|
Advanced Search Options
Income Tax - Case Laws
Showing 1 to 20 of 1116 Records
-
2015 (10) TMI 2853
Accrual of income in India - treating receipt from sale of software product as royalty and subjecting it to tax - PE in India or not? - assessee an American Company is engaged in the business of providing information solution - as argued such income has not been offered to tax on the reasoning that as the assessee is not having a P.E. in India such income being in the nature of business income is not taxable under the provisions of India USA DTAA
HELD THAT:- On a perusal of the material on record, it is seen that identical dispute came up for consideration before the co-ordinate bench of the Tribunal in assessee’s own case for the assessment year 2007-08[2011 (11) TMI 887 - ITAT MUMBAI] wherein after considering the terms of both the agreements as well as other relevant facts came to conclude that the receipts from sale of computer software products is not royalty but business income.
in the assessment year 2007-08 also, the Departmental Authorities treated the receipt from sale of software product as royalty solely relying upon the nomenclature of the product given in the invoice as “intellectual” value which is also the case in the impugned assessment year.
Tribunal, taking into consideration such fact has given a categorical finding that the amount received by the assessee towards sale of software products cannot be treated as royalty and thereby accepted assessee’s claim of business income. As there is no material difference in the facts considered by the Tribunal in assessment year 2007–08 and the impugned assessment year, we accept assessee’s claim that the amount received from sale of software product cannot be considered as royalty but is the business income of the assessee, hence, as per the provisions of India–USA treaty it is not taxable in absence of a P.E - Assessee appeal allowed.
-
2015 (10) TMI 2850
Addition u/s 40A - assessee had paid excessive interest - this interest was @ 12% paid to depositors who are not family members, 15% to relatives and 18% to the associated concern - AO adopted uniform interest rate in all the above three categories to be @ 15% resulting in the impugned disallowance - HELD THAT:- We find that the hon’ble jurisdictional high court in Sarjan Realities Ltd.[2014 (8) TMI 206 - GUJARAT HIGH COURT] holds that solely because an assessee had paid an interest to different parties would not itself be a ground to come to conclusion that payment of interest to related companies at rate other than that paid to other parties was excessive and unreasonable resulting in section 40A(2)(b) addition in question. We reiterate that neither of the lower authority gives an independent finding of such an excessive component over and above the prevailing market interest rate. The Revenue fails to point out any distinction on facts or law. We accept assessee’s arguments and delete the impugned addition - Assessee’s appeal is allowed.
-
2015 (10) TMI 2848
Unexplained investment in construction of residential building - Addition merely on the basis of DVO’s report - CIT(A) has deleted the addition - HELD THAT:- Mere valuation report is not sufficient to conclude that the assessee has made unexplained investment. From perusal of the assessment, nowhere it reveals that inspite of search, Revenue was in a position to lay its hands on any material exhibiting the unexplained investment made by the assessee, over and above one stated in the books of accounts.
FAA is of the opinion that the addition cannot be made merely on the basis of DVO’s report, and there should be some other incriminating material to support the case of the Revenue. No reason to interfere in the order of the CIT(A), which is confirmed and the ground of appeal of the Revenue is dismissed.
-
2015 (10) TMI 2846
Addition of cash credit u/s.68 - whether Assessee has discharged the onus of proving the identity and capacity of the creditor? - CIT(A) deleted the addition - HELD THAT:- CIT(A) while deleting the addition has given a finding that Assessee had submitted the copy of Pan Card, Address, confirmation letter, copy of return and bank statement of RSA Marketing, the party from whom the Assessee had received loan. She has further given a finding that the loan was taken by cheques and the perusal of the bank statement of RSA Marketing did not reflect any cash deposits immediately before issuing cheques to the Assessee.
She has further noted that Assessee has discharged the onus of proving the identity and capacity of the creditor and also the genuineness of loan transaction. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A). No reason to interfere with the order of ld.CIT(A) and thus this ground of Revenue is dismissed.
-
2015 (10) TMI 2845
Unexplained cash deposits in bank account u/s.68 - no narration of cash deposit and withdrawal has been given - assessee submitted that the authorities below failed to appreciate the fact that the assessee had been withdrawing and depositing the amount with ICICI Bank - HELD THAT:- We find that both the authorities below have failed to appreciate the fact that on various occasions, the assessee has withdrawn from the same account and deposited in the bank after a week’s time.
