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Showing 41 to 60 of 584 Records
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2017 (6) TMI 1330 - ITAT CHENNAI
Disallowance being the premium paid on forward contracts to cover the exchange fluctuations on the repayment of loan - assessee admittedly borrowed loan in Indian currency from State Bank of India for the purpose of setting up of plant / project, namely, Surajbari I Project - HELD THAT:- The said loan was converted into foreign currency loan and the assessee has paid premium. The assessee amortized the premium paid over a period of three years and 1/3rd of premium has been claimed as revenue expenditure, during the year under consideration. Both the authorities below concurrently found that the premium paid by the assessee was in the course of setting up of project Surajbari I Project, therefore, the loss, if any, is on the capital field and it cannot be allowed as revenue loss.
Assessee now claims alternatively that if it is capital loss, it will definitely go to increase the cost of the project, hence, the assessee shall be given depreciation on the enhanced value of asset.
Admittedly, the loan was borrowed for setting up of plant for generation of wind energy, therefore, the loss suffered in foreign exchange fluctuation would definitely go to increase the cost of the project to the extent of loss suffered by the assessee. As rightly found in JSW Steel Ltd. [2010 (5) TMI 716 - ITAT BANGALORE] the assessee is entitled for depreciation on the enhanced value. Accordingly, while confirming the orders of the lower authorities that the loss suffered by the assessee is capital loss, the Assessing Officer is directed to grant depreciation to the assessee as applicable on the enhanced value of the project after commencement of its business.
Disallowance u/s 14A - HELD THAT:- It is not in dispute that the investments were made in subsidiary companies. When the investments were made in wholly owned subsidiary companies, this Tribunal M. BASKARAN [2015 (3) TMI 192 - ITAT CHENNAI] consistently taking a view that it cannot be construed that investment is made for earning exempt income. Investment made in wholly owned company is only for the purpose of business. Moreover in Redington [2017 (1) TMI 318 - MADRAS HIGH COURT] held that when there was no exempt income, there cannot be any disallowance under Section 14A - This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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2017 (6) TMI 1329 - ITAT CHENNAI
Computation of deduction u/s 10A - exclusion of expenditure incurred by the assessee in foreign currency towards communication expenses, project travel, software development charges, etc. - HELD THAT:- As carefully gone through the provisions of Section 10A. For the purpose of maintaining parity, the factors which were excluded from the export turnover should also be excluded from total turnover. Since, admittedly, the expenses incurred in foreign currency towards communication expenses, project travel cost, software development charges, overseas project expenses were excluded from export turnover, the same shall also be excluded from total turnover. CIT(Appeals) has rightly directed the AO to exclude the same from total turnover. Hence, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Disallowance u/s 14A r.w.r. 8D - mandation of recording satisfaction - HELD THAT:- Whenever the Assessing Officer is not satisfied that the claim made by the assessee towards expenditure for earning the income is not correct, he can recompute the same by applying Rule 8D. This Tribunal is of the considered opinion that computation of expenditure under Rule 8D is mandatory. The method of computation by applying Rule 8D is not in dispute. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Exclusion of expenditure incurred in foreign currency while computing deduction u/s 10A - HELD THAT:- This Tribunal specifically found that both export turnover and total turnover shall be of the same factor, therefore, when the expenditure incurred in foreign currency is not included in the total turnover, the same cannot also be included in the export turnover. There should be a parity between export turnover and total turnover. Hence, whatever expenditure incurred is not included in the export turnover, the same cannot form part of total turnover also.
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2017 (6) TMI 1328 - ITAT CUTTACK
Reopening of assessment u/s.147 - payment of freight charges addition - HELD THAT:- There was no new material which has come to the knowledge of the AO to show after passing of the order u/s.143(3) of the Act on 21.12.2011 that income chargeable to tax has escaped assessment so as to trigger the reopening of assessment made u/s.147.
In the case of CIT vs. Jet Speed Audio Pvt Ltd. [2015 (2) TMI 766 - BOMBAY HIGH COURT] has held that the power to reopen is not a power to review an assessment order. At the time of passing assessment order, it is expected of the Assessing Officer that he will apply mind and pass an order. If the AO had considered and formed an opinion on the material in the original assessment itself then he would be powerless to start the proceedings for reassessment.
Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] has held that he concept of “change of opinion” must be treated as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.
Reopening in the instant case has been made on the basis of very same set of material to hold that freight charges was paid in cash by the assessee and hence was to be disallowed u/s.40A(3) of the Act which is clearly a change of opinion and in view of the decision in the case of Jet Speed Audio Pvt Ltd [2015 (2) TMI 766 - BOMBAY HIGH COURT] and in the case of Kelvinator of India Ltd (supra), reassessment is not permissible in law. - Decided in favour of assessee.
