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Income Tax - Case Laws
Showing 41 to 60 of 645 Records
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2016 (10) TMI 1330 - ITAT PUNE
TDS u/s 194C - payment made by AOP to the subcontractors - as per revenue assessee had given the contract work to AOP without deduction of tax - disallowance under section 40(a)(ia) - AO of the view that execution of contract was the responsibility of assessee and this sub-contracting of the work to one of the members of the AOP cannot be considered as revenue sharing arrangement - HELD THAT:- We find the ld. CIT(A) while deleting the addition had noted that the facts of the present case are identical to that of Swapnali RDS Joint Venture [2014 (12) TMI 320 - ITAT PUNE] and he had followed the decision of predecessor in assessee’s own case for assessment year 2009-10 [2014 (12) TMI 347 - ITAT PUNE]. We find that the Co-ordinate Bench of the Tribunal in assessee’s own case for assessment year 2009-10 has decided the issue in favour of the assessee
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2016 (10) TMI 1329 - ITAT MUMBAI
Disallowance of deduction claimed under the head “provision of leave encashment” u/s 43B(f) - HELD THAT:- As identical issue was considered by the Coordinate Bench of the Tribunal in assessee’s own case relating to A.Y. 2007- 08 [2016 (2) TMI 889 - ITAT MUMBAI], restored this matter to the file of the Assessing Officer with the direction to decide the issue in the light of the decision rendered by Hon'ble Supreme Court in the case of M/s. Exide Industries Ltd. & Another [2009 (5) TMI 894 - SC ORDER]
Even though the assessing officer did make a reference to the above said order of Hon’ble Supreme Court, the Ld A.R submitted that the assessee should be given benefits as observed by the Hon’ble Apex Court in the matter of interest and penalty. Accordingly, consistent with the view taken by the Coordinate Bench in assessee’s own case relating to A.Y. 2007-08, we restore this matter to the file of the Assessing Officer with the direction to examine this issue afresh
Disallowance of employees contribution to ESIC and Labour welfare fund - HELD THAT:- We are of the view that the claim of the assessee is required to be allowed in view of the binding decision GHATGE PATIL TRANSPORTS LTD. [2014 (10) TMI 402 - BOMBAY HIGH COURT] since the assessee has paid the employees contribution before the due date for filing return of income. Accordingly, we set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to allow claim of the assessee.
Characterization of income - Excise duty refund” received by the assessee - revenue or capital receipt - HELD THAT:- According to Ld A.R, this issue is squarely covered by the decision rendered by Hon’ble J & K High Court in the case of Shree Balaji Alloys [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT]. However, the Ld D.R submitted that there is some confusion about the quantum of deduction and also the parity of facts between the assessee’s case and the case of Shree Balaji Alloys (supra) need to be examined. We find merit in the submissions of Ld D.R. Accordingly, in our view, this issue requires fresh consideration at the end of the Assessing Officer in order to find out parity of the facts between the assessee’s case and the case of the Shree Balaji Alloys that was decided by Hon'ble J&K High Court. Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the matter to the file of the Assessing Officer with the direction to examine the parity of the facts
Disallowance Relating to mark to market loss - assessee provided for loss arising on the outstanding derivative contracts on foreign exchange on account of valuation done as at the year end - in respect of provision made for loss on account of valuation, the AO took the view the same is not allowable in view of the Instruction No.3/2010 dated 23/3/2010 and accordingly rejected the claim of the assessee - HELD THAT:- Having heard rival submissions, we are of the view that there is merit in the submissions made by the Ld A.R. The forward contract in foreign exchange has been held to be the business activity and the assessee has entered into the forward contracts upon receipt of orders from its foreign clients. Since the export bills have not been raised as on the date of Balance Sheet, the assessee was required to value the outstanding forward contracts, which is in accordance with the requirements of accounting standards and accounting principles. Accordingly, we are of the view that the loss claimed on valuation of outstanding forward contracts is allowable as deduction. Accordingly we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the claim of the assessee.
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2016 (10) TMI 1326 - ITAT MUMBAI
Capital gain computation - Consideration for de-merger of the telecom undertaking - value of consideration adopted for computation of capital gain - as per AO revaluation of assets e taken as a consideration for transfer of undertaking - HELD THAT:- Full value of consideration has to be taken based on the price that has been commercially agreed between the parties and cannot be imputed on a notional basis.
In case of transfer of a capital asset, what can be taxed in the hands of the seller under the Act is real or actual gain that accrues/ arises from transfer of the assets and hence, in absence of any sale consideration (and resultant profit from such transfer) no notional gain can be imputed in the hands of the seller to tax such transfer.
The other two only Sections (Le. Section 50C and Section 50D of the Act), which provide for imputation of consideration are also not applicable to the present case and hence, no consideration can be imputed in the instant case.
Wherever considered appropriate, the legislature has inserted specific provisions for assumption of sale consideration for transfer of assets in specified cases. It is therefore unjust and unwarranted to impute/ assume consideration in cases which clearly do not fall within the ambit of such specified Provisions.