In our considered view, this amount should not have been added to the total income of the assessee. It is settled position of law that only unexplained deposit could be subjected to tax. If an assessee is able to demonstrate that he had deposited the amount earlier withdrawn from the same account, in that case, the AO would not be justified to subject both the credits to tax.
Assessee in respect of other deposits could not give any satisfactory explanation, therefore we hereby direct the AO to make addition on the basis of the peak-credits. AO is directed to compute the peak-credits and make addition accordingly. Ground raised in the assessee’s appeal is allowed for statistical purposes.
-
2015 (10) TMI 2844
TDS u/s 194J - Non deduction of TDS on “Portfolio Management Fees” - addition u/s 40(a)(ia) - HELD THAT:- We find that the Co-ordinate Bench of Tribunal in the case of Hiren Valves Pvt. Ltd.. [2014 (9) TMI 1275 - ITAT AHMEDABAD] on identical issue has held that only the services rendered by a person in the course of carrying out listed professions and other notified professions constitutes “fee for professional services” and only the payment in connection with those services attract the provision for Section 194J.
Revenue has not pointed any distinguishing features in the present case and that of Hiren Valves (supra) nor has demonstrated as to why the aforesaid decision rendered by the Co-ordinate Bench could not be applied to the facts of the present case. We therefore, hold that no disallowance of expenses u/s. 40(a)(ia) in respect of payment of management fees was called for in the present case. We therefore direct its deletion. Thus the ground of Assessee is allowed.
-
2015 (10) TMI 2840
Exemption u/s 11 - accumulation not made as per law and assessed it as AOP - objects specified in Form No. 10 for accumulation of income were too vague and further there was no need for assessee to accumulate funds for the purpose of salary as it has enough funds including grants received from State Government for this purpose - Assessee stated that the assessee is a society registered under section 12A of the Act since 2005 - whether assessee has accumulated the funds as per law? - HELD THAT:- On perusal of the bye laws of the assessee society, we see that hiring of staff and utilization of funds for welfare of patients are two objects of the society. Therefore, it cannot be said that the objects which are stated for the purpose of accumulation of funds under Form No.10 are outside the objects as provided in the bye laws of the society. The contention of the AO is that these objects are too vague and are not specific.
No reason for not granting assessee the benefit of such accumulation given the fact that the accumulation is sought for the purpose of its objects on the basis of which it was granted registration u/s 12A - We do not even find the objects stated in the Form No.10 too vague either, as these are the objects as per the bye laws. Admittedly, the objects stated in Form No.10 are not elaborately stated, but that cannot be the reason to deny the said benefit.
Thus we find that there is no vagueness in the purposes specified by the assessee in Form No.10.
Assessee has enough funds for the purposes of salary to be paid in the form of grants received from the State Government as well as the unutilized amount of grant so received by the assessee - It is not the Assessing Officer’s case that the assessee has not complied with any of these conditions. His only concern is the availability of a huge amount of funds for the said purpose. AO in this regard has to confine himself to the provision of the Income Tax Act read with the Income Tax Rules only.
AO does not have any prerogative to comment on the way the activities are to be carried on by the assessee. How much funds are needed for which purpose and how funds are to be used for different purposes is none of the Assessing Officer’s concern. It is only assessee’s own way of functioning. AO cannot sit on the armchair of the assessee to decide all these things, given the fact that the Income Tax Act does not give him any such power. Whether the assessee is receiving excess grant or whether it is in need of such grants may be the concern of the granting authority or that the assessee, but certainly not of the AO.
We find that this issue raised by the AO to be not relevant for giving benefit of accumulation. benefit of accumulation of funds as provided u/s 11(2) allowed - Decided in favour of assessee.
-
2015 (10) TMI 2838
Gains arising from sale of land - Nature of land sold - correct head of income - business income OR capital gains - period of holding of asset - contention of the assessee was that the assessee has sold part of the land after holding it for a period of 20 years and utilizing it for agricultural purposes during the said period without effecting any kind of improvement on the land, therefore, earning of sale of land has to be treated as capital gain and not profit and gains of business and profession - HELD THAT:- The land has been recorded in the Revenue records as agricultural land, there is nothing on record to show that the entry was wrong.