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2017 (6) TMI 1327 - CALCUTTA HIGH COURT
Undisclosed purchase - unexplained expenditure - assessment made u/s 144 - addition was directed by the AO on the basis of a document in the form of a sheet found in course of a search and seizure operation under Section 132 of the Act, which contained certain figures scribbled on it - HELD THAT:- No question about the said document was put to the Director of the assessee in course of search. This factor was also taken into consideration by the aforesaid Appellate bodies. The two Statutory Appellate Authorities doubted the inherent probative value or quality of the above-referred document upon applying their mind on it. In substance, the said authorities found no reason to draw presumption against the assessee on the basis of scribbled figures appearing on the document in question. This is how two fact finding bodies chose to deal with that document.
Even without proper explanation from the assessee, when the mandate of law is that authorities may presume certain facts under Section 292C of the Act to come to a conclusion in favour of Revenue, the nature of information contained in or revealed by such document would have to be examined to link such document to undisclosed income of the assessee. Both the Commissioner and the Tribunal found no linking factor. Both these authorities rejected the reasoning of the Assessing Officer on this basis of which the latter came to his finding that the figures appearing on the said document could be computed to arrive at undisclosed income of the assessee.
The findings of the Statutory Appellate Authorities cannot be held to be perverse or based on no evidence in this case. The Statutory Appellate Authorities had examined the said document and found that the same could not be connected with assessee's transactions for the relevant assessment year.
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2017 (6) TMI 1325 - ITAT MUMBAI
Estimation of income - bogus purchases - AO in applying the profit rate i.e. gross profit rate @ 12.5% - CIT(A) confirming the addition @ 7.50% - HELD THAT:- Admittedly, these are bogus purchases but assessee has already disclosed a profit rate of 5.05% and qua that reduction should have been allowed to the assessee. Application of profit rate at 12.5% is perfectly but assessee has already disclosed profit rate of 5.05%, which should have been reduced. Accordingly, profit rate to the bogus purchases should be estimated at the rate of 7.45% and disallowance should be made. Direct the AO accordingly. The appeal of assessee is partly allowed.
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2017 (6) TMI 1323 - ITAT AHMEDABAD
Addition on account of interest on share application money advanced to Sun Pharma Global Inc. - TPO/AO noted that the assessee has given share application money towards subscription of shares in its associated enterprise - TPO was of the opinion that the assessee should have charged interest at LIBOR plus basis and that arm's length price would be the LIBOR charged by the assessee + 200 basis points - HELD THAT:- Adjustment on account of notional interest on share application money which is not disputed be to be so are not liable to be re-characterized as loans only because there was a delay in allotment of share is not justifiable, more so when assessee has given plausible reason for such delay to avoid repetitive documentation and other regulatory exigencies. There is no dispute that the AE is a 100% subsidiary of the appellant company and the appellant company in its capacity as sole owner of the subsidiary my subscribing to share capital is beneficiary of all the gains of the subsidiary company. Merely, because allotment of shares is delayed and in books share application money is reflected as advance for share application money till the allotment would not alter the characterization to the prejudice of assessee's position anyway. In our considered view, the percentage of ownership is the only material factor which remains at 100% prior to allotment and also post allotment. As the assessee is the only shareholder in it's 100% owned subsidiary company SPG BVI it should not make any difference merely because part of the share application money is converted into equity shares and the balance were allotted in subsequent assessment years. We, therefore, do not find any merit in the submissions of revenue in this behalf.
As relying on STERLING OIL RESOURCES (P.) LTD [2016 (4) TMI 163 - ITAT MUMBAI] direct the A.O. to delete the addition - Decided in favour of assessee.
Addition on account of interest on Optional Fully Convertible Debentures (OFGD) subscribed to in Sun Pharma Global Inc.- HELD THAT:- As decided in own case CIT (A) while deleting the addition has noted that as per the agreement, the interest was payable only if the conversion option was not exercised on the expiry of 5 year period. If at any time during the 5 year period conversion option was exercised and the loan was converted into equity, no interest accrued or become payable. He further noted that the funds were provided by the Assessee as per RBI guidelines and in the immediately next year, the entire loan given to subsidiary was converted into equity shares of Zydus International Pvt. Ltd. He has further held that since the Assessee has converted the loan into equity in the immediate next year, there was no question of taxing notional interest. He has further held that Assessee had not granted interest free loan but invested in Optionally convertible loan with a clause of interest in case, Conversion option was not exercised and further field the Assessee's transaction with subsidiary was at arms length. Before us, the Revenue could not controvert the findings of CIT (A) by bringing any contrary material on record. In view of these facts, we find no reason to interfere with the order of CIT (A).