Allegation of AO for taking the revaluation of assets as a consideration for transfer of undertaking, the learned AO has failed to understand that the Business Restructuring Reserve created in the books of the assessee was merely an accounting entry passed in the books of the Appellant on account of revaluation of its investment and that, the amount representing an accounting entry could not be deemed to be the value of consideration for transfer of the telecom undertaking by the assessee. The fair valuation of the investments by the assessee in its books cannot by any stretch of imagination be considered as a consideration received by the assessee from ICL for de-merger of its telecom undertaking.
The creation of such a reserve only represents an accounting entry passed by the assessee in its books of account and does not represent any consideration whatsoever received from ICL or any third person towards transfer of the telecom undertaking to ICL. Further, in case of any consideration being received or paid, there have to be atleast two parties and given that in the instant case the reserve was created on account of a unilateral action by the assessee, the same cannot be treated as a consideration received from ICL. It is unimaginable to assume that creation of reserve in the books of the assessee on account of revaluation of its own investments is the consideration paid by ICL. The Business Restructuring Reserve merely represented a notional reserve created to bring the value of the investment held in Indus to its fair value and does not in any manner represent any consideration received by the assessee.
In the instant case, there is no nexus between transfer of telecom undertaking by the assessee and revaluation of the investment in Indus except that both the transactions are independent transactions arising from the same Scheme of Arrangement. Hence, as no consideration has accrued to the assessee on account of the said de-merger, no profit or gain can be said to have accrued or received by the assessee. Accordingly, on the short ground of no consideration having been accrued or received by assessee, AO was not justified in computing capital gain on the transfer of undertaking. We therefore, set aside the order of AO on this issue.
As we are going to allow this ground of assessee‟s appeal regarding no capital gains in absence of any consideration for de-merger of the telecom undertaking, we are not going to deal with the other arguments of learned AR.
Denial of amortization of telecom licence fees under section 35 ABB (2) is restored back to the file of AO for deciding afresh keeping in view our above observation of no capital gains on demerger of telecom undertaking to ICL. We direct accordingly.
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2016 (10) TMI 1324 - ITAT DELHI
Penalty u/s. 271(1)(c) - addition made in the quantum order framed by the AO - HELD THAT:- We find that in assessee’s own case the ITAT, Delhi Bench in quantum proceedings has decided the issue in favour of the assessee and against the Revenue by quashing the assessment.
Thus we find that in assessee’s own case the ITAT, Delhi Bench in quantum proceedings has decided the issue in favour of the assessee and against the Revenue by quashing the assessment. - Decided in favour of assessee.
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2016 (10) TMI 1323 - ITAT JAIPUR
Disallowance of the provision for Leave Encashment - HELD THAT:- We find that the Hon’ble Calcutta High Court in the case of Exide Industries Ltd. & Others vs. Union of India & Others [2007 (6) TMI 175 - CALCUTTA HIGH COURT] has struck down section 43B(f) being arbitrary, unconscionable and de hors the Apex Court decision in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT]. This judgment was duly brought into the notice of the ld. CIT (A). However, the ld. CIT (A) without taking note of the ratio laid down by the Hon’ble Calcutta High Court proceeded to sustain the finding of the AO. The ld. CIT (A) has recorded the fact that the AO has disallowed the claim as per provisions of section 43B(f) of the Act and it has been struck down by the Hon’ble Calcutta High Court. In our considered view, the ld. CIT (A) was not justified and acted beyond his jurisdiction. Therefore, the order of ld. CIT(A) on this issue is set aside. The AO is directed to delete the disallowance - Assessee's Ground no. 1 and 1.1 are allowed.
Disallowance invoking the provisions of section 14A r.w.r. 8D - HELD THAT:- AO has made disallowance by invoking the provisions of Rule 8D of the IT Rules, 1962 towards interest. There is no dispute with regard to the provisions. If the assessee uses its own non-interest bearing funds, in that event it would not be open to the AO to make disallowance in respect of the interest by invoking the provisions of rule 8D of the Income Tax Rules. The ld. Counsel for the assessee has made reliance on the judgment of the Hon’ble Bombay High Court rendered in the case of CIT vs. K. Raheja Corporation P. Ltd. [2011 (8) TMI 148 - BOMBAY HIGH COURT] wherein held that in the absence of any material or basis to hold that the interest expenditure directly or indirectly was attributable for earning the dividend income, the decision of the Income Tax Appellate Tribunal in deleting the disallowance of interest under section 14A cannot be faulted. In the present case both the authorities below have proceeded merely on the basis of presumption which is not supported by any material.
Computation of book profit under section 115JB in respect of the amount of disallowance made under section 14A - HELD THAT:- We have already allowed ground no. 2 of the assessee’s appeal by directing the AO to delete the disallowance made under section 14A. Accordingly, the AO is directed to re-compute the book profit in view of our decision in ground no. 2. This ground of the assessee is allowed for statistical purposes.