As in the case of CIT v Sohan Khan [2008 (4) TMI 142 - RAJASTHAN HIGH COURT] made a remarkable observations and stated that in the absence of anything to show that assessee had purchased the land with the intention to sell it at a profit or that the assessee is a regular dealer in real estate, piecemeal sale of land by the assessee by earmarking plots constituted disposal of capital asset and not an ‘adventure in the nature of trade’ and therefore, surplus is taxable as capital gains.
Also in Pai Provision Stores [2011 (8) TMI 725 - KARNATAKA HIGH COURT] held that even though development and sale of property was one of the object of the assessee firm, the assessee was in fact not carrying on that business hence income from sale of part of developed property, which was utilized in clearing the debts incurred in development of property was capital gains and not business income, more so even the remaining property was used by assessee in carrying out its business and letting out to tenants.
In the instant case, the assessee sold part of the agricultural land holding for last 20 years and entire sale proceeds were invested in constructing the residential house, which clearly suggest that assessee is not in the business of sale / purchase of immovable property and, therefore, the stand taken by the authorities below are not sustainable. Decided in favour of assessee.
-
2015 (10) TMI 2837
Penalty u/s 271(1)(c) - disallowance made for no explanation regarding non-maintenance or non-production of bills/vouchers could be furnished by the assessee - income of the assessee was estimated by the Assessing Officer and the addition was sustained by the learned CIT(A) - HELD THAT:- As in the absence of supporting evidence for allowability of the expenses claimed by the assessee, certain disallowance made could be sustained but this fact alone is not sufficient to sustain the penalty imposed u/s 271(1)(c) of the Act. There is no material brought on record on behalf of the Revenue to suggest that the assessee was guilty of concealment of income or filing of inaccurate particulars of income.
Merely because the assessee could not file the supporting vouchers/bills for the expenses claimed by it, it could not be concluded that the assessee has claimed bogus expenses and could be penalized u/s 271(1)(c) of the Act. The conduct of the assessee was bona-fide and the assessee has filed an explanation before the Revenue authorities. In the facts of the case, we are of the view that it was not a fit case for levy of penalty u/s 271(1)(c) of the Act, which is accordingly cancelled and the ground of appeal of the assessee is allowed.
Penalty u/s 271(1)(b) - As assessee was required to file certain information/documents before the Assessing Officer before the completion of assessment proceedings. However, the assessee has failed to comply with the statutory requirement without any valid reason and therefore, in my view, the penalty imposed at ₹ 10,000/- u/s 271(1)(b) of the Act was reasonable and is accordingly confirmed and the ground of appeal of the assessee is dismissed.
-
2015 (10) TMI 2834
Penalty imposed u/s 271(1)(c) - depreciation at a higher rate on software development - HELD THAT:- In the case under consideration, the ld. CIT(A) gave a categorical finding that the assessee has made proper and full disclosure of its income and the higher percentage claimed in depreciation was only a bonafide error which was corrected by assessee. Therefore, the ratio laid down by the Hon’ble Supreme Court fully RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] supports and is applicable to the case of assessee. Accordingly, we do not find any infirmity in the order of CIT(A) in cancelling the penalty levied by AO u/s 271(1)(c) of the Act and the same is hereby upheld dismissing the grounds raised by the revenue.
-
2015 (10) TMI 2833
Deduction u/s 80P(2)(a)(i) - Addition u/s 56 - bank interest received by the assessee - HELD THAT:- As assessee was a co-operative society engaged in the business of providing credit facility to its members. The assessee claims that it was engaged in the business of banking and consequently, the income earned by the assessee from its activities including the interest received from Union Bank of India against the FDR’s kept with the said bank, was income from business, which was eligible for deduction under section 80P(2)(a)(i) - Assessing Officer held that the interest income was assessable as income from other sources, in view of the ratio laid down by the Hon’ble Supreme Court in Totgars Co-Op. Sale Society Ltd. [2010 (2) TMI 3 - SUPREME COURT]
In view of the ratio laid down by the Hon’ble Supreme Court in Totgars Co-Op. Sale Society Ltd. Vs. ITO (supra), the interest income from surplus fund / short deposits with the bank was assessable as income from other sources, which in turn, is taxable under section 56 of the Act. The said income assessed under the head ‘Income from other sources’ is not eligible for deduction under section 80P(2)(a)(i) of the Act.