Addition on account of Corporate Guarantee provided to associated enterprises Sun Pharmaceutical Bangladesh Ltd. - HELD THAT:- When the bench has already taken a considered view in assessee's own case in the A.Y. 2007-08 [2017 (4) TMI 1434 - ITAT AHMEDABAD] and set aside the matter to follow Hon'ble High Court judgment in assessee's own case, we see no convincing reason not to follow our own order.
Addition on account of Sale of Pantoprazole to Sun Pharma Global - TPO was of the belief that the TNMM method applied by the assessee was not the most appropriate method and Profit Split Method (PSM) was the most appropriate method - main reason taken by ld. TPO to for rejecting assessee's TP working was view that it was not a contract manufacturer - HELD THAT:- No basis whatsoever to carry out any enhancement on account of profits on Sale of Pantoprazole for the detailed submissions made above and further as no profit has been earned on it after claim of infringement payment. Rather, we once again pray that the relief sought by the appellant in the appeal be granted and the entire addition made by the TPO / Assessing Officer be deleted. To that extent we request your good self to either delete the addition or reduce/ reallocate the profit allocation made to the Appellant and oblige.
PSM can offer a solution for highly integrated operations for which a one-sided method would not be appropriate. PSM may also found to be the most appropriate method in cases where both parties to a transaction make unique and valuable contributions to the transaction - Considering the functions performed by the appellant company to SPG BVI, it is clear that SPIL has performed only one simple function and that is manufacturing of Pantoprazole Tablets. Except for this, there is no significant unique contribution by SPIL. For such simple functions as per OECD guidelines for transaction profit split method typically would not be appropriate of the functional analysis of that party.
By the order of the Hon'ble High Court Innovative Research and Development /division of the appellant company was demerged and given to Sun Pharma Advance Research company (SPARC) subsequently SPARC transferred ANDA rights to SPG BVI. SPG BVI has been entered into an agreement with the appellant company SPIL for the manufacturing of Pantoprazole. Pursuant to this agreement assessee manufactured Pantoprazole and sold the same to Caraco Ltd on the directions of SPG BVI. On such sale transaction, the appellant company had shown a net margin of 21.57% benchmark the same on transactional net ,margin method which was dismissed by the revenue authorities questioning firstly, the ANDA rights with SPG BVI and secondly, comparing the contract manufacturing agreement of SPIL with SPG BVI and SPIL with ELI Lily. The revenue authorities ultimately applied profit split method and 'made the upward adjustment.
As demonstrated elsewhere, the IPR/ANDA rights were very much with SPG BVI who entered into an agreement with the appellant company for the manufacturing of the said drug. The application of Transactional Net Margin Method is the most appropriate method in such sale transaction and has been benchmarked by the assessee by showing it to be higher than the margin earned from the sales made to Eli Lily.
Considering the facts in totality in the light of the decision of the Hon'ble Supreme Court In the case of Vodafone International Holdings B.V. [2012 (1) TMI 52 - SUPREME COURT] and on conspectus understanding of the facts as discussed elsewhere, we do not find any merit in the findings of the First Appellate Authority in accepting the application of PSM as the MAM, in our understanding of the facts TNMM is the MAM on the given facts and the same is accepted as such. We set aside the findings of the ld. CIT (A) and direct to delete the addition - Ground of the assessee is allowed.
Denial of weighted deduction u/s. 35(2AB) on trademark charges, overseas product registration charges - HELD THAT:- Basis for upholding the disallowance has been removed. We further find that on identical set of facts, the Mumbai Bench in the case of USV Ltd. [2012 (9) TMI 43 - ITAT MUMBAI] has allowed the claim of the assessee in respect of expenditure incurred in respect of patent application. Respectfully, following the findings of the co-ordinate Bench (supra), we direct the A.O to delete the disallowance.