Deduction u/s 80IB on the Miscellaneous Income - HELD THAT:- As per section 80IB, the deduction is available in respect of the profits and gains derived from any business referred to in sub-section 3 to 11, 11(A) and 11(B) of section 80IB of the Act. The assessee is required to demonstrate that the amount represents the profit derived from the eligible business. In the present case the amount represents unclaimed security deposit written back in the book. In our considered view, the security deposit although might have received in the normal business transaction, however, the writing off the same cannot be the profit derived from the eligible business. Therefore, we do not see any merit in the ground of the assessee and the same is hereby dismissed.
Interest income earned from regular business activities of the assessee company - Business income or Income from Other sources - Disallowing deduction u/s 80IB - contention of the assessee is that the assessee has no other alternative but to deposit the amount in the form of FDRs as per the terms of agreement and the earning out of this fund deposited in the fixed deposits under the term of contract, which was lying idle at some point of time would certainly be the income derived from the eligible business - HELD THAT:- We find some merit in the contention of the ld. Counsel for the assessee, but the fact whether there was such term of contract forcing the assessee to deposit the amount in the form of FDR requires to be verified at the end of the AO. Therefore, we set aside the order of ld. CIT (A) on this issue and restore the issue to the file of the AO for decision afresh. This ground of the assessee’s appeal is allowed for statistical purposes.
Depreciation claimed on road/on road construction, while treating it as a building in nature - HELD THAT:- the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench of the Tribunal in the assessee’s own case in Revenue’s appeal [2014 (9) TMI 163 - ITAT JAIPUR] for the assessment year 2008-09. Therefore, he prayed that ground no. 1 of the revenue’s appeal be rejected.
Deduction u/s 80IB on sale of scrap - HELD THAT:- As scrap has been generated in the normal course of business of operation and maintenance of the toll highway and is a normal business transaction which in any case could not be held as non-business receipt. The scrap include the metal crash barriers, pedestrian guard rails etc. which are fixed on the toll road and got damaged in the accidents taken place and being not remained for use as such become scrap. Had there been no business of operating and maintaining of the toll highway, there would be no question of generation of any such scrap, thus the income from sale of scrap is normal business income and therefore is eligible for deduction u/s 80IB - Decided against revenue.
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2016 (10) TMI 1322 - ITAT AHMEDABAD
Suppressed sales/unaccounted sales - clubbing turnover of Swastik Polymers with the assessee firm - on the basis of information received from Central Excise Department with regard to suppressed sales there were two proprietorship firms out of which one named M/s Subham Polymers owned by Shri Ashokkumar C. Dharewa HUF, (the assessee) and the other named M/s Swastik Polymer, owned by Shri Bimalkumar Chainroop Dharewa (brother of Shri Ashok Chainroop Dharewa) Karta of HUF - HELD THAT:- Excise Department has mainly clubbed the gross turnover of two concerns M/s Subham Polymers and M/s Swastik Polymers and have taken the clearance value of ₹ 1,52,38,813/- as against total turnover of ₹ 1,52,43,382/- (turnover of Subham Polymers ₹ 87,76,159/- + turnover of Swastik Polymers ₹ 64,67,823/-) as shown in their respective audited financial statements.
No case against the assessee of suppressed sales or unaccounted sales, when the turnover as calculated by Excise Department has been shown in separate books of account and they are part of audited books of account and income-tax return furnished.
AO has grossly erred in taking the excise limit of ₹ 1.5 crores whereas for the year under appeal excise limit was at ₹ 1 crore. During the course of hearing ld. AR has relied on the judgment of President Industries [1999 (4) TMI 8 - GUJARAT HIGH COURT] wherein it has been held that sale proceeds itself cannot be treated as undisclosed income rather the net profit embedded in the sale should be treated as undisclosed income.
CIT(A) while adjudicating the appeal of assessee has rightly given effect to the judgment of President Industries (supra) and has taken the net profit of ₹ 2,27,573/- shown by M/s Swastik Polymers in the audited profit and loss account placed as an addition to the income of assessee at the place of addition towards suppressed sales of ₹ 1,13,24,749/- taken by ld. Assessing Officer. We, therefore, find no reason to interfere with the order of ld. CIT(A) - Decided against revenue.
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2016 (10) TMI 1321 - BOMBAY HIGH COURT
Distribution of profit - payment of rate difference after the closure of the accounting year - commercial expediency - Whether amount to be paid was not out of the profits ascertained at the Annual General Meeting ? - HELD THAT:- It is an agreed position between the parties that the issue raised herein stands concluded by the decision of this Court in Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd. [2009 (4) TMI 19 - BOMBAY HIGH COURT] in favour of the Respondent-Assessee - question as framed does not give rise to any substantial question of law as the impugned order has merely followed the binding decision of this Court. Thus, not entertained.
Depreciation on fixed assets on project - Non deducting subsidy received from the National Dairy Development Board, ignoring the provisions of section 43(1) and Explanation 10 to section 43(1) - HELD THAT:- Revenue is unable to points out whether or not any appeal on the issue raised herein, has been filed by the Revenue. In fact, the order of this Court in Kolhapur Zilla Sahakari Dudh Utpadak Sangh Ltd. (supra), appears to be an appeal by the Revenue in respect of the very orders which are being relied upon by the impugned order (as evident from paragraph 14 of the order of the CIT(A)). However, the issue raised herein was not even an issue raised therein.