The plea of the assessee that it was required to keep the funds in specified securities with the banks does not entitle the assessee to claim it as expenditure since the same being assessed as income from business being eligible for deduction under section 80P(2)(a)(i) of the Act. Accordingly, we uphold the order of CIT(A) in this regard.
Alternate plea of the assessee is that it has only positive income Assessing Officer had not disallowed any of the expenses in the hands of assessee - In view thereof, we find no merit in the directions of CIT(A) to the Assessing Officer to examine the claim of expenses made by the assessee and also the same as inadmissible under section 56 of the Act. On the other hand, in case the interest income of Rs.31,62,825/- is assessed under section 56 of the Act as income from other sources and there is net loss of Rs.20,94,884/- assessable in the hands of assessee as income from business, then in view of the provisions of the Act, the assessee is entitled to the claim the benefit of set off of business loss against the income from other sources of the instant assessment year. Accordingly, we direct the Assessing Officer to allow the claim of the assessee after due verification and in accordance with law.
Appeal of the assessee is partly allowed.
-
2015 (10) TMI 2830
Income accrued in India - fixed place Permanent Establishment (PE) in India under article5(1), 5(2)(a) and 5(2)(c), a Service PE under Article 5(2)(l) as well as a Dependent Agent PE under Articles 5(4)(a) and 5(4)(c) of the India -USA DTAA - Whether the CIT(A) was justified in holding that the assessee has a PE in India/ - HELD THAT:- Taking a consistent view, we hold that the assessee has a fixed place PE in India, but has no dependent agent PE in India. Accordingly, ground raised by the assessee and the only ground raised by Revenue in their respective appeals are dismissed.
Attribution of profits to PE - We hold that since in the A.Y. 2002-03, the margin kept by assessee after payments to CIS is in loss, no profit attribution is available to PE in India. Ground No. 2 of assessee’s appeal is accordingly disposed of.
Levy of interest under section 234B - The charging of interest is automatic under the Act if the assessee has defaulted in payment of advance tax. The income of the assessee was not liable for withholding tax under section 195 of the Act. In this case we have no option but to hold. that the assessee is liable to interest u/s 234B, as the income being assessed now cannot be held. to be income liable to TDS under Indian provisions. The same is being assessed in the hands of PEs who had not filed their return on the ground that this income was not attributed to Indian Business Connection. Provisions of section 234B are mechanical in nature. In view of the above this ground of appeal of the assessee is dismissed.
Taxability on IPLC/link charges - As held payment is not taxable in the hands of the assessee as Royalty - We hold that there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held. that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee.
-
2015 (10) TMI 2829
Reopening of assessment u/s 147 - assessment Reopened after four years from the end of the relevant assessment year - eligibility of reasons to believe - HELD THAT:- Undisputedly in the instant case, nothing has been mentioned by the Assessing Officer that income chargeable to tax has escaped assessment on account of failure on the part of the assessee. Moreover, the issue on which assessment was reopened was already discussed by the AO in the original assessment. In the light of these facts, we are of the considered view that the assessment was reopened without the jurisdictional foundation u/s 147 of the Act. Therefore, the notice u/s 148 and subsequent proceedings are without jurisdiction and liable to be quashed - Decided against revenue.
-
2015 (10) TMI 2827
Non-appearance before the Tribunal on the date of hearing by assessee - HELD THAT:- As none appeared on behalf of the assessee though the notice was sent through RPAD. The notice has been sent on the address given on Form No.36. The assessee has not intimated change of address, if any, to the Tribunal. There is not even an adjournment petition received from the assessee.
Assessee is not interested in pursuing these appeals, and no useful purpose would be served by adjourning the hearing. Considering these facts and keeping in mind the provisions of Rule 19(2) of the ITAT Rules, as were considered in the case of Multiplan India [1991 (5) TMI 120 - ITAT DELHI-D] and in view of the decision of Estate of Late Tukoji Rao Holkar, [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] we dismiss these appeals in limine.