Deduction of remuneration received from partnership firm for determination of book profit u/s. 115JB - HELD THAT:- Firstly the profit and loss account of the company should be in accordance with the relevant provisions of the Companies Act. Secondly, only specified items have to be added back as provided in various clauses to Explanation 1 and reduced by specific items provided thereon. The only specific amount of income which has to be reduced is the income to which provisions of Sections 10, 11 or 12 apply, if any such amount is credited to the Profit and Loss account and Section 10(2A) defines such income as the share of profit of a partner from the partnership firm, the language is clear and unambiguous and needs no other insertion or deletion. The remuneration to partner may have the colour of appropriation of profit of a partnership firm as held by the Hon'ble Supreme Court and Hon'ble High Courts in various decisions relied upon by the ld. Senior Counsel but as mentioned elsewhere, Section 115JB is a complete code in itself. Therefore, if the remuneration is credited by the appellant company in its Profit and Loss account then the same could be reduced it specifically provided under the Explanation to Section 115JB of the Act which we find missing from the relevant provisions. We, therefore, do not find any merit in this claim of the assessee.
Addition of expense disallowed u/s, 14A for computing book profit u/s. 115JB - HELD THAT:- we direct the A.O. to delete the addition of expense disallowed u/s. 14A for computing book profit u/s. 115JB of the Act.
Addition u/s 40A - HELD THAT:- Provisions of section 40A(2) are applicable only in respect of payments made to related parties mentioned therein. But the transaction before us is of credit in nature i.e. sales so provisions of section 40A(2) are not at all applicable. See [2016 (5) TMI 1306 - ITAT AHMEDABAD]
Addition on account of re-characterizing remuneration as alleged royalty income from the partnership firm SPI for use of Trademark, Brand and Technology - HELD THAT:- The partnership firm SPI has claimed ₹ 40.12 crores as remuneration to the assessee company but at the same time, it did not claim the same as deduction as it was not paid to a whole time partner as provided in the Act. It is true that the appellant company has also not offered the same for taxation taking a shelter behind the provisions of Section 28(v) of the Act. No doubt, the profits of the partnership firm are exempt u/s. 80-IB(4) of the Act, Even, if the partnership firm had not charged ₹ 40.12 crores as remuneration to the appellant company, the profits of the firm would have increased by this amount. Since the assessee is holding 97.5% share in the profits of the partnership firm, this amount of 40.12 crores would have otherwise come to the assessee in the firm of share of profit which again is exempt from taxation u/s. 10{2A) of the Act, Therefore, in our considered opinion, the allegation that it is a case of tax evasion is ill-founded. The fact of the matter is that such payments were never re-characterized as royalty in earlier assessment years and the action of the First Appellate Authority in the year under consideration is nothing but based Upon assumptions and presumptions. No addition can be sustained which are based upon assumptions, surmises or conjectures. We, therefore, set aside the findings of the Id. CIT (A) and direct the A.O. to delete the amount as re-characterized by the First Appellate Authority. Ground allowed.
Disallowance of expenditure treating them as capital expenditure - HELD THAT:- First Appellate Authority after considering the bills/vouchers has given a categorical finding that the extruder purchased by the assessee was an asset independently capable of producing article or thing. Even, it is accepted that the extruder was in replacement of old extruder yet it was a new asset and cannot be considered as repairs. We, therefore, decline to interfere with the findings of the ld. CIT (A). The A.O. has already allowed depreciation as per the provisions of the law. Therefore, no interference is called for addition to the extent of ₹ 10,17,500/- is confirmed, Ground No.15 is dismissed.
Payment to Nile Ltd. is concerned, we find that the First Appellate Authority has given a categorical finding after verifying the purchase order that this item has replaced damaged bottom body which is also supported by the Excise Challah. Such categorical finding cannot be brushed aside lightly. We, therefore, do not find any error or infirmity in the findings of the First Appellate Authority.
Items purchased for effluent treatment systems - First Appellate Authority have given a categorical finding that the effluent treatment systems after regular intervals requires maintenance and upgradation and the expenditure incurred during the year is on existing machines and did not bring into existence any new asset or added advantage to the assessee. As this factual finding has not been controverted before us, we do not find any reason to interfere with the findings of the First Appellate Authority.
Disallowance of provision for leave encashment u/s 43B - HELD THAT:- Restore the issue to the files of the A.O. with a direction to decide the issue afresh after decision of M/S EXIDE INDUSTRIES LTD. & ANR. [2009 (5) TMI 894 - SC ORDER]
Addition u/s 14A r.w.r. 8D - HELD THAT:- The only distinguishing fact for the year under consideration is that Rule 8D in fact is applicable for the year under consideration and therefore, We direct the A.O. to compute the disallowance for administrative expenditure as per the formula given under Rule 8D.