Question as framed does not give rise to any substantial question of law as the impugned order of the Tribunal has merely followed its own orders for the earlier Assessment Years, which have been accepted by the Revenue.
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2016 (10) TMI 1319 - ITAT AHMEDABAD
Correct head of income - gain on sale of property - capital gains or business income - HELD THAT:- The issue involved is essentially factual in nature. It is the case of the assessee that the land and other properties were no correction and acquired/purchased over several years and held as “capital asset” in the nature of investment. From the written submissions of the assessee as extracted by the CIT(A) in his order, we note that there a considerable time lag between the purchase and the sale of land and other properties. Simultaneously, the land/properties have been declared as “capital investment” by the assessee all along.
Some of the properties were let out and rent thereon was earned as a yield on such investments. Agricultural income has been consistently declared year-after-year on agricultural land so held before its sale. The non-agricultural land so held were shown as investment and subjected to wealth tax being capital asset.
On perusal of the written submissions as reproduced by the CIT(A) we note that the land/properties were purchased and held for several years in many cases before its sale. Coupled with this, we also take note of the fact that assessee has large capital of its own at its disposal which is far in excess of the corresponding investments made in land/properties over years. On cumulative reading of these glaring facts, we fail to comprehend the action of the Revenue in holding capital gains earned on sale as declared to be a business venture. It is manifest that the AO as well as CIT(A) misdirected themselves in law and on facts in holding the land/properties to be in the nature of trading asset merely on the ground that some of the agricultural land were converted into non-
Agricultural land and some agreements were entered for the development of the land in the year under appeal acquired and held for decades in many cases. We find considerable weight in the plea of the assessee that intention at the time of purchase to hold impugned land/properties as a capital asset is manifest on records. The balance-sheet filed by the assessee over years, wealth-tax returns filed by the assessee, adequacy of its own capital clearly underscore the intention of the assessee to hold land/properties as capital asset as claimed.
We also take note of the plea of the assessee that he is a co-owner of impugned land/properties holding certain percentage of ownership-rights therein and the claim of the land/properties as capital asset has been accepted by the Revenue in the hands of other co-owners in the assessment proceedings u/s.143(3) of the Act. This fact has remained uncontroverted. We also note that having regard to the facts noted above, the Coordinate Bench of the Tribunal in assessee’s own case relevant to AY 2004-05 has decided the issue in favour of the assessee. [2011 (6) TMI 994 - ITAT AHMEDABAD]
Thus land/properties were held by the assessee as capital asset before its sale and consequential gains arising on sale thereto is chargeable under the head of “capital gains”. AO is directed to consider the gains arising on sale of land/properties under the head “capital gains”. AO is further directed to de novo consider the relief as and where claimed by the assessee u/s.54B relevant to assessment years under appeals in accordance with law after affording requisite opportunity to the assessee. We accordingly set aside the issue towards eligibility of relief claimed u/s.54B of the Act back to the file of the Assessing Officer for fresh consideration.
Validity of assessment u/s 153A - HELD THAT:- On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Legal issue stands adjudicated in favor of the assessee. Thus, in our considered view, the realignment of income from one head of income to another without reference to any incriminating material is not sustainable in law in the facts of the present case.
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2016 (10) TMI 1318 - ITAT BANGALORE
Revision u/s 263 - additions on account of TP adjustment in relation to transaction with AE - The order passed by the CIT u/s. 263 of the act has been challenged by the assessee before the Tribunal in 2016 (7) TMI 1587 - ITAT BANGALORE] quashed the order of the CIT passed u/s. 263 - HELD THAT:- Having carefully examined the order of Tribunal passed in appeal filed against the order of CIT u/s. 263 of act. We are the view that once the order of CIT passed u/s. 263 is quashed, consequential proceedings are not sustainable in the eyes of law. We therefore set aside the order of Assessing Officer as well as CIT(A). Accordingly the appeal of assessee is stands allowed.
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2016 (10) TMI 1317 - ITAT CHENNAI
Capital gain computation - Fair Market Value (FMV) as on 01.04.1981 of the property as capital asset - FMV ₹ 4,500/- per acre as per CIT-A as against ₹ 6,000/- per acre claimed by the assessee - valuation report obtained from a Chartered Engineer relied by assessee - HELD THAT:- CIT(A) had considered the average of registered valuer and Sub-Registrar valuation for determining the FMV of the property as on 01.04.1981. This decision of Ld.CIT(A) is based on the order of the Tribunal, Chennai Bench in the case of M/s.Kutty Flush Doors [2014 (10) TMI 1027 - ITAT CHENNAI]. Being so, we do not find any infirmity in the order of Ld.CIT(A). The same is confirmed.