However, if the assessee on a later stage gives explanation in regard to its non-appearance before the Tribunal on the date of hearing before the Tribunal by filing a Miscellaneous Application as per the ITAT Rules and if the Bench is so satisfied these appeals of the assessee can be recalled for hearing on merit.
-
2015 (10) TMI 2824
Taxability of the undisclosed receipts of business found during the course of search - HELD THAT:- Notably, in so far as the nature of such unrecorded receipts is concerned, there is no dispute between the assessee and the Revenue. Both sides agree that the undisclosed receipts found during the course of search are a part and parcel of the business of the assessee of developing real estate properties. In this factual background, in our view, the same methodology ought to be adopted to assess income embedded in such undisclosed receipts, as has been accepted by the Revenue in the regular assessments.
No doubt, at the time of search assessee offered income from such undisclosed receipts in the respective years of receipt, which was a departure from the regular methodology of computing, income accepted by the Revenue. Notwithstanding the aforesaid, in the returns of income filed in response to the notices issued under section 153A of the Act for the captioned assessment years, the assesseecompany declared income from such undisclosed receipts as per the regular methodology accepted by the Revenue in the regular assessments. The stand of the Assessing Officer, in our view, leads to an inherent contradiction in the final assessment because the resultant income would be a mix of two methodologies. Firstly, the resultant income contains income from business computed on the basis of regular methodology and secondly, income in relation to undisclosed receipts of the same business, which is assessed on receipt basis. To obviate such inherent contradiction, in our view, assessee- company had rightly asserted at the time of filing of returns of income under section 153A of the Act that the income from undisclosed receipts be also computed as per the regular methodology accepted by the Revenue in the past. Therefore, on this aspect we uphold the plea of the assessee.
Addition made under section 69C of the Act for unexplained cash expenditure - CIT-A restricted the addition telescoping benefit against the unexplained expenditure found noted in the search material - HELD THAT:- We do not find any infirmity in the decision of the CIT(A), which is ostensibly based on the facts emerging from the record. Thus, the order of the CIT(A) on this aspect is affirmed and Revenue fails in its appeal for assessment year 2005- 06.
-
2015 (10) TMI 2823
Disallowance which represented Data ‘Processing Costs’ paid to the Head Office - HELD THAT:- Head Office has acquired its main banking software and when the assessee branch was set up in India in Mumbai the software licence was amended to allow the branch also to use the same software making it accessible through the servers located at Belgium. Since the branch in India is using the IT resources situated at Belgium and paid by the Head Office, the branch reimbursed to the Head Office pro-rata cost for the use of the said resources. The aforesaid expenditure was not allowed by the AO, as according to him, the said expenditure was in the nature of royalty and, therefore, tax was liable to be deducted at source, which the assessee had not deducted. Therefore, as per the Assessing Officer such expenditure was hit by the provisions of section 40(a)(i) of the Act. The aforesaid stand of the Assessing Officer was in line with his stand for the earlier Assessment Years 2004-05 to 2006-07.
It was a common point between the parties that in Assessment Year 2004-05 [2014 (3) TMI 726 - ITAT MUMBAI] the Tribunal has decided the said issue in favour of the assessee as held that the data processing cost paid by the assessee does not amount to royalty and, therefore, there was no requirement of deduction of tax at source so as to warrant the application of section 40(a)(i) of the Act. Following the aforesaid precedents, which continue to hold the field, we allow the plea of the assessee. Accordingly, on this aspect the Assessing Officer is directed to delete the addition made out of the data processing costs. Thus, on this aspect the assessee succeeds.
Interest paid to Head Office on subordinated debts and Term borrowings - HELD THAT:- As the relevant tax has been deducted and paid in the course of the impugned assessment year, it is contended that the same be allowed as a deduction in the current assessment year also. We deem it fit and proper to direct the Assessing Officer to apply the precedents in assessee’s own case in the past years and rework the income on this aspect accordingly and also by taking into account assessee’s plea for a further deduction purported to have been disallowed in the earlier Assessment Years on account of provisions of section 40(a)(i) of the Act. Thus, on this aspect assessee succeeds for statistical purposes.