Diisallowance of depreciation on motor car @ 30% claimed by the assessee and allowed by the A.O. @ 15%. - HELD THAT:- It is true that the main business of the assessee is manufacturing of bulk drugs as well as formulation products. It is equally true that the assessee is also in the business of leasing and finance activity. There is no dispute that the Hire charges have been assessed as business income. Therefore, we do not find any reason why the higher rate of depreciation should not be allowed. In our considered opinion, once the basic conditions are duly satisfied, there is no bar for claiming higher depreciation. Moreover, this issue is now well settled in favour of the assessee and against the revenue by the Hon'ble Supreme Court in the case of ICDS Ltd. [2013 (1) TMI 344 - SUPREME COURT]
Addition of provision of Wealth Tax u/s. 115JB - HELD THAT:- There is no dispute that Wealth Tax Act, 1957 imposes the charge of Wealth Tax on the 'net wealth' of every individual, HUF/company as on the valuation date. While Income-tax is tax on income. Both Income-tax and Wealth Tax are governed by separate and distinct legislated laws. It is true that under the Explanation to Section 115JB of the Act, certain items have been mentioned which have to be added back for the computation of book profit. It is equally true that there is no mention of Wealth Tax provision. The provisions of the Act are clear and unambiguous and require no addition/deletion of any items other than those mentioned in the provisions.
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2017 (6) TMI 1321 - ITAT AHMEDABAD
Surplus earned from functioning of PDS [Public distribution system] on behalf of Government - Taxability as income in the hands of assessee - HELD THAT:- Assessee company was set up by the Government of Gujarat under the companies Act, 1956. The assessee company manage the public distribution system and other public welfare scheme on behalf of the Government of Gujarat. The Government of Gujarat has been providing handling commission as per the Government of Gujarat (GR) Government Resolution - the surplus which was earned by the assessee for the activities carried out on behalf of the Government of Gujarat belonged to the Government and payable to the Government along with interest after deducting of commission earned by the assessee. We further observed that the commission income earned by the assessee on the activities carried on behalf of the Government and other income from its own activities are taxable in the hand of the assessee.
In the earlier assessment year the assessing officer has accepted the similar accounting practices followed in the case of the assessee. We considered that surplus earned on behalf of the Government for carrying out function of Public Distribution System as agent of Government is not taxable in the hand of the assessee.
As elaborated in the order of the Ld.CIT(A) and considered that the Ld.CIT(A) is justified in deleting the addition made by the Assessing Officer by stating that surplus earned from functioning of PDS on behalf of Government cannot be taxed in the hand of the assessee. In view of the above stated facts and findings we uphold the order of the Ld.CIT(A).
Deduction not found to be justified as the assessee failed to substantiate with relevant supporting evidence that the said amount was offered to tax in the earlier years - We have also gone through the paper book filed by the assessee and noticed that hand-written entry as per page no.126 was not sufficient to prove that such amount was offered to tax in the earlier year, therefore, we do not find any reason to interfere in the decision of the Ld.CIT(A) on this issue.
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2017 (6) TMI 1320 - ITAT DELHI
Reopening of assessment u/s 147 - as argued reasons recorded are vague and scanty, without application of mind by the AO, and without necessary approval of the Joint Commissioner of Income-tax - HELD THAT:- We agree with the contention of the Ld. Senior DR about the practice of discussing the matters with higher authorities. Further, the decisions relied upon by the Ld. counsel of the assessee are distinguishable on facts as in the present case there was statements of the person looking after the affairs of the assessee company, admitted of having engaged in accommodation entry.
Thus, in our opinion, in the instant case, the Addl. CIT has applied his mind to the material and then arrived at a conclusion.
Reasons recorded by the Assessing Officer are neither scanty nor vague nor recorded in mechanical manner and Reasons recorded are with due application of mind AND Reasons recorded are with necessary approval of the Additional CIT
We hold that the reassessment proceeding are in terms of section 147 to 151 of the Act. Accordingly, ground No. 1 challenging the validity of reassessment is dismissed.
Objections raised by the assessee agitating the jurisdiction were not disposed off by the Assessing Officer, before passing the impugned order - HELD THAT:- Assessing Officer issued notice u/s. 143(2) & 142(1) on 14.08.2007, after a gap of almost one year from issue of notice u/s 148 of the Act, but the assessee didn’t comply said notice. The Assessing Officer issued a final show cause notice on 04.12.2007 proposing to assessee the income as mentioned in the notice. The assessment was to be completed on 31.12.2007 and the assessee asked reasons recorded on 20.12.2007, which were provided. The assessee vide letter dt. 24.12.2007 furnished reply of the queries raised about income of the assessee and in that letter the assessee raised the issue that reason were not acceptable. In the facts & circumstances, we find that the assessee raised objections not as per the decision of the Hon’ble Supreme Court in GKN Driveshaft India Ltd. [2002 (11) TMI 7 - SUPREME COURT] . Since in the year under consideration, no objections have been filed effectively by the assessee, therefore, disposing off such objections specifically also does not arise. Accordingly, the ground of the assessee is dismissed.