Denial of loan liability from the cost of acquisition as deduction in the computation of long term capital gains - AO has denied the claim of deduction as impugned capital asset was settled by the grandmother of the assessee in his favour vide Settlement Deed wherein no narration of the pre-existing change/mortage in the capital asset and loan liability was related to a partnership firm M/s.S.Albert & Co., taken for the business purposes of the aforesaid firm - HELD THAT:- Property was given as a collateral security for the loan availed by other than the assessee, which is a M/s.S.Albert & Co., as pointed out by the AO in his assessment order and neither the assessee nor the assessee’s grandmother who settled the property in favour of the assessee, is borrower nor a party to the suit, the mortgage debt cannot be considered as a cost of acquisition of property so as to give deduction while computing the capital gains from the transfer of the property. If the consideration of sale of property apportioned towards the outstanding debt in bank, the assessee is having very well right to claim from the borrower of the bank whose debt was settled. No infirmity in the order of the Ld.CIT(A). The same is confirmed. - Decided against assessee.
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2016 (10) TMI 1316 - ITAT DELHI
Assessment u/s 153A - absence of any incriminating material in search - unexplained share application money u/s 68 - HELD THAT:- From the CIT(A)’s order there is a clear finding that no incriminating document or material was found related to the property which corroborates the allegation made by the AO. In Para 3.2, the CIT(A) clearly mentioned that the documents were filed before the AO. Thus, besides these documents there was nothing incriminating found by the Assessing Officer. The CIT(A) also observed that during the course of search at the appellants’ premises nothing incriminating was found reference to the impugned share application money.
There is no need to interfere with the order of the CIT(A). The present case is also squarely covered by the judgment of the Hon’ble Delhi High Court in case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]. - Decided in favour of assessee.
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2016 (10) TMI 1315 - ITAT CHENNAI
Set off unabsorbed deprecation - As per AO under the old provision unabsorbed depreciation could be considered only for eight years - As per CIT (Appeals) amendment made by Finance Act, 2001 w.e.f. 01.04.2002 reinstated the old provision and according to him, the assessee was eligible for carried forward depreciation for the assessment year 1997-1998 that amended provisions would apply - HELD THAT:- In our opinion, the issue stand settled by virtue of jurisdictional High Court judgment in the case of CIT vs. Pioneer Asia Packing P. Ltd [2007 (11) TMI 285 - MADRAS HIGH COURT] as held Tribunal has rightly come to the conclusion that the assessee is entitled to the unabsorbed depreciation brought forward as on April 1, 1997, and could be set off against the business profits and in order to give effect to that finding, the case was remitted to the file of the Assessing Officer for verification as to how much depreciation was available up to April 1, 1997, that could be included in the income of the assessee.
Accordingly, we are of the opinion that ld. Commissioner of Income Tax (Appeals) is justified in taking a view that assessee was eligible for carried forward deprecation for the assessment year 1997-1998.
Addition u/s.43B (b) or u/s.40A(7)(b) - provision made for gratuity - HELD THAT:- As in the case of CIT vs. Common Wealth Trust (P) Ltd & Anr [2004 (4) TMI 51 - KERALA HIGH COURT] and CIT vs. Bechtel India (P) Ltd [2007 (11) TMI 2 - HIGH COURT , DELHI] had held that harmonious construction of Sec. 40A(7) (b) and Sec. 43B(b) of the Act could clearly indicate that the legislature never intended to take away the benefit conferred under clause (b) of Sec. 40A(7) of the Act through the provisions of Sec. 43B(b) .
So far as additional depreciation is concerned, balance of additional depreciation remaining after the claim of 50% in one year could be allowed in succeeding year by virtue of judgment in the case of Rittal India Pvt. Ld [2016 (1) TMI 81 - KARNATAKA HIGH COURT]. We, therefore of the opinion that ld. Commissioner of Income Tax (Appeals) was justified in allowing the claim of the assessee in both years.
Appeals of the Revenue stand dismissed.
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2016 (10) TMI 1313 - ITAT MUMBAI
TP Adjustment - comparable selection - HELD THAT:- Acropetal Technologies Ltd. - Rejection of this company as comparable to low end BPO service providers on the reasoning that this company is providing KPO services.
R. Systems International ltd. - Remit the issue of comparability of this company to the AO/TPO for examining afresh in the light of the relevant judicial precedents and of course after due opportunity of being heard to the assessee.
Aditya Birla Minacs Word Wide Ltd. and Tata communication transformation Ltd. - Assessee’s contention in relation to application of RPT filter to these two comparables needs to be looked into fresh keeping in view the observations of the ITAT in case of Nokia India (P) Ltd. v/s DCIT [2014 (11) TMI 101 - ITAT DELHI] - We, therefore, remit the issue of comparability of the aforesaid two comparables to the Assessing Officer / Transfer Pricing Officer for deciding afresh after due opportunity of being heard to the assessee.
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2016 (10) TMI 1311 - SC ORDER
TP Adjustment - addition to the arm’s length price of its international transaction pertaining to the import of edible oil from the Assessee’s associated enterprise by using the Comparable Uncontrolled Price (‘CUP’) method
HELD THAT:- Learned counsel for the petitioner to get instruction as to whether comparable uncontrolled price method (CUP) is accepted by Transfer Pricing Officer in subsequent assessment years by accepting quotation for benchmarking international transaction.
Post after four weeks.
