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Showing 81 to 100 of 1610 Records
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2016 (5) TMI 1537
Deduction u/s 80-IB - whether the business income declared by assessee included income from eligible business? - HELD THAT:- Figures prove that the assessee had its business income from business of stone crushing only as the other income claimed in the return of income is on account of income from the house property and honorarium and interest as noted by the AO - Income of the assessee for business do not include the income from any other business than the eligible business of stone crushing, therefore, to the business income if any it made on account of disallowances of expenses will only increase income from eligible business which again will be exempt u/s 80IB.
In HARBHAJAN KAUR, PROP. [2013 (12) TMI 1559 - ITAT AMRITSAR] under similar facts and circumstances has held that disallowance of expenses claimed by assessee from the eligible business will increase its income which again will be exempt u/s 80-IB.
Increase in income of the assessee due to additions will only increase income which again will be exempt u/s 80IB of the act. The contention of learned DR that the Amritsar Bench had passed a perverse order as the assessee cannot be allowed benefit of exemption u/s 80-IB on the disallowances do not hold any force in view of the fact that the disallowance of expenses will automatically increase the income of assessee from eligible business as the additions has been made from the expenses incurred during running of such eligible business and therefore the increased income can only be attributed to the eligible business of the assessee. In view of the above respectfully following the order of Amritsar Bench we accept the alternative contentions of learned AR that additions even if sustained will not have any impact on the taxable profits as the sustenance will only increase the profits eligible for deduction u/s 80-IB. - Appeals filed by the assessee are allowed.
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2016 (5) TMI 1536
Validity of assessment u/s 153A - Jurisdiction u/s.153A - HELD THAT:- In the present case, the assessment was framed consequent to search in the case of the assessee and duly recording panchanama on the basis of incriminating material. Hence, we do not find any infirmity in framing the assessment u/s.153A of the Act and the same is confirmed. This ground of appeal of the assessee is dismissed.
Disallowance of sales promotion expenses - agreed addition - AO disallowed it on the basis of consent given by the assessee to make that addition, as the assessee has failed to produce the evidence in support of the claim of expenditure - HELD THAT:- Revenue authorities have not doubted the incurring of expenditure for sales promotion. However, they doubted the quantum of expenditure incurred. The business cannot be carried on without incurring sales promotion expenditure. The ld. AR pleaded, before us, that most of these payments were passed through banking channels. In such circumstances, the disallowance of entire sales promotion expenditure is not proper. If the sale promotion expenditure are not supported by proper bills or vouchers or receipts and payments have been made only by cash, then there are chances of inflating of such cash expenditure.
Even if it is so, the entire expenditure cannot be disallowed. Since, there is possibility of inflating of cash expenditure, disallowance of certain percentage of the expenditure to be made. From this point of view, if the expenditure is not fully vouched, the Assessing Officer is directed to disallow only 10% of the unsupported cash expenditure out of this and he shall not disallow 100% of such expenditure. Accordingly, we remit this issue to the file of the AO for fresh consideration - Assessee's ground is allowed for statistical purposes.
Levy of interest u/s.234A and 234B - HELD THAT:- The interest under section 234A is chargeable from the date of expiry of the notice period given under section 153A to the date of completing the assessment under section 143(3) r.w.s. 153A of the Act, as held by the Tribunal in the case of ACIT v. VN. Devadoss [2013 (9) TMI 400 - ITAT CHENNAI]. The interest under section 234B is to be levied only on the additional tax levied on the enhanced income determined under section 143(3) r.w.s. 153A of the Act. Therefore, the period of charging of interest should be from the date of determination of income under section 143(1) or 143(3) to the determination of enhanced income under section 143(3) r.w.s. 153A of the Act.
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2016 (5) TMI 1535
TDS u/s 194C - advertising charges - payments made by the respondent-assessee-company to M/s.Bennet, Coleman & Co., for procurement of advertisement agency - Whether advertisement between the assessee and the media (Bennet Coleman) as agent and media and not client and media? - HELD THAT:- Though most of the advertisements belong to respondent-assessee-company’s own business, payments are made in the capacity of an advertisement agency to M/s.Bennet, Coleman & Co., Therefore, circular No.715 dated 8/8/1995 as well as circular No.5 of 2016 dated 29/2/2016 are squarely applicable.