Incriminating material was not made available for rebuttal of show cause notice issued proposing the addition and no crosss-examination was provided, which is in violation of natural Justice and thus the order of the Assessing Officer is a nullity - HELD THAT:- No letter retracting that statement was filed either before the Assessing Officer or before the appellate authorities. Moreover, the statements relied upon by the Assessing Officer are the statements of the directors and authorized signatory of the assessee company, no question of providing cross-examination arises as they are not third-party witnesses. Further, the Assessing Officer has made addition under section 68 of the Act not only on the basis of the statements but due to failure on the part of the assessee in discharging its onus of establishing identity and creditworthiness of the persons who paid money and genuineness of the transaction carried out. The assessment proceedings are to be completed by the Assessing Officer in limited time period but the assessee sought adjournment again and again & delayed in replying to queries of the Assessing Officer. In view of the circumstances, the ground of the assessee that it is deprived of natural Justice for not providing cross-examination and proper show cause notice is not sustainable in law. Accordingly, the ground No. 3 of the appeal is dismissed.
Addition u/s 68 - HELD THAT:- Contradictory claims regarding the filing of the documentary evidences in support of identity and creditworthiness of the payer and genuineness of the transaction, in the interest of Justice, we feel it appropriate to restore the issue to the file of the Assessing Officer for deciding the merit of the issue of addition under section 68 of the Act, afresh with the direction to the assessee to produce all the above documents, before the Assessing Officer. The Assessing Officer may carry out the enquiries which deemed fit in the facts and circumstances of the case including enquiries from the banks of parties transacted. The assessee shall be afforded sufficient opportunity of hearing. Accordingly the ground No. 4 of the appeal is allowed for statistical purposes.
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2017 (6) TMI 1318 - ITAT DELHI
TP Adjustment - comparable selection - Accentia Technologies is selected by the ld TPO but is challenged now by the assessee submitting that it has an extra ordinary event during the year, functionally dis-comparable as it is engaged in medical transcription, has significant intangibles and abnormally high profit margin - HELD THAT:- Medical transcription is a service which requires employment of medical professional also. However, the medical coding the billing may not require higher technical skill. In annual report the company has mentioned that it has only one segment and therefore it does not have segmental results pertaining to medical transcription vis-à-vis coding and billing activity. According to us the medical transcription itself cannot be said to be comparable with the functions performed by the assessee. However, the medical coding and billing activities are similar to the functions performed by the assessee. But , in absence of the segmental accounts with respect to medical coding and billing activities this comparable cannot be included. Hence, TPO is directed to exclude it.
E-Clerx Services Ltd - nature of business carried on by e- Clerx Services Ltd., it is patent that the same being a KPO company, is quite different from the assessee, providing only IT enabled services to its AE, which fall in the realm of BPO services. Apart from that, it is further observed that this company has significant intangibles which it uses in rendering KPO services, against which the assessee does not have any intangibles. A s such, e-Clerx Services Ltd. cannot be considered as comparable.
Igate Global Solutions Ltd - As the functional profile of amalgamating company and amalgamated company are similar the mere fact of amalgamation during the year does not make a company otherwise comparable on FAR as non-comparable. On looking of the functional profile of Igate Global Solution it is found that it is engaged in provision of contract sample services and IT enables services. On the income revenue stream of the assessee is also with respect to ITES services. It is also engaged in BPO activities. In view of this we do not find that the functional profile of this company differs from assessee. In view of this we do not find any merit in the argument of ld AR for exclusion of this comparable. Hence, the order of the ld TPO in retaining this comparable is upheld.
ICRA Techno Analytics Ltd - This company as per its annual accounts placed at Page NO. 1210 shows that it is engaged in the business intelligence and analytics space. It is also engaged in software development and consultancy, engineering services, web development and hosting services. It is also noted that it has two income segments of services and sales and it does not have the complete segmental information with respect to both the segments of services and sales as fixed assets and services are used inter-changeability. In view of this we find that this company is functionally not comparable as well as it does not have complete segmental information with respect to the sales and service segments. In the result we direct the Transfer Pricing Officer to exclude the above comparable.
Infosys BPO Ltd. - In the present case the size of this comparable with the size of the assessee is more than 20 times. Therefore, we direct exclusion of this comparable on the size and scale of its operation.