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2016 (10) TMI 1310 - ITAT MUMBAI
Draft assessment order u/s 143(3) r.w.s. 144C - maintainability of th objection filed by the assessee under Form No. 35A - curable defect u/s 292B - DRP dismissing the application filed by the appellant in Form 35A in limine by holding that the application is invalid and non-est - Form No. 35A filed by the assessee is only a scanned copy containing the signature of the concerned person - HELD THAT:- Revenue's only objection is regarding furnishing of the application in scanned copy. Otherwise, the said scanned copy is meant for the assessee and for the purposes of the Act in all respects. Further, we find it is undisputed fact that, in response to the show cause notice, the assessee attempts to file the Form No 35A in original and however, the same was not successfully allowed by the DRP. Rather, the DRP preferred to act on the said scanned copy of Form No 35A unfairly and considered the said the scanned application as non-est. Further, it is relevant to mention that the DRP failed to provide the written reasons for rejecting the Original Application attempted to be filed by the assessee in response to the show cause notice.
Thus, in our opinion, the expression 'other proceedings' is wider enough to cover the present defect or omission of replacing the scanned copy with the original in time. We order AO accordingly.
As per assessee original Form No.35A could not be furnished to replace the scanned copy which is already with DRP, within the prescribed time of 30 days for the reasons as the assessee geographically located in Singapore; the signed original application could not be received in India in time; to meet the dead lines, assessee filed the application with colour scanned copy of Form No.35 with the intention to replace the same with the original one at the time of hearing before the DRP; and there was a change in the tax consultant / AR of the assessee and the responsibility of replacing the scanned copy with the original application has missed inadvertently.
As discussed above, we find, the same is not without reason and the same being the change in the Representative. As such, the furnishing of the scanned papers and replacing them with hard copies or soft copies, if any, is now not new to the Department. Further, now, the Revenue started accepting the e-filing of application / appeals these days. Why not this also should not be deemed as such but for the procedural defects, if any.
Both decisions of the first appellate authority in treating the application non-est and dismissing the same as in limine are unsustainable in law. We order accordingly. Thus, grounds no.1 to 4 raised by the assessee are allowed.
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2016 (10) TMI 1309 - ITAT DELHI
Disallowance of interest expenses - addition being 2/3rd of interest expenditure claimed by the assessee - HELD THAT:- Assessee has failed to comply with the express directions of Tribunal. The question for adjudication has been whether deduction of the interest expenditure claimed by assessee was justified or not in terms of section 36(1)(iii) of the Act and in the attending facts and circumstances of the case.
Assessee was to justify the business expediency under which he had to pay interest on the borrowed funds at the rate more than the interest received on the same funds advanced by the assessee. Several opportunities were given by the AO by issuing notices u/s. 143(2) along with questionnaire in terms of Tribunal’s directions but the assessee did not bother to comply with the notices issued to him. One of the submissions of the assessee has been that the loan was advanced at lower rate to Merlin Resources Pvt. Ltd. for a long period whereas the loan raised from Silverline Technologies Pvt. Ltd. was repaid in a short period.
Assessee could not submit any evidence or any loan agreement before us in support of such contention nor could he lay any evidence to justify any business prospects by borrowing the funds at higher rate of interest and lending the said borrowed funds at lower rate of interest, particularly when the assessee was engaged in the business of financial services. There are also no previous or subsequent instances on record to prove such business practice of the assessee.
Assessee failed to prove the business expediency, under which he chose to suffer loss in the business by paying much more interest on borrowed funds and by earning lesser interest on advancing the said borrowed funds. No justification to discard the conclusions of the authorities below regarding admissibility of inordinate interest expenditure claimed by assessee on borrowed funds. - Decided against assessee.
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2016 (10) TMI 1307 - ITAT KOLKATA
Addition u/s 41(1) towards subsidy - accrual of subsidy / receipt of subsidy - Year of assessment - assessee had shown a sum being 75% of sales Tax / VAT as Sales Tax Incentive Receivable under the scheme of State Government. This sum was correspondingly credited to General Reserve of the assessee - quantification of subsidy was in the form of reimbursement of sales tax / VAT paid by the assessee on sale of its finished products to the extent of 75 % of the same after the commencement of production - CIT -A deleted the additions on the ground that the subsidy was actually released / sanctioned to the assessee which falls in the financial year 2008-09 relevant to Asst Year 2009-10 and hence the accrual of subsidy / receipt of subsidy had to be seen only in that year - HELD THAT:- Assessee had to first set up its project in the State of West Bengal and start manufacturing operations. The finished goods manufactured should be sold after payment of sales tax / VAT. The assessee has to produce the evidence for payment of sales tax / VAT. Thereafter, WBIDCL on satisfactory compliance made by the assessee in this regard, would release the subsidy by reimbursing 75% of the sales tax / VAT paid by the assessee. We have gone through the relevant pages of the paper book of the assessee containing the evidence in the form of tax paid challans for sales tax / VAT. Hence we hold that the ld AO had factually erred in stating that the sales tax / VAT were not paid by the assessee.