No TDS is attracted on payments made by television channels/newspaper companies to the advertising agency for booking or procuring of or canvassing for advertisements. It is also further clarified that 'commission' referred to Question No. 27 of the Board's Circular No. 715 dated 8.8.95 does not refer to payments by media companies to advertising companies for booking of advertisements but to payments for engagement of models, artists, photographers, sportspersons, etc. and, therefore, is not relevant to the issue of TDS referred to in this Circular. ”
It is needless to mention that CBDT circulars are binding on the authorities employed for execution of the provisions of the Income-tax Act so long as they are beneficial to the assessee. The said circular is squarely applicable to the facts of the case as impugned payments were made in the capacity of agent to the publisher of newspaper. The mode of discharge of liability has no bearing on the applicability of TDS provisions. Therefore, we do not find fault with reasoning of CIT(A). - Decided against revenue.
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2016 (5) TMI 1534
Fees for technical services - services rendered by the assessee for installation of cranes - HELD THAT:- As decided in M/S. SANDVIK AB VERSUS DY. DIRECTOR OF INCOME TAX, (INTERNATIONAL TAXATION) -II, PUNE [2014 (12) TMI 388 - ITAT PUNE] on the basis of the protocol to the DTAA between the India and Sweden the assessee can claim the benefit of the conditions imposed for bringing to tax the fees for technical services in the treaty between the India and Portuguese. We, therefore, hold that on the principle of the most favoured nation (MFN) clauses the payment of ₹ 5.93 Crores received by the assessee company from its Indian subsidies cannot be brought to tax.
Fee charged by the assessee from SAPL for installation of crane, upgradation/service of other equipments does not involve ‘make available’ of any know how, technology which can be used by the Indian Associate of assessee independently for its benefit in any manner, whatsoever. Accordingly, we direct the Assessing Officer to delete the addition made on account of ‘fee for technical services’ for installation of machines etc.
Royalty’ towards use of CAD/CAM designing software and IT support - contention of the assessee is that the assessee has purchased the basic version of program/software from the third party and after making certain changes/modification to the basic program has standardized the software to be used by the entire group - basic program has been stored in Sweden and the users have limited accessibility to the program for using it without any further modification - HELD THAT:- Authorities below while deciding the issue has not considered the agreement between the assessee and Sandvik Asia Private Limited for the use of program. Thus, we are of the considered view that this issue needs a revisit to the file of AO
Assessee shall furnish the details of modifications/changes carried out by the assessee in the program for standardizing the same to be used by all the group concerns and also the terms and conditions for the use of program by SAPL. The Assessing Officer after considering the same shall decide the issue afresh in the light of decision of Co-ordinate Bench of the Tribunal in the case of Sandvik Australia Pty. Ltd. Vs. Deputy Director of Income Tax (International Taxation-II, Pune (supra).
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2016 (5) TMI 1533
Disallowance of expenditure u/s 14A - assessee accounted dividend income during the year under consideration which was exempted u/s 10(35) - AO by applying third limb of Rule 8D of the Income-tax Rules, disallowed 0.5% of the average investment which yielded the exempted income - as per AR no expenditure was incurred for earning the exempted income - HELD THAT:- It is nobody’s case that the assessee has borrowed any loan for the purpose of making investment, therefore, the first limb of Rule 8D may not be applicable. No material is available on record to suggest that the assessee has incurred any interest expenditure which are not directly attributable to any particular income or receipt. Second limb of Rule 8D is also not applicable.
Now coming to third limb of Rule 8D, an amount equal to 0.5% of the average value of the investment, income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee as on the first day and last day of the previous year, has to be considered for disallowance.
In this case, AO has considered the investments which are appearing in the balance sheet as on the first day and last day of the previous year and taken the income which was not formed part of the total income. Therefore, this Tribunal is of the considered opinion that the Assessing Officer has rightly applied third limb of Rule 8D for making the disallowance. - Decided against assessee.