TCS eServe International Ltd - This company also contributes to Tata Brand Equity from this year and according to Schedule M of the financial statement during the year it has contributed ₹ 37 crores towards the brand. In view of this the functional profile of the assessee as well as the assets employ are not comparable. In view of this ld Transfer Pricing Officer is directed to exclude it.
TCS eServe Ltd. - As perused the annual report of the company for year ended 31.03.2010. The company is mainly engaged in IT enabled services and business process outsourcing. It is also providing technical services which involve software testing, verification and validation. It also contributes similarly to Tata Brand Equity and for this year the contribution was ₹ 42 crores. Therefore, following the same reasoning given by us for exclusion of TCS eserve International Ltd we also direct the ld TPO to exclude this comparable.
e4e Healthcare Ltd - we reject the contention of the assessee of withdrawing of its own comparable for the reason that the assessee could not demonstrate before us that how the original comparable was selected when the same functional profile of the company was available at the time of preparing TP documentation. In view of this, we reject the argument of the assessee for exclusion of this comparable.
R Systems Pvt. Ltd - It is held in several decisions that if the assessee can demonstrate with publicly available authentic information for the remaining period and exclusionary period and further produces the tabulated data for the similar accounting year as followed by the assessee then if the FAR analysis of that company is comparable, it may be included. Therefore, it is now the duty of the assessee to satisfy the Assessing Officer/TPO with such information. Hence, we direct the ld Transfer Pricing Officer to verify the information with respect to this comparable in accordance with the law and then decide inclusion or exclusion.
Omega Healthcare Ltd - This comparable was selected by the assessee but rejected by the ld Transfer Pricing Officer and ld DRP for the reason that the annual report of the relevant year is not available in the public domain. The ld AR stated that same is available in public domain and further same is also produced before us at page No. 1269 to 1284 of the paper Book. In view of this we direct the ld TPO to verify the annual report and decide the issue about inclusion of this comparable.
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2017 (6) TMI 1317 - ITAT KOLKATA
Addition on account of rent receipts shown as “business income” -HELD THAT:- Income in respect of Gadhidham unit was already offered to tax as evident from the financial statement of the assessee which are placed on pages 1 to 21 of the paper book, more particularly from the profit and loss account which is placed on page 9 of the paper book. Moreover, we find that Ld. CIT(A) has merely directed the AO to verify the same whether the income in respect of Gandhidham unit has been included in its books of account, as such, we find no infirmity in the order of Ld. CIT(A). Thus the AO has all the right as provided under the statute to ensure whether income has been included in the income of the assessee and therefore we find no infirmity in the order of ld. CIT(A). Hence, this ground of Revenue’s appeal is dismissed.
Benefit u/s 80-IB(11A) denied - Deduction was denied by AO on the ground that the warehouses in respect of which the deduction was claimed were not ready for commercial activities in the year under consideration - HELD THAT:- On perusal of Section u/s 80IB of the Act we find there is no pre-condition for claiming the deduction that there has to be any completion certificate. Admittedly, the income of assessee has shown the unit located at Gandhidham in its profit and loss account. Thus, in our considered view, the deduction u/s. 80IB(11A) of the Act cannot be denied merely on the ground that completion certificate was furnished at the fag-end of financial year. It is also pertinent to note that the inspector has given the report by stating that the warehouse was rented out to M/s Rishi Shipping Limited since long which proves that the commercial activity started before the completion certificated obtained by the assessee.
Other reason that the requirement of provision of Sec. 80IB(11A) of the Act that the assessee must be engaged in the integrated facilities providing for handling, transportation and storage charges. In this regard, we find that the assessee has not produced any supporting documents other than list of clients which are placed in the record. On perusal of that list, we find that it is internal list maintained by assessee which was duly furnished before Authorities Below. However, in our considered view, the list cannot be a conclusive evidence that the assessee is engaged in providing integrated service.
We disagree with the contention of Ld. DR that there was a storage of DAP (fertilizer) in the warehouse maintained by assessee. it is because, the AO observed that there was a storage of DAP (fertilizer) on the basis of report submitted by Inspector which was furnished in the year 2009-10 and there is no information available with the Revenue what was stored in the year under consideration in the warehouse of the assessee. Therefore, we are of the view that the Revenue has failed to produce necessary evidence suggesting that there was storage of DAP (fertilizer) and not food-grains in the year under consideration.