AO had erred in invoking the provisions of section 41(1) of the Act. It is well settled that the said provision could be invoked only when the assessee had claimed deduction in earlier years at the time of creation of liability and if the said liability ceases to exist, then the provisions of section 41(1) of the Act could be invoked. In the instant case, admittedly, the assessee had not claimed any deduction in the earlier years towards the sales tax portion of the subsidy. Hence, the provisions of section 41(1) of the Act could be invoked in the facts of the instant case.
Keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents relied upon hereinabove, we hold that the subsidy is to be treated as capital receipt not chargeable to tax in the hands of the assessee and not in the years under appeal - Subsidy cannot be the subject matter of taxation in the years under appeal as the same got released / sanctioned only in the financial year 2008-09 relevant to Asst Year 2009-10. Accordingly, the grounds raised by the revenue for both the years are dismissed.
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2016 (10) TMI 1306 - ITAT CHENNAI
Agricultural income - CIT(A) restricting 50% of the agricultural income computed by AO - Since the assessee has not carried out any agricultural operation, the AO treated the above income as “income from unexplained sources” and brought to tax - main dispute of the Department is with regard the income from the lands at Kolli Hills and Ulagankathan village - HELD THAT:- Location of the land holdings are not situated in metro city so that the lease-holder can execute agreement or of any kind and the assessee can produce the same before the authorities below. When the agricultural land held by the assessee was not disputed, it cannot be held that there was no income from the above said agricultural land holdings. Since the ld. CIT(A) restricted the disallowance on estimated basis in the absence of material evidence for the income earned by the assessee, we are of the considered opinion that the disallowance sustained by the ld. CIT(A) is on higher side and it has to be reasonably reduce the disallowance sustained by the ld. CIT(A). Accordingly, we allow 75% of the income as income derived from the said land holdings and the Assessing Officer is directed to disallow the balance 25%. Thus, the ground raised by the assessee is partly allowed.
Addition of cash deposit with UTI Bank - HELD THAT:- If it is the withdrawal from bank account as claimed by the assessee then, the assessee should have made entry in the cash book. In the absence of suitable explanation offered by the assessee, we are inclined to accept the mere submission of assessee that it was a technical mistake. As contended by the ld. DR, on perusal of the assessment order, we find that the AO has made similar addition when the assessee has given same reply with regard to the amount deposited in the Axis Bank account and not shown in the cash book. In view of the above facts and circumstances, we sustain the addition made by the Assessing Officer and the ground raised by the assessee is dismissed.
Addition of differential amount of cash deposit - HELD THAT:- On appeal, the assessee has failed to give any convincing explanation with regard to the source for ₹.66,520/-. Therefore, the ld. CIT(A) confirmed the addition made by the Assessing Officer. Even before us, assessee has not given any details with regard to the source for ₹.66,520/- except reiterating the submissions as was made before the Assessing Officer. Hence, we find no reason to interfere with the order of the ld. CIT(A) on this issue and thus, the ground raised by the assessee is dismissed.
Disallowance of the claim of interest payments - whether payment of interest on loans taken for payment of tax cannot be considered as expenditure incurred for the purpose of business? - HELD THAT:- CIT(A) has observed that as the payment of interest on loans taken for payment of tax cannot be considered as expenditure incurred for the purpose of business, he sustained the addition made by the AO. On further appeal before the Tribunal, the ld. Counsel for the assessee relied on the grounds of appeal and has not filed any explanation with regard to the claim of the assessee - no reason to interfere with the order of the ld. CIT(A) on this issue. Thus, the ground raised by the assessee is dismissed.
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2016 (10) TMI 1304 - ITAT PUNE
Unexplained investment in the hospital building u/s. 69 - Admission made by the assessee in statement recorded u/s. 133A - HELD THAT:- In the present case, we find that although the assessee during survey proceedings had admitted as additional income during the period relevant to assessment year 2009-10, however, subsequently vide letter dated 04-03-2009 the assessee has retracted from said admission. Apart from the statement of assessee there is no other documentary evidence which suggest undisclosed income of the assessee. Rather the assessee has furnished credible evidence to substantiate source of funds. In such circumstances addition on the basis of statement recorded u/s. 133A cannot sustain. We find merit in the appeal of the assessee. Accordingly, impugned order is set aside and the appeal of the assessee is allowed.
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2016 (10) TMI 1303 - ITAT CHENNAI
Recomputation of deduction claimed by the assessee u/s 80IB - CIT(A) had summarily rejected the claim of the assessee that R&D activities carried on had no bearing with Pondicherry Unit - HELD THAT:- As stated in the annual report for financial year 2004-05 that R&D carried out by the assessee was to absorb the technology for air assisted direct injection for two stroke engines, and product launch was proceeding as per schedule, for Indian three wheeler application. It is not disputed by the lower authorities that products manufactured at Pondicherry Unit and Maraimalainagar Unit though similar were not identical. That the products were different is clear from the list enumerated in paper book page 110 - products were different - R&D unit itself as such was situated in Maraimalainagar Unit. This is evident from letter dated 15.4.2004 of Ministry of Science and Technology of New Delhi, giving recognition to the R&DRP Unit, placed at paper book page 62. When the assessee asserted that R&D was exclusively for Maraimalainagar Unit and for its products, in our opinion, without any evidence being brought on record the lower authorities should not have taken a view that such expenditure was also relatable to Pondicherry Unit - reallocation of R&D expenditure was not called for in the facts and circumstances of the case. Such reallocation of R&D expenditure and the consequent reduction in claim u/s 80IB of the Act stands deleted.