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2016 (5) TMI 1532
Deduction u/s 54EC - CIT(A) directing AO to assess premium received by appellant company on transfer of tenancy right of the shops from one tenant to another as capital gains - Whether premium received by the assessee company on transfer of tenancy rights of the shops from one tenant to another should be treated as income from other sources and not as capital gains as claimed by the assessee ? - HELD THAT:- We agree with the observations of the CIT(A) that during the course of time the assessee acquired bundle of rights with respect to the impugned shops. These rights include inter-alia, rights of possession in tenancy. As per section 2(14) “capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession.
A perusal of this definition shows that the legislature has intended to define the term “capital asset” in the widest possible manner. This definition has been curtailed to the extent of exclusions given in section 2(14) itself which include stock-in-trade and personal effects. The impugned asset does not clearly fall in the aforesaid exclusions given in section 2(14). The bundle of rights acquired by the assessee is undoubtedly valuable in terms of money - The said tenancy rights shall form part of a capital asset in the hands of the assessee and, therefore, any gains arising there from would be assessable under the head ”Income from capital gains” eligible for deduction u/s 54EC - Decided against revenue.
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2016 (5) TMI 1531
Re-conveyance of the bought out Land - Whether the petitioner is entitled for re-conveyance of the land without paying the market value of the land? - Section 50 of Revenue Recovery Act - HELD THAT:- In this case the petitioner paid the amount. This was accepted without any demur. The sale was concluded in the year 1985. Therefore, the petitioner's payment cannot be considered as the payment effected in the light of the Government order referred as above. There is no case that the petitioner has committed any fraud on the officials of the Government. No such case was espoused in the counter. Further, the official respondents also have no case that the petitioner made the payment by misrepresentation. It is to be noted that nobody has a case that remittance was under mistake or under compulsion. In such scenario, the only conclusion is possible is that the petitioner made the payment and he was encouraged to make such payment by the Government. The stand in the counter that since the petitioner had cleared the entire liability, the Government can re-convey the land only if the petitioner remits the market value of the land. It is to be noted that the petitioner did not make any application - Therefore, the only irresistible conclusion that can be drawn is that the Government encouraged the petitioner to make the payment or the Government remains acquiesced when payments have been effected to discharge the liability.
Certainly, the principle relating to the proprietary estoppel would come into play to the aid of the petitioner - Petition allowed.
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2016 (5) TMI 1530
Deemed dividend u/s. 2(22) (e) - Whether assessee company has share holding and substantial interest in the financial aspects of the company? - HELD THAT:- CIT- A has dealt based on the thorough financial analysis of the earlier years were the assessee is having regular business transactions on commercial expediency and dealt with subsidiary company and the payments, on terms of commercial transactions, The ld. Commissioner of Income Tax (Appeals) relied on the Tribunal decision on assessee’s own case for the assessment year 2004-05 [2010 (7) TMI 1171 - ITAT CHENNAI] on the same issue. The contention of the Department before the Tribunal that the Revenue has not accepted the order of Tribunal and an appeal has already been filed in Madras High Court and the same is pending. This Tribunal is of the considered opinion that mere pendency of appeal before High Court cannot be a reason to take a different view. The order of Tribunal is binding on all the authorities in the State of Tamil Nadu and Union Territory of Pondicherry. The Commissioner of Income Tax (Appeals) has allowed the claim of the assessee.
Diminution of value of investments - Whether assessee is not entitled for claim of diminution in value of investments as Revenue expenditure by debiting to profit and loss account which takes the characteristic of capital in nature? - HELD THAT:- If debts are written off u/s.36(i)(vii) than it should be considered as Business loss. On the other hand, the investment is written off it should be treated as Capital loss. The ld. Commissioner of Income Tax (Appeals) has confused the facts and treated investment as debt in the normal course of business. We are not in a position to appreciate the reasons given by CIT(A) and also the facts brought on record by the lower authorities are not sufficient to adjudicate the disputed issue. Therefore, we set aside the order of Commissioner of Income Tax (Appeals) to the file of Assessing Officer for fresh consideration.