Whether the assessee is engaged in the integrated service as envisaged under the provision of Section 80IB(11A) ? - AR has furnished a list of 17 pages wherein the income of storage, transportation, and handling charges was shown. However, in our considered view, that the list cannot be treated as conclusive evidence to hold that the assessee is engaged in the integrated services. Besides the above, we also find that the AO has not exercised his power u/s. 143(3) of the Act to ascertain from the parties where they availed integrated services from the assessee. With this view of the matter, we are inclined to give one more opportunity to assessee to justify its claim for deduction u/s. 80IB(1A) of the Act. In the light of above stated discussion, thus, we restore this issue to the file of AO to adjudicate the issue afresh in accordance with law and after giving opportunity of being heard to assessee. Hence, this ground of Revenue’s appeal is allowed for statistical purpose.
Disallowance made by AO for debt redemption reserve in calculating book profit u/s. 115JB - HELD THAT:- Judgment of Hon'ble Bombay High Court in the case of CIT vs. Raymond Ltd. [2012 (4) TMI 127 - BOMBAY HIGH COURT] has held that the debenture redemption reserve is a ascertained liability and therefore allowable deduction u/s. 115JB of the Act. - Decided against revenue.
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2017 (6) TMI 1315 - ITAT BANGALORE
Deductions u/s. 10A - reduction of the items of expenditure incurred in foreign currency i.e; on communication and travel which are attributable to the delivery of software outside India and in rendering of technical services outside India - HELD THAT:- Jurisdictional High Court of Karnataka in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] has held that when certain expenses are excluded from the, export turnover for the purpose of computing deduction admissible under the Act, like u/s. 10A of the Act, such expenses are also to be excluded from total turnover, as export turnover forms part of total turnover. The decision in the case of Tata Elxsi Ltd. (supra) has also been followed by the Hon'ble Court in the case of CIT v. Motor Industries Co. Ltd. [2015 (7) TMI 876 - KARNATAKA HIGH COURT] , holding that if any expenditure is sought to be reduced from export turnover, then it should also be reduced from total turnover for the purposes of computing the eligible deduction u/s 10A of the Act. In this legal and factual matrix of the case, as discussed above, we find no reason/requirement to interfere with or deviate from the finding rendered by the DRP on this issue and, therefore, uphold the same. - Decided against revenue
Risk adjustment - DRP order in granting the assessee 1% risk adjustment arbitrarily and on an ad hoc basis - HELD THAT:- While the co-ordinate benches of this Tribunal in specific cases have been directing the TPO to grant the assessee risk adjustment, if warranted, based on examination of the working submitted by the assessee; in this case however we find that the DRP has allowed ad hoc risk adjustment of 1%, without any examination of the assessee's working of risk, the facts of the case or assigning reasons for its finding. In these factual circumstances, we are of the opinion that the decision of the DRP in granting the assessee an ad hoc 1% risk adjustment is baseless and bereft of any examination of the assessee's working of risk, if any, the facts of the assessee's, case vis a vis the comparable companies etc. We, therefore, set aside the order of the DRP granting the assessee ad hoc risk adjustment of 1%. Consequently, ground of Revenue's appeal is allowed.
TP Adjustment - comparable selection - HELD THAT:- Exclusion of companies from the list of comparables on account of it failing to satisfy the filter of 75% revenues to be from software technology services revenue.
Companies functionally dissimilar with that of assessee's international transactions in software development services need to de deselected from final list.
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2017 (6) TMI 1313 - ITAT COCHIN
Disallowance u/s. 40(a)(ia) - non deduction of tax at source on payments made by the assessee to C&F agents - HELD THAT:- In the case of Deepak Bhargava [2015 (1) TMI 56 - ITAT DELHI] where also the question was disallowance u/s. 40(a)(ia) for non deduction of tax at source on payments effected to clearing and forwarding agents.
Same view was taken by the Bangalore Bench of this Tribunal in the case of DCIT vs. Dhanyaa Seeds (P) Ltd. [2013 (9) TMI 1072 - ITAT BANGALORE] . Hon’ble Gujarat High Court in the case of Pr. CIT vs. Consumer Marketing (India) (P.) Ltd. [2015 (11) TMI 124 - GUJARAT HIGH COURT] held that when separate bills are there for reimbursement of expenditure received by C&F agent, TDS was not required to be made on reimbursement. It is an admitted position in the case before us that assessee had in addition to reimbursement of expenses, separately paid brokerage and commission which was subjected to disallowance in the original assessment. CIT(A) was justified in deleting the disallowance made u/s. 40(a)(ia) of the Act. We do not find any reason for interference with the order of the CIT(A) . Appeal of the Revenue stands dismissed.
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2017 (6) TMI 1312 - ITAT CHENNAI
Disallowance as lorry hire charges - production of self vouchers and PAN - proof of reasonable probability - HELD THