasons for the TPO/Assessing Officer to take a different view, normally, the trend in which the assessment has been made will not be upset or a different view will not be recorded. In any event, all issues can very well be agitated by the appellant/assessee before the DRP. We find that, in the counter affidavit filed by the respondent in the writ petition, certain factual issues have been set out to sustain their contention that the decision of the Tribunal for the Assessment Year 2013-14 would not apply.
There are also other averments made touching upon the merits of the matter. The assessee has also filed a rejoinder affidavit to the counter affidavit. In the impugned order, we also find that the learned Single Bench has made certain observations or recorded the submissions of the Revenue, touching upon the merits. In our considered view, if the appellant has to avail the remedy provided under Section 144-C of the Act, before the DRP, then the Court would not be justified in making any observation touching upon the merits of the assessment and all issues should be left open.
Writ Appeal is dismissed and the order passed by the learned Single Bench is affirmed, giving liberty to the appellant/assessee to approach the DRP.
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2021 (8) TMI 1363
Assessment of trust - depreciation on the assets even though the cost of purchase of asset was already treated as application of income under Section 11 - HELD THAT:- Substantial question of law No.1 has to be answered against the Revenue in the light of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Rajasthan and Gujarati Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT] wherein it was held that normal depreciation could be considered as legitimate deduction in computing real income of assessee on general principles or u/s.11 (1)(a) of the Act. Accordingly, the substantial question of law No.1 is answered against the Revenue by complying the above decision.
Construction contract as granted to the firm in which the managing trustee was a partner would tantamount to “service” as contemplated under Section 13(2)(c) - How sub-section (2) of Section 13 should be interpreted and whether there is a deemed provision? - HELD THAT:- We find from the order passed by the CIT(A) which has been confirmed by the Tribunal that there has been no discussion on such aspects, nor the Assessee raised such issue. Nevertheless the issue, being ultimately a legal issue, involves question of fact and law for the Tribunal is required to take a fresh decision considering all issues and also the effect of sub-section (2) of Section 13.
In the result, the matter is remanded to the Tribunal to decide the issue regarding whether there was a violation committed by the Assessee Trust under Section 13(1)(c) read with 13(2) and Section 13(3) of the Act in respect of building contract awarded to a firm in which managing trustee was a partner and the firm having earned profit, whether the Assessee is entitled for exemption under Section 11.
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2021 (8) TMI 1362
TP Adjustment - Comparable selection - Computation of margin of the comparable companies adopted by the TPO - HELD THAT:- On perusal of the financial, it is clear that comparable company, namely, Priya International Limited is having three segments for the relevant assessment year also. Out of the total revenue for the relevant assessment year, the sale of software/electronics is only to the tune - AO/TPO is directed to adopt the margin of Priya International Limited with regard to the segment of electronics alone.
TP adjustment by directing the TPO to re-compute the arm's length price in the case of the Appellant at entity level - HELD THAT:- Bangalore Bench of the Tribunal in the case of IKA India Private Limited [2018 (10) TMI 49 - ITAT BANGALORE] had held that as per section 92 the transfer pricing adjustment has to be made with reference to the international transactions the assessee had undertaken with its AEs.
In view of the clear directions of the Co-ordinate Bench order of the Tribunal in the case of IKA India Private Limited v. DCIT (supra) that the transfer pricing adjustment should be restricted to AEs related transaction, we direct the AO/TPO to re-compute the arm's length price of the assessee in respect of the international transaction it had entered with its AEs.
Disallowance of interest expenses - allowable business expenditure - AO erred in disallowing the interest paid on account of statutory payments - CIT(A) erred in not deleting the said disallowance - HELD THAT:- The assessee had claimed as deduction in the Profit and Loss Account, interest expenditure on account of delayed payment of statutory dues - Whether the statutory payment are routed through the Profit and Loss account or not is immaterial for deciding the issue whether interest paid for the belated payment of statutory dues is compensatory or not (if the same is compensatory, the interest expenditure is allowable deduction u/s. 37 of the I.T. Act). Mumbai Bench of the Tribunal in the case of Chander K. Raichandani [2013 (2) TMI 713 - ITAT MUMBAI] had clearly held that the simple interest paid for belated payment of statutory dues is nothing but compensatory and allowable deduction u/s. 37 - we hold that the sum paid as interest for belated payment of statutory dues is an allowable deduction.
Working capital adjustment - HELD THAT:- In terms of Rule 10B(1)(e)(iii) of the I.T. Rules, the net margin arising in comparable uncontrolled transactions should be taken into account the differences, if any, between the international transaction and the comparable uncontrolled transactions which could materially affect the amount of net profit margin in the open market. It is not the case of the TPO/DRP that differences in working capital requirements of the international transactions and the uncontrolled comparable transactions is not a difference which will materially affect the amount of net profit margin in the open market. If for reasons given by the Revenue Authorities working capital adjustment cannot be allowed to the profit margin, then the comparable uncontrolled transactions chosen for the purpose of comparison will have to be treated as not comparable in terms of Rule 10B(3) of the I.T. Rules.
Assessee in the present case has given all the details required for working capital adjustment. Therefore, the Revenue Authorities were not justified in denying the claim of the assessee for deduction. Hence, the AO/TPO is directed to allow the working capital adjustment in the light of the material placed on record, after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly.
Corporate Guarantee Commission - HELD THAT:- The corporate guarantee is an international transaction and there is no doubt that the arm's length price has to be computed with reference to the said transaction. However, in the instant case, it is the case of the assessee that amount of the subsidiary is lying with the assessee on account of advance for which no interest was being charged by the subsidiary. This factual aspect has not been examined neither by the AO/TPO nor by the DRP - We are of the view that the matter needs to be examined afresh by the AO/TPO and we remit the issue to the files of the AO/TPO. It is ordered accordingly.
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2021 (8) TMI 1361
TP adjustment - MAM selection - determination of ALP in respect of the international transaction of purchase of stock - in- trade by the Assessee from its AE - assessee aggregated and benchmarked the transactions of purchase of consumables, raw materials, stock-in-trade and capital assets by selecting Cost Plus Method (CPM) as Most Appropriate Method (`MAM') and the overseas AE as tested party - Assessee submitted that the TPO ought not to have rejected the claim of the Assessee that RPM was the MAM for determination of ALP - HELD THAT:- A method for determining arm’s length price, to be held as a ‘most appropriate method’ (MAM), should be, as provided in rule 10C(1). A method "which is best suited to the facts and circumstances of each particular transaction" and a method and "which provides the most reliable measure of arm’s length price of the international transaction" Under rule 10C(2)(c), "the availability, coverage and reliability of data necessary for application of the method" is one of the crucial factors determining suitability of a method of determination of arm’s length price in a particular fact situation.
Similarly, it is also important to determine whether accurate adjustments can be made for the differences between the international transactions and the comparable uncontrolled transactions, and unless such adjustments can be made the related method cannot be said to be most appropriate method.
Determination of ALP on the basis of facts and circumstances and as per the requirements of the relevant statutory provision is mandatory and cannot be accepted owing to default. We therefore set aside the order of the AO/TPO on the issue and the directions of the DRP on the issue and remand the issue to the DRP for passing a speaking order after meeting the specific objections raised by the Assessee. The relevant grounds of appeal being Gr.No.1 to 12 are accordingly treated as allowed for statistical purpose.
Disallowance of reimbursement of expenses by invoking the provisions of Sec.40(a)(ia) - submission of the Assessee on the aforesaid disallowance was that the reimbursements were purely on a cost to cost basis and there was no margin whatsoever and therefore there was no question of deduction of tax at source on such reimbursements - HELD THAT:- We are of the view that the DRP fell into an error in refusing to examine the plea of the assessee that the sum paid were mere reimbursement with no element of income by following the decision of Transmission Corporation AP Ltd. [1999 (8) TMI 2 - SUPREME COURT]. The said decision has been explained in a later decision in the case of GE Technologies [1999 (8) TMI 2 - SUPREME COURT] and in terms of the said judgment the chargeability of the sum paid in the hands of the recipient has to be gone into. If the payments were mere reimbursement, then there would not no income chargeable in the hands of the recipient and hence no requirement of deduction of tax at source. Since this exercise is required to be carried out by the DRP, we deem it proper to remit this issue also to the DRP.
Admission of additional ground - Assessing Officer computing total income without adjusting the declared loss - HELD THAT:- Additional grounds of appeal raise questions of law, which can be decided on the basis of material available on record. The omission to raise the aforesaid grounds of appeal is bonafide. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co Ltd [1996 (12) TMI 7 - SUPREME COURT] and Jute Corporation of India [1990 (9) TMI 6 - SUPREME COURT] and the discretion vested in your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, the additional grounds of appeal is admitted for adjudicated on merits.
Merits of the claim made in the additional ground is concerned, the issue requires examination by the AO when he gives effect to the order. Ends of justice will be met, if the AO is directed to consider the claim of the assessee and if found correct give appropriate adjustment to the total income.
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2021 (8) TMI 1360
TP Adjustment - computation of assessee’s own PLI - As submitted foreign-AE being least complex entity, should be taken as tested party for the purpose of benchmarking - HELD THAT:- AEs were providing marketing services in overseas markets against lump-sum fees. Therefore, the selling and marketing expenses incurred in domestic segment were rightly allocated to non-AE sales by the assessee. There was no justification to allocate the same to AE segment. So far as the compensation for use of premises is concerned, we are of the opinion that this expenditure would mostly be fixed in nature and would bear no relation with the turnover. The same has to be incurred irrespective of quantum of turnover. On the other hand, if the number of employees were more, the assessee would require larger premises and the expenditure would be more. Thus, allocating the same on the basis of number of employees would be more scientific method of allocating these costs. Similar is with electricity cost. More the employees more would be such cost. Therefore, we do not concur with Ld. TPO’s approach in allocating the same on the basis of sales. The method adopted by the assessee was more scientific and supported by guidance note issued by the Institute of Cost Accountants of India for allocating administrative overheads which provide for number of employees as one of valid allocation key. Therefore, the assessee’s PLI of 21.36% & 21.53% with respect to OTI-USA & OTG-Germany was to be accepted. We order so.
Comparable selection - Assessee is engaged in providing Engineering Design Services (EDC) to its various overseas customers through its marketing arm in the form of Associated Enterprises (AE) in USA and Germany. It is evident that the AEs are remunerated at lump sum marketing-fees which were in the range of 3% to 3.5% and rest of the revenue would accrue to the assessee, thus companies functinally dissimilar with that of assessee need to be deselected.
Since the assessee’s PLI is much better than average PLI of remaining comparable entities, the transactions under consideration are to be considered at Arm’s Length Price. We order so. The impugned TP adjustments, as confirmed in the impugned order, stands deleted.
Equity investments - re-characterizing the transactions as loans / advances and make TP adjustment based on notional interest computation - HELD THAT:- Assessee was operating in USA markets through its AE i.e. OTI-USA. It has made investment in share capital in its subsidiary which is evident from foreign remittance certification, annual report and financial statement of the subsidiary. The shares have been subscribed at face value in accordance with RBI’s guidelines. The subsidiary has issued share-certificate to the assessee within a period of 60 days as mandated by RBI. The investment was made to fund the expansion plan of USA subsidiary and to strengthen its Balance Sheet which had accumulated losses. This being so, the action of lower authorities to re-characterize these transactions, in our opinion, was based more on mere allegations rather than being based on any tangible evidence on record. The assessee was holding company of its AE and any adverse working of AE would directly impact assessee’s interest. It was true that had the AE obtained the funds through loan / debt, it would have to meet interest expenses at regular interval which would have ultimately affected its profitability and would not have provided the requisite cash-flow to carry on its business swiftly. The assessee, as a holding company, had infused funds in its subsidiary with a long-term objective through equity mode so as to enable the AE to carry on its business smoothly and swiftly. The Ld. TPO failed to distinguish between loan and capital contribution by way of equity. Therefore, we do not concur with the approach / action of lower authorities in re-characterizing the transactions as loans / advances and make TP adjustment based on notional interest computation. - Therefore, considering the factual matrix, we direct Ld. AO to delete this adjustment. The ground, to that extent, stands allowed.
TP adjustment arising out of reimbursement of software expenses to OTI-USA - HELD THAT:- It could be seen that the services of M/s Orasoft has been availed by the assessee only. The AE has merely carried out the transactions on behalf of the assessee. The payment made by the assessee was in the nature of reimbursement of third-party payments. There is nothing on record which would show that AE has been paid extra remuneration, in any way, for the said purpose. To summarize, the transactions are duly evidenced by agreement, invoices raised by M/s Orasoft and consequent debit note raised by AE on the assessee. The only doubt raised by Ld. TPO is tangible evidence with respect to receipt of services.
TPO has also doubted the genuineness of the invoices. However, there are no concrete findings or material which would justify rejection of assessee’s explanation and documentary evidences. The Ld. CIT(A) also erred in rejecting these documentary evidences without any sound basis. Therefore, not concurring with the approach of lower authorities, we direct for deletion of this adjustment.
TP adjustment on account of Share Application Money - As there was end-to-end billing by OTI-USA to assessee’s customers vis-à-vis amount billed by assessee to OTI-USA. The aforesaid fact remains uncontroverted before us also. This being the case, no benefit arose to assessee’s AE and therefore, there would be no question of computing ALP of the same. Concurring with the conclusion of Ld. DRP, we dismiss Ground Nos. 1 & 2 of revenue’s appeal.
Margin of 5% as retained by OTG-Germany - We find that percentage of revenue earned from this entity is merely 1.71% of total revenue earned by the assessee. The margin retained by this entity was quite less than mean margin of 8.89% reflected by comparable entities as selected by the assessee in its TP study report (though we do not accept foreign AE as tested party as held in AY 2008-09). Nevertheless, the assessee’s segmental PLI of 45.57% was much above the mean margin of comparable entities selected by Ld. TPO. Therefore, no fault could be found in the approach of Ld. DRP.
Computation of notional interest on Share Application money - We find that factual matrix is similar as in AY 2008-09. Therefore, our adjudication as for AY 2008-09 would apply here also. Taking the same view, we would hold that re-characterization of these transactions as loans / advances was not justified and accordingly, we delete the adjustment as made by lower authorities. Ground No.3 of revenue’s appeal stand dismissed whereas Ground No.1 of assessee’s appeal stands allowed.
Deduction of late payment of employees’ PF and ESIC - HELD THAT:- We find that the assessee has deposited an amount of Rs.81.21 Lacs as employee’s contribution to PF and ESIC of Rs.0.08 Lacs. The payment was made after due date as specified under the respective acts but before the due date of filing of return of income - this issue is covered in assessee’s favor by the decision of this Tribunal in assessee’s own case for AY 2006-07 [2013 (6) TMI 209 - ITAT MUMBAI] Therefore, respectfully following the same, we direct Ld.AO to allow the deduction of the same to the assessee. This ground stand allowed.
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2021 (8) TMI 1359
TP adjustment on brand royalty computed by authorities below - HELD THAT:- As per the aforesaid provisions, consideration for transfer of rights (including granting of a licence) in respect of a trade mark or similar property or for use of a trademark or transfer of rights (including granting of a licence) in respect of any copyright, literary, artistic or scientific work, falls under the definition of ‘Royalty’ under the IT Act.
The revenue has not been able to produce any agreement to establish the payment of royalty by the associated enterprises to assessee. It is also not been established that by the use of brand “Sasken” the subsidiary associated enterprises were able to get premium price which could be ultimately translate into profits to pay royalty.
Admittedly, in the present facts of the case, assessee has registered the trademark at all the jurisdiction where the subsidiaries are located. It is also not brought on record that assessee has incurred any expenditure or contributed any money for establishment of its name in the geographical areas that benefited the associated enterprises.
Based on the above, we cannot uphold 2% royalty computed on the turnover of the AE’s by the Ld.AO/TPO.
We remand this issue back to the Ld.TPO for fresh consideration - TPO shall carry out necessary verification based on the which it must first be determined whether there is any Royalty that could be attributed. In the event Royalty is to be attributed, proper benchmarking needs to carried out the accordance with section 92CA of the Act, by selecting an authorised method and comparables. We place reliance on BEPS action plan reproduced herein above. Needless to say that proper opportunity of being heard must be granted to assessee.
Benchmarking of the international transaction between the assessee and Sasken Inc. - HELD THAT:- There is no document to show the risk assumed or that assessee had anything to do beyond mediating between Sasken Inc., and GE Ultrasound Ltd. We note that the observations of authorities below that the contract is coming because of numerous intangibles and that assessee has contributed to the intangibles along with Sasken Inc., is all assumptions in thin air without any basis. On these facts, the Ld.TPO used PSM without there being any discussion about the comparables chosen and whether they were acceptable or not to the assessee. Such action by Ld.TPO cannot be approved as it is not in accordance with the Rule 10(1)(d) of Income-tax Rules. We therefore remand this issue back to the Ld.AO/TPO for carrying out the benchmarking of the international transaction between the assessee and Sasken Inc., in accordance with law to determine if the price changed by assessee to be a facilitator is at arms length.
Disallowance of deduction u/s 10 AA - We direct the Ld. AO to compute deduction under section 10 AA of the act in accordance with the ratio laid down by Hon’ble Supreme Court in case of Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT]
Disallowances made u/s 14A and MAT credit not granted in respect of taxes paid outside India under section 90/90A - HELD THAT:- AO has not considered the submissions of assessee before computing the disallowance in the hands of assessee on these issues alleged. Accordingly we deem it fit and proper to remand this issue back to the AO. AO is directed to verify all the details filed by assessee and to consider the claim in accordance with law.
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2021 (8) TMI 1358
TP Adjustment - comparable selection - HELD THAT:- Acropetal Technologies has been held to be into products and that RPT is at 18.66% which is beyond the marginal limit of 15% for year under consideration, by this Tribunal, in case of Electronics for Imaging India Pvt.Ltd for assessment year 2011-12 [2017 (7) TMI 1335 - ITAT BANGALORE] We therefore do not find any this comparables to be functionally similar with assessee.
E- Infochips Ltd. does not satisfy service income filter being 75%. We therefore, do not see any reason to set aside this company to Ld.TPO. Therefore, respectfully following view taken by coordinate bench of this Tribunal in DCIT vs M/s CGI Information Systems and Management Consultations Pvt.Ltd. [2018 (4) TMI 567 - ITAT BANGALORE] we direct Ld. TPO to exclude this company.
ICRA Techno Analytics Ltd., E-Zhest Solutions Ltd have been consistently excluded by this Tribunal in case of a captive service provider like assessee. CIT.DR could not establish anything contrary to observations of this Tribunal reproduced hereinabove. Respectfully following aforestated view, we do not find any infirmity in exclusion of these comparables by DRP.
Addition in respect of advertisement expenses - re-allocation of expenses from the Non-STPI unit to the STPI units - HELD THAT:- As Tribunal, in assessee's own case for AY 2009-10 [2015 (8) TMI 1447 - ITAT BANGALORE] deleted identical addition made on account of re-allocation of expenses from the Non-STPI to the STPI unit as they wew made without any basis. Revenue has not been able to establish any factual difference in the year under consideration with that of AY 2009-10. Respectfully following the same we do not find any infirmity in the view taken by the Ld.CIT(A).
Deduction u/s 10A - reducing the expenditure incurred in travel, telecommunicaiton etc. from export turnover and toatl turnover for compulting deduction - HELD THAT:- Admitedly this issue stands settled by Hon’ble Supreme Court in case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] Respectfully following the same, we do nto find any infirmtiy in the view taken by Ld.CIT(A). Accordingly this ground raised by revenue stands dismissed.
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2021 (8) TMI 1357
Exemption u/s 11 - treating unutilized amount of grant received from “Essar Limited” - claim towards actual application of income in the immediately next financial year - HELD THAT:- We find that the law permits availability of deduction u/s 11(1) of the Act where the assessee has successfully demonstrated the application of income in the immediately subsequent financial year. Inconsistency in taking shelter of either Section 11(1) or Section 11(2) of the Act, in our view, is not fatal for the purposes of granting tax relief to a charitable trust engaged in benefit of public at large.
The substantial compliance of the conditions laid down in the respective provision is of overriding importance. The assessee, in the instant case, claimed that, on facts, it has complied with the provisions of Section 11(1) of the Act read with Explanation (1)(1)(b) thereto towards utilization of CSR money received and thus entitled to tax benefits available to the charitable trust.
We observe that the claim towards actual application of income in the immediately next financial year is a question of fact. The aforesaid fact thus requires suitable examination at the end of the AO to enable him to form a view on entitlement of tax benefits u/s 11 of the Act in accordance with law and in terms of observations made hereinabove.
We accordingly consider it expedient to set aside the first appellate order and restore the issue back to the file of the AO to ascertain actual utilization of donation/income received from Essar Steel Ltd. for charitable purposes in immediately next financial year in terms with Explanation 1(b) to Section 11(1) of the Act. In the event, where the AO finds to his satisfaction that the amount has been utilized in the next financial year as pleaded, he shall grant the deduction to the assessee as claimed in accordance with law. Needless to say, proper opportunity shall be granted to the assessee to ascertain the relevant facts and the AO shall pass speaking order.
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