Disallowance of administrative and interest expenses - no income has been generated by way of business operations - HELD THAT:- Contention of assessee on the claim of expenditure that the ld. AO has not allowed any claim of expenditure though there was some activity in the company and the income being in the nature of rental income, income from capital gains and income from other sources and also raised grounds to allow claim of write off of investments made in the year 2005 as against the sale in current year and also for advances provided to subsidiary company by the assessee in the same year are not convincing and further on perusal of assessment records these contentions never raised in assessment proceedings as the AO passed the order on the claim of expenditure, rental income and capital gains only. The write off of investments and advances to subsidiary claim are not emanating from the assessment order. Therefore, we are not inclined to adjudicate the fresh disputed issue and remit the entire file to the Assessing Officer who shall verify and examine the claims.
Advances are doubtful for recovery and claimed deduction u/s.37 - Assessee company being investment company and investments are made in subsidiary companies but due to loss in business operations of subsidiary companym this amount could not be recovered and investments has not yielded any profits and claimed write off and prayed for allowing the deduction - HELD THAT:- AO and ld. CIT (Appeals) has highlightened only on the Annual accounts of the assessee company but not the balance sheet and profit and loss account of subsidiary company which incurred loss and which plays vital role in taking decision of write off and also there is no findings on the financial statements of the subsidiary company before the AO to disallow the claim. Considering the factual aspects, we are of the opinion that the matter has to be re-examined based on the financial feasibility and losses of subsidiary company in which assessee has made investments and advanced the money for working capital. Therefore, we remit the entire file to the Assessing Officer to decided a fresh and assessee should co-operative in providing the information. This ground of the assessee is allowed for statistical purpose.
Interest expenditure on loans - AR contention of allowing total claim is only on the basis of investment in subsidiary company and CIT(A) has restricted the claim to 3% of outstanding balance as on balance sheet date which the assessee challenged - HELD THAT:- Prime facie the company is a investment company, charging of interest on subsidiary company should be considered as good business principle. Otherwise the financial result will show distress implication on liquidity. AR submissions cannot be accepted without any bonafide evidence. CIT (Appeals) has restricted to 3% of charging of interest on closing balance, we are of the opinion considering the genuineness of transaction payments and usage of funds, the matter has to be examined on the financial implication of the company. Therefore, we set aside the issue for re-examination to the file of Assessing Officer and the ground of the assessee is allowed for statistical purpose.
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2016 (5) TMI 1529
Scrutiny assessment t u/s.143(3) r.w.s.144 - findings of the CIT(A) that order passed u/s.144 is not tenable - HELD THAT:- The grievance with the Department is justified. When CIT(A) takes decision against the Department, he should have called for a remand report from the AO for which he fails to do so. Accordingly, we vacate the findings of the CIT(A) on this issue. Thus, this issue would go back to the file of AO for fresh consideration after giving due opportunity to the assessee. Appeal of Revenue is partly allowed for statistical purposes.
Forex fluctuation loss - Claim of exchange loss on forward contracts - As per revenue assessee has hedged the export proceeds receivable much more than what is available in stock as receivables therefore, falling within the ambit of speculative transactions - HELD THAT:- As decided in M/S. AISHWARYA & CO. P. LTD., [2015 (9) TMI 8 - ITAT CHENNAI] AO has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the AO is directed to compute accordingly.
AO has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from these foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration. Appeal of assessee is partly allowed for statistical purposes.
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2016 (5) TMI 1528
Disallowance u/s 14A read with Rule 8D - Whether assessee has demonstrated that the investments were made from and out of the surplus funds? - HELD THAT:- Rule 8D(2) provides for computation of expenditure by all the three limbs provided therein on aggregate basis. Since the CIT(Appeals) has not considered the available funds with the assessee and source thereof, this Tribunal is of the considered opinion that the Assessing Officer shall reconsider the issue afresh and find out whether the assessee had any surplus funds as observed by the CIT(Appeals). If surplus funds were available, the Assessing Officer has to consider such surplus funds for making the investments.