Benefit of deduction u/s 80IB denied - Foreign exchange fluctuation gain/loss - HELD THAT:- . Rule of consistency requires that when foreign exchange loss is considered as expenditure for calculating deduction u/s 80IB of the Act in earlier years, when there is a surplus in a subsequent year, it should not be excluded. When a similar set of facts permeates through a number of years and there is nothing on record to show that a different view was required to be taken on such set of facts, though rule of res judicata does not apply to income tax proceedings, rule of consistency has to be applied unless there is a gross violation of law which calls for a deviation. We are of the opinion that the lower authorities erred in not allowing the claim of deduction u/s 80IB of the Act on foreign exchange gains.
Reallocation of electricity and rental expenditure incurred for the Head Office to the Pondicherry Unit while working out deduction u/s 80IB - HELD THAT:- As decided in own case [2011 (4) TMI 1342 - ITAT CHENNAI] it was held by this Tribunal that assessee could not show why the Head Office expenditure ought not have been allocated in proportion to total turnover. The facts and circumstances being the very same, we do not find any reason to interfere with the order of the CIT(A) in this regard. Ground Nos. 9 & 10 are dismissed.
Claim of deduction by the R&D Unit of Maraimalainagar Unit disallowed - HELD THAT:- Assessee being already into the line of manufacturing fuel injection systems, developing the technology for an improved version of fuel injection system cannot be considered as a new venture at all. In taking this view, we are just fortified by the judgment of Apex Court in Alembic Chemical Works Co. Ltd [1989 (3) TMI 5 - SUPREME COURT] - We also note from the break-up of expenditure given by the assessee in page 64 of the paper book that these were salaries, travel and administrative expenditure, technical guidance, components, consumables and tools, preliminary fee etc. These payments do not give any enduring benefit to the assessee nor result in acquisition of any capital asset. In the circumstances, we are of the opinion that the disallowance was not called for. Such disallowance stands deleted.
Upward adjustment for notional interest calculated on the advances given by the assessee to its wholly owned subsidiary called M/s Amtec Precision Products Inc, in USA - HELD THAT:- Finding a comparable uncontrolled transaction, where a loan was given to an entity which was subsidiary to the tested party, and whose capital stood completely eroded due to loss was not practical or feasible. The simple reason is that no other person would have given any loan to such an entity, whatever might be the interest rate since the chances of recovery was negligible. In such a situation, when there could have been no reasonably identifiable comparable uncontrolled transaction, computation of comparable uncontrolled price by applying of Rule 10B(1), fell at the threshold.
Section 92C(1) prescribes computation of ALP by comparable uncontrolled price method, resale price method, cost plus method, profit split method, transactional net margin method and any other method prescribed by the Board could have been applied. In our opinion, the question of benchmarking the transaction of the nature mentioned, applying any of the methodology prescribed in sec.92C(1) did not arise at all due to the particular facts and circumstances. According to us, fastening of an interest rate on the assessee when there was no comparable uncontrolled rate that could have been identifiable was incorrect. We, therefore, have no hesitation in deleting the addition made by the Assessing Officer/TPO.
Interest u/s 234A - HELD THAT:- We are of the opinion that this matter can be looked into by the Assessing Officer and if there was no delay in filing the return, question of levy of interest u/s 234A of the Act would not arise. Accordingly, this ground is allowed for statistical purposes.
Addition based on TDS certificates - payment to the assessee fell u/s 194J of the Act and sec. 194C was mentioned by mistake - HELD THAT:- Assessee had placed before the Assessing Officer letter dated 5.6.2013 issued by M/s Visteon Climate Systems India Ltd where they had mentioned that they had received some testing service from the assessee on which it had made a provision of ₹ 32 lakhs in its accounts. It was also mentioned by the said party that the payment to the assessee fell u/s 194J of the Act and sec. 194C was mentioned by mistake. It is also not disputed that Form 16A was updated by the deductor. In such circumstances, we are of the opinion that the addition ought not have been made just for a reason that a mistake was committed by the deductor in the TDS certificate issued. In addition there was nothing on record to show that assessee had rendered any services which could earn it income of ₹ 1.6 crores. In our opinion, the addition was not called for. Such addition stands deleted. Ground of allowed.
Deduction u/s 80IA claimed on windmill division - HELD THAT:- We find that the issue raised by the assessee is squarely covered in its favour by the judgment of the Jurisdictional High Court in the case of Velayudhaswamy Spinning Mills P. Ltd. [2010 (3) TMI 860 - MADRAS HIGH COURT] - The SLP filed by the Department against the said judgment was dismissed by the Apex Court. In such circumstances, we are of the opinion that prior year depreciation could not have been forcibly set off against the income of the assessee when the initial assessment year for which the assessee preferred the claim was different. We, therefore, allow Ground raised by the assessee.
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