Taxability of interest on subordinated debts and Term borrowings by the Head Office from the India Branch - HELD THAT:- Having regard to the decision of Hon’ble Calcutta High Court in the case of ABN Amro Bank.N.V. [2010 (12) TMI 340 - CALCUTTA HIGH COURT] the same is not taxable in the hands of the Head Office. We find that in A.Y 2004-05 he Tribunal has considered an identical controversy. As per the Tribunal, since the assessee was eligible to the benefits of tax treaty between India and Belgium, interest could not be taxed in the hands of the assessee being a foreign enterprise being payment to self, but the same is deductible while determining the profits attributable to its Permanent Establishment, which is taxable in India as per the tax treaty. Following the aforesaid precedent, we direct the Assessing Officer to re6 work the tax liability accordingly. Thus, on this aspect also assessee succeeds.
Deduction of interest paid on income tax while computing the income of the assessee - HELD THAT:- The relevant facts were that assessee had disclosed certain interest income in the return of income which represented interest received from the income tax department under section 244A of the Act net of the amount of interest paid to the income tax department under section 220(2) - The assessment was originally completed under section 143(3) of the Act accepting the said position as such. Thereafter, the assessment was sought to be reopened by issuing notice under section 148 on the ground that instead of net interest, the entire interest received under section 244A of the Act was required to be offered for taxation, since under section 40(a)(ii) of the Act income tax paid or payable does not constitute deductible expenditure. In this background, assessee therein preferred a Writ Petition before the Hon’ble High Court contending that the reopening of assessment was bad in law because assessee had disclosed fully and truly all material facts pertaining to assessment.
The aforesaid controversy has been addressed by the Hon’ble High Court and the stand of the assessee was upheld, as according to the Hon’ble High Court the invoking of section 147/148 of the Act was invalid having regard to the facts and circumstances of the case. In our considered opinion, the controversy before us has been directly answered by the Hon’ble Supreme Court in the case of Bharat Commerce Industries Ltd.[1998 (3) TMI 2 - SUPREME COURT] and that the judgment of the Hon’ble Bombay High Court sought to be relied upon by the assessee in the case of Arthur Anderson & Company [2010 (3) TMI 322 - BOMBAY HIGH COURT] is not in the context of the issue relating to deductibility of payment of interest for default in payment of advance tax.
Appeal of the assessee is partly allowed.
-
2015 (10) TMI 2822
Ex-parte orders of CIT - application of adjournment sent to CIT (A) by Speed post requesting for adjournment because the counsel of the assessee company CA Shri Shailesh Kumar Gupta had undergone left eye surgery for cataract along with Hospital Discharge Summary - HELD THAT:- Considering this fact that the counsel of the assessee had undergone left eye surgery for cataract on 28.01.2014 and last two dates of hearing before CIT (A) were 10.02.2014 and 18.02.2014, we feel that in the interest of justice, the assessee deserves one more opportunity. Accordingly, we set aside the order of CIT (A) in both years and restore the entire matter back to his file for fresh decision in both years after affording reasonable opportunity of being heard in both years. In view of our decision, we do not make any comment on merit of the issues raised by the assessee in these appeals.
-
2015 (10) TMI 2820
Deduction u/s 80IB - Denial of deduction as assessee has not obtained the completion certificate from the local authority before 31/03/2008, which is mandatory as per explanation-2 to section 80IB(10) - HELD THAT:- We note that section 80IB (10) of the Act was substituted by the Finance (No.2) Act, 2004, w.e.f. 01/04/2005 and prior to its substitution sub-section (10), as amended by the Finance Act, 2000, w.e.f. 01/04/2001 and Finance Act, 2003, w.r.e.f. 01/04/2002 provides 100% of the profit derived in any previous year relevant to any assessment year from such housing project approved before 31/03/2005. Thus, time project completion time limit is not provided in the section. The project of the assessee commenced in the financial year 2003-04 i.e. before 01/04/2005. Circular no.772 dated 23/12/1998 with respect to tax incentive provision/tax holiday supports the case of the assessee.
There is uncontroverted finding in the impugned order that identical issue was decided for A.Y. 2008-09 on 28/03/2011 holding that the project under taken by the assessee had not commenced prior to 01/10/1998, wherein, the Assessing Officer was directed to allow the claimed deduction. No contrary decision was brought to our notice contradicting the finding recorded in the impugned order, thus, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) on these issues raised by the Revenue, consequently, the appeal of the Revenue is dismissed.
-
2015 (10) TMI 2819
TP Adjustment - exclusion of comparables by the DRP from the set of comparables companies chosen by the TPO - contention of revenue that these companies qualify all the qualitative and quantitative filters applied by the TPO and therefore the DRP was wrong in directing the exclusion of these companie - HELD THAT:- Revenue has raised a general ground without specifying or bringing on record material to establish why it considers the decision of the DRP to be erroneous. We find that the DRP has given elaborate reasons for directing the exclusion of each of the companies. In the absence of any material evidence to controvert the findings of the DRP, the contentions of Revenue in this ground remain unsubstantiated and therefore we are unable to concur with the same. In this view of the matter, we dismiss Ground No.1.
Risk Adjustment - Revenue contends that risk adjustment is not required in this case as the assessee face risks like political risk, foreign exchange risk and also market risks - Since these details and quantification of the assessee's claim for risk adjustment has only been placed before us and was not before the authorities below, we deem it appropriate to remand this issue back to the file of the TPO with a direction that the TPO examine the assessee's claim for risk adjustment and allow the same if the facts of the case on hand so warrant such adjustment. Needless to add, the assessee shall be afforded sufficient opportunity of being heard and to make its submissions in this regard which shall be considered by the TPO before he takes a decision in the matter. It is ordered accordingly.
Comparable selection - IDL (India) Ltd - It is seen that the facts submitted by the assessee in this regard emerge from the records. This company was included in the list of comparables chosen by the assessee in its T.P. Study. We find that the TPO has indeed mentioned in the T.P. order that this company is ‘functionally comparable and acceptable’. That being so, it is not clear as to why this company was not selected and included in the final set of comparables and why this company did not figure in the search process conducted by the TPO. In this view of the matter, we consider it appropriate to remand this issue to the TPO for consideration with a direction that the TPO may consider the submissions made by the assessee for inclusion of this company in its list of comparables. Needless to add, the assessee shall be afforded adequate opportunity of being heard and to make submissions/file details in this regard which shall be considered by the TPO before deciding the issue.
Kores (India) Ltd. - Business and Computer Systems Division is involved in a variety of operations like marketing of equipment relating to banking, postal offices, etc and after sales services including software support. The after sales services referred to in this division is an insignificant component of the revenue of the company and therefore it is not appropriate to compare the division of this company with the Market Support Services performed by the assessee. We find that the DRP has given detailed reasoning for rejection of this company as a comparable company to the assessee in the case on hand. Before us, the assessee had failed to adduce any material evidence to controvert the findings of the DRP. In this factual matrix, we find no infirmity, in the order of the DRP that would require our interference and therefore uphold its decision to exclude this company from the set of comparables to the assessee.
Computation of Margin - as submitted by the assessee that the assessee has computed the margin of Cyber Media Research Ltd./IDC (India) Ltd - We have perused the relevant portions of the TPO’s order and find that the OP/Cost is given by the TPO at 13.68% (Page 6 of TPO’s order) and later computed at 19.52% (Page 9 of TPO’s order). In these circumstances, the TPO is directed to verify the above contention of the assessee and adopt the correct margin of IDC (India) Ltd. / Cyber Media Research Ltd. after affording the assessee adequate opportunity to be heard and make submissions in the matter, which shall be considered by the TPO before coming to a finding in the matter. It is ordered accordingly. Consequently, Ground No.6.3 is allowed for statistical purposes.
Comparables for Global Support Services Segment - G.K.Consultants Ltd. - From the TPO’s order, it is not clear as to whether the TPO has examined this aspect of the company operating in several segments out of which professional services is only a small portion. It is also not clear as to whether the TPO has adopted the segmental details or the entity level details. In fact, the DRP has directed that it is to be ascertained whether segmental margins were adopted or entity level margins. In this factual matrix as discussed above, we are of the view that it would be appropriate to remand the issue back to the file of the Assessing Officer / TPO to examine the comparability of this company with the assessee, in the light of our observations above and if this company is found comparable, to adopt the margins as per the segmental details.
Maruti Insurance Agency Logistics Ltd. - As seen from the orders of the Insurance Regulatory & Development Authority (‘IRDA’) that this company is a group entity belonging to the Maruti Suzuki Ltd. group and is acting as its corporate agent. In that order of the IRDA, it has been held that no insurer is supposed to be granted license to act as corporate agent on the basis of reputation and strength of the applicant firm and a finding has been rendered that the corporate agent; namely this company has violated the statutory provisions. We find that the documents filed before us were evidently not placed before the TPO and DRP and therefore this aspect has not been examined by the authorities below. In this view of the matter, we deem it appropriate to remand the issue back to the file of the Assessing Officer / TPO to examine the comparability of this company with the assessee.
Inclusion of CRA Management Consulting Services Ltd. (‘ICRA’) and Pagaria Energy Ltd. - Evidently these two companies have not been selected as part of or as a result of any search process and therefore could be a case of “cherry picking” by the assessee. However, it is also a fact on record that the assessee had included the Global Support Services Segment in the Distribution Segment and therefore had not conducted an independent bench marking for this segment. Therefore, if the Global Support Services Segment is considered as a separate segment, as has been done by the TPO, the assessee should have the right to conduct its search process and select its set of comparables; which of course will be subjected to the examination and scrutiny of the TPO. In this view of the matter, we deem it appropriate to remand the issue back to the file of the Assessing Officer / TPO to examine the comparability of these two companies with the assessee
Working Capital Adjustment - On perusal of the orders of the authorities below, we find that the DRP has granted the assessee working capital adjustment, subject to the upper limit of average cost of capital of the comparables. The Assessing Officer / TPO is directed to examine the assessee's claim for and allow working capital adjustment vis-à-vis the comparable companies, in accordance with law, if so warranted.
Risk Adjustment - This claim was put forth before the DRP, though bereft of any detailed quantification of the adjustment claimed on account of risk differential. However, before us, as submitted by the learned Authorised Representative of the assessee has submitted its documentation in respect of risk adjustment and quantification of its claim - Since these details and quantification of the assessee's claim for risk adjustment has only been placed before us and was not before the authorities below, we deem it appropriate to remand this issue back to the file of the TPO with a direction that the TPO to examine the assessee's claim for risk adjustment and allow the same if the facts of the case on hand so warrant such adjustment. Needless to add, the assessee shall be afforded sufficient opportunity of being heard and to make its submissions in this regard which shall be considered by the TPO before he takes a decision in the matter.
Benefit of + / - 5% as set out under the proviso to Section 92C(2) - The new section 92C(2A), mandates that if the AM price falls beyond + / - 5% from the price charged in international transactions, then the assessee does not have any option referred to in Section 92C(2) of the Act. Thus, as per the above amendment, it is clear that the + / - 5% variation is allowed to justify the price charged in the international transactions and not for adjustment purposes. The aforesaid amendment has settled the issue and accordingly, the 5% benefit is not allowable in the assessee's case. In view of the retrospective amendment by way of insertion of Section 92C(2A) w.r.e.f. 1.4.2012 brought about therein by Finance Act, 2012, this Ground of the assessee's appeal is not maintainable and is accordingly dismissed.
-
2015 (10) TMI 2817
Addition on account of commission expenses claimed on sales - No proof of business use of the expenditure claimed - whether merely furnishing of confirmations, PAN, copy of return and bank statements cannot in all cases tantamount to satisfactory discharge of onus the part of the assessee company, in establishing that services were actually rendered by the brokers? - HELD THAT:- As relying on own case [2015 (1) TMI 98 - ITAT JAIPUR] books of account are audited which has been accepted by the Assessing Officer, sale and purchase have been treated genuine, but doubted the commission payment and the AO made addition on surmises and conjectures. Therefore, we are of the considered view that commission paid by the assessee either on sale and purchase are allowable as the expenses incurred wholly and exclusively for the purpose of business u/s 37 - Decided in favour of assessee.
........
|