Since the order of CIT(Appeals) is not clear regarding the availability of surplus funds and source thereof, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the lower authorities are set aside and the entire issue is remitted back to the file of the Assessing Officer. AO shall reconsider the issue afresh and find out the availability of surplus funds and source thereof and thereafter decide the issue in accordance with law, after giving reasonable opportunity to the assessee.
Disallowance of contribution made to ESI and Provident Fund. - Addition u/s 2(24)(x) and Section 36(1)(va) - HELD THAT:- It is not in dispute that the employees’ as well as the employer’s contribution to Provident Fund and ESI was deposited before the due date for filing of return of income. The Madras High Court in Industrial Security & Intelligence India Private Limited [2015 (7) TMI 1063 - MADRAS HIGH COURT] after considering the judgment of Apex Court in Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT] found that even though the employees’ contribution towards Provident Fund and ESI was deposited after the due date prescribed under the relevant Act but before the due date for filing of return of income under the Income-tax Act, no disallowance can be made under Section 43B of the Act. In view of this judgment of Madras High Court in Industrial Security & Intelligence India Private Limited (supra), this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2016 (5) TMI 1527
Recovery of cash credit/loan amount alongwith interest - time limitation - Section 18 of the Limitation Act, 1963 - acknowledgement of liability made before the expiration of the period of limitation for any suit - It was argued by the respondent/defendant that since the two letters were obtained/written after the period of limitation expired for preferring the suit, and therefore those letters could not have been treated as validating letters - HELD THAT:- From a bare reading of two letters (Ex.PW2/2 and Ex.PW2/3), it would appear that the respondents have clearly admitted their liability of the outstanding dues towards the Bank, only for the purposes of restituting the Bank. The contents of the aforesaid two letters are nothing short of an acknowledgment of the dues as also an implied promise to pay. The promise to pay as required under Section 25(3) of the Indian Contract Act need not be express and can be implied or inferred as well. Any acknowledgment of liability is necessarily an admission of the fact that the maker owes money to the creditor. The only corollary of such an acknowledgment is that the same is payable and that the person making the acknowledgement would pay such amount or else there would be no requirement of making any such acknowledgment.
No doubt, there is a distinction between an acknowledgement under Section 18 of the Limitation Act and a promise under Section 25 (3) of the Indian Contract Act inasmuch as though both have the effect of giving a fresh lease of life to the creditor to sue the debtor, but, for an acknowledgement under Section 18 of the Limitation Act to be applicable, the same must be made on or before the date of expiry of the period of limitation whereas such a condition is non-existent so far as the promise under Section 25 (3) of the Indian Contract Act is concerned - also, implied promise is not unknown under the Indian Contract Act.
The letters indicate the categorical endorsement of the liability to make the payments, and thus, it could be treated as an implied promise to pay. The circumstances under which such an acknowledgement was made, viz. after the reminders by the Bank for repayment of the loan amount, further lends support to the hypothesis that the aforesaid letters are in the nature of a promise to pay. Prior to the aforesaid acknowledgements, there was a confirmation of the balance amount by the respondent/defendant. Any written acknowledgment after the confirmation of the balance amount can safely be treated as a promise to pay and not mere acknowledgement - the First Appellate Court was not justified in dismissing the suit of the appellant on the ground of the same being time barred.
The letters are in the nature of a promise and therefore there was no requirement of the same having been obtained/written within a period of three years to be counted from 02.09.2002 - appeal allowed.
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2016 (5) TMI 1526
Penalty proceedings u/s 271(1)(c) - assessment order u/s 153A - additional income disclosed in the return filed in response to the notice u/s 153A was a voluntary disclosure of income with a view to buy peace, and therefore, the alleged voluntary disclosure of income does not form within the mischief of deemed - HELD THAT:- As far as the first fold of stand point is concerned, deemed concealment of income ought to be supported by availability of money, bullion, jewellery not by an inference of existence of money, bullion, jewellery or valuable articles or entry.
As far as second fold of submission raised by the ld.CIT(DR) in the written submissions is concerned, we find that the case of the assessee does not fall under the main provision. There is no addition to the income of the assessee. Returned income has been accepted as it is. Only by virtue of Explanation-5, this additional income declared by the assessee can be categorized under the deemed concealment. In the main provision, the case of the assessee cannot be brought. The assessee has placed on record copy of the statement recorded under section 132(4) of the Income Tax Act. We have perused the assessment order. AO has nowhere made a mention of any seized material. Thus, on facts there is no disparity. Therefore, all the appeals of the assessee are allowed and delete the impugned penalty for the respective assessment years.
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2016 (5) TMI 1525
Rectification of mistake - Revised order invoking the provisions of section 154 - input / CENVAT credit on capital goods claimed by the assessee as business expenditure - HELD THAT:- From the facts of the case it is apparent that the learned AO has invoked the provisions of section 154 of the Act after passing orders under section 143(3) r.w.s. 147 of the Act on an issue which is debatable and to be decided by a conscious thought process. Therefore we are of the considered view that, the learned Commissioner of Income Tax (Appeals) has rightly relied in the decision in the cases of Dimosaur Steels Ltd. and JCIT [2012 (9) TMI 839 - SUPREME COURT] and in the case of CIT Vs. Soora Subramanian [2009 (10) TMI 579 - MADRAS HIGH COURT] wherein it was held that section 154 of the Act can only be invoked for rectifying mistake which is apparent on the face of the record but not in respect of an issue which is debatable in nature. In these circumstances, we do not find it necessary to interfere with the order of the learned Commissioner of Income Tax (Appeals) on this issue. - Decided against revenue.
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2016 (5) TMI 1524
TP Adjustment - Tribunal had directed the AO to accept the pricing of thee international transaction of the assessee for the impugned year to be at arms length, if similar transactions with AEs were accepted by the TPO to be at arms length for previous years relevant to A. Ys. 2007-08 and 2008-09 - TPO had pursuant to the DRP directions passed an order not complying with the directions of the DRP and AO had therefore persisted with the same adjustment that he had done earlier - HELD THAT:- It is clear that the directions of the DRP is binding on the AO. No doubt as per Section 92CA(4) of the Act, an AO has to compute total income in conformity with the arms length price determined by the TPO. However, once there is an order of DRP, AO is bound by the directions of the DRP by virtue of sub-section (1) to Section 144C of the Act. AO is not required to refer the matter which has been decided by the DRP to the TPO again. We are therefore of the opinion that the addition made by the AO without considering the directions of the DRP reproduced by us above cannot stand in the face of the clear legal mandate. We delete such additions.
Disallowance of warranty provision - whether assessee had made the provisioning for warranty in a scientific manner - assessee doing the business of sale of laptops and desktops - HELD THAT:- Expenditure incurred against warranty given on sales made in any given year would be reflected in the succeeding year, when the provisioning is done on the basis of machine months. Assessee had done the provisioning based on machine months. If by application of the formula of multiplying machine months with repair action rate and cost per claim, an excessive warranty provisioning had resulted, then definitely in the succeeding year the expenditure incurred on warranty would be much less. The table above would show that expenditure on warranty was higher in almost all succeeding years except financial year 2009-09.
We cannot say that assessee had followed a method which was not scientific. We are of the opinion that the three conditions set out in the case of Rotork Controls India (Pvt) Ltd [2009 (5) TMI 16 - SUPREME COURT] have been satisfied by the assessee, viz., establishing that there is a present obligation on account of a past event, working out the probable estimate of the outflow of the resources required and substantiating the reliability of such estimate. Especially so since the assessee was mandatorily required to follow AS-I and principles of prudence stipulated in such AS-I required provisioning for all known liabilities even if it could not be determined with certainty, but was made based on available data. We therefore delete the addition made by the AO disallowing the provision for warranty. - Decided in favour of assessee.
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2016 (5) TMI 1523
TP Adjustment - No opportunity of cross-examination was granted to the petitioner or not - HELD THAT:- Petitioner would have had no opportunity of rebutting the data unless the persons, who submitted the data, were subjected to cross-examination. This is all the more so because the data that was submitted was not part of the audited accounts. In these circumstances, we set aside the impugned order dated 29.03.2016 and remit the matter to the TPO for affording an opportunity to the petitioner to cross-examine the authorized personnel of the said companies, who submitted the segmental data, which has been utilized by the TPO. The TPO may thereafter pass a fresh order in accordance with law.
The learned counsel for the petitioner states that the petitioner shall not take up the plea of limitation.
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2016 (5) TMI 1522
Reopening of assessment - validity of reason to believe - disallowance towards repairs and maintains expenses incurred by the assessee - HELD THAT:- AO on going through the records noticed that assessee claimed certain expenditure towards repairs and maintenance and according to him this is not an admissible expenditure. Therefore he was of the opinion that there is escapement of income within the meaning of Sec. 147 of the Act by the assessee.
On going through the reasons recorded, we find that no tangible materials have come on record after completion of assessment so as to believe that the income of the assessee has escaped assessment. It is only from the records the Assessing Officer came to the conclusion that the expenses are not allowable and therefore there is escapement of income. This is only a mere change of opinion of the Assessing Officer to reopen the assessment based on the materials already available on record which it is not permissible under law. See RALLIS INDIA LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (3) TMI 164 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2016 (5) TMI 1521
Deduction u/s.80P - assessee was carrying on banking business - HELD THAT:- As decided in Kulswami Co-operative Society assessee [2014 (4) TMI 355 - ITAT MUMBAI] Co-operative Society does not fall within the restriction placed in sub-section (4) of section 80P of the Act, and decided the identical issue in favour of the assessee.
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2016 (5) TMI 1520
Assessment u/s 153A - Period of limitation - Six preceding years will have to be reckoned from the date of recording of satisfaction note u/s 153C and not from the date of search - HELD THAT:- Referring to CBDT Circular dated 31.3.2014 and cases SSP AVIATION LTD. [2012 (4) TMI 335 - DELHI HIGH COURT] and SHREE JASJIT SINGH [2015 (8) TMI 982 - DELHI HIGH COURT clinch the issue in favour of the assessee and, accordingly, we quash the assessment framed u/s 153A/143(3) for assessment year 2007-08 as being void ab initio as being barred by limitation. Ground of the assessee’s appeal is allowed.
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2016 (5) TMI 1519
Liability towards gratuity and payable to employees - represented an unascertained liability so as to enhance the book profit in terms of provisions of Clause (c ) of Explanation to Section 115JA(1) - HELD THAT:- The issue relating to provision for gratuity is restored back to the file of the AO to be adjudicated in the same manner as has been directed, for AY 2002-03. However, the provision for leave encashment is to be considered ascertained liability and, therefore, not required to be added back for computing book profits u/s 115JB.
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2016 (5) TMI 1518
Allowability of 60% depreciation on V-sat equipment - AO has restricted the claim of depreciation of 60% on V-sat equipments to 25% - HELD THAT:- An identical facts on similar issue, in the case of Anagram Capital Ltd. v. ACIT [2011 (2) TMI 1575 - ITAT AHMEDABAD] since the facts are identical as has been considered in the earlier year in which it was held that the VSAT equipments cannot be categorized as computer software, there is no material on record to dispute the findings of the authorities below. Nothing is brought to our notice on facts to distinguish the facts considered in earlier year as noted above. - Decided against assessee
Disallowance of ROC fees paid to Registrar of Companies for increasing the share capital - revenue expenditure or capital expenditure - HELD THAT:- As perused the order of the Hon’ble Supreme Court in the case of Punjab State Industrial Development Corporation Limited v. CIT [1996 (12) TMI 6 - SUPREME COURT] wherein, held that “the fee paid to the Registrar for expansion of the capital base of the company was directly related to capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure was directly related to the expansion of capital base of the company and thus it was not an expense in the nature of revenue” - Decided in favour of revenue.
Disallowance of lease rentals - main argument of the AR is that the lease rental was crystallized during the assessment year 2005-06 and 2006-07 and the same was claimed in these years - ssessee is following mercantile system of accounting - HELD THAT:- The expenditure relating one assessment year cannot be claimed in another assessment year since each assessment year is an independent assessable unit. The assessee was following mercantile system of accounting and the expenses not recorded in relevant assessment year, the same cannot be allowed as deduction because remedy does not lie on the next assessment year. Considering the facts and circumstances of the case, we are of the opinion that it would be appropriate to remit the issue back to the Assessing Officer with regard to lease rentals paid to NELCO to allow rental accrued in the relevant assessment year only. AO shall exclude prior period of lease rentals while considering the same. With these observations, we set aside the order of the ld. CIT(A) and remit the matter back to the Assessing Officer to work out the allowable deduction in accordance with law. Thus, the ground raised by the Revenue is allowed for statistical purposes.
Lease transactions with HCL Comnet Ltd. - CIT(A) has observed that the advance payments were down payments towards lease rentals for both the assessment years - HELD THAT:- It is a fact that a mere down payment does not make the transaction a sale nor the amount can be treated as refundable deposit without any basis. Therefore, these expenditures should be considered as revenue expenditure. Further, the Assessing Officer has not given any finding to disallow the band width charges for 256 KBPS and lease rental charges paid to various franchisees as well as v-sat shifting charges. Though both the items are not provided in the books of accounts, but the assessee has made the claim in the computation of income statements, which is found to be in order in view of the judgement of CIT v. Pruthvi Brokers and Shareholders P. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] . Therefore, the ld. CIT(A) has rightly held that both the charges would be treated as revenue items and eligible for deduction. Thus, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the Revenue is dismissed.
Allowability of depreciation on office equipments - at 15% or10% - HELD THAT:- CIT(A) was of the opinion that the claim of the assessee seems to be in order. He also observed that as per Appendix-I to Rule 5 of Income Tax Rules, 1962, Block III(i), the depreciation rate is 15% for office equipments. Depreciation rate of 10% is applicable for Furniture and Fittings falling in Block II to the above Appendix-I. Office equipments obviously and apparently falling under Block III are entitled to 15% depreciation rate. Accordingly, he directed the Assessing Officer to allow the depreciation @ 15% on Office Equipments. In view of the above findings of the ld. CIT(A), we find no reason to interfere with the order passed by the ld. CIT(A) on this issue. Thus, the ground raised by the Revenue is dismissed.
Allowability of depreciation on printers and scanners - assessee has claimed depreciation at 60% on printers and scanners under the head ‘Computers’ - AO has restricted the depreciation to 15% and the excess depreciation was added back to the total income of the assessee - HELD THAT:- We find that the Hon’ble Delhi High Court in the case of BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] has held that computer accessories and peripherals such as printers, scanners and server etc. formed an internal part of the computer system and, in fact, the computer accessories and peripherals cannot be used without the computer. The Hon'ble High Court thus held that they are the part of the computer system and are entitled to depreciation at the higher rate of 60%. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) and thus, the ground raised by the Revenue is dismissed.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- In the argument advanced by the assessee. However, we are of the opinion that the investments would definitely involve certain administrative and establishment cost since the decision to make investments, track investments, sale of such investments and follow-up of the receipt of income, sale proceeds etc have to be undertaken which entails definite costs. It is for this purposes that Rule 8D(2)(iii) provides that one half percent of the average value of the investments will be deemed to be expenditure incurred for the same. When the Act has specified a definite formula for working out the expenditure to be disallowed, the Assessing Officer should have disallowed ½ % of average value of the investments as per Rule 8D(2)(iii) as expenditure incurred for earning of exempt income. Accordingly, we set aside the order of the ld. CIT(A) on this issue and direct the Assessing Officer to disallow under Rule 8D(2)(iii) alone. Thus, the ground raised by the assessee is allowed for statistical purposes.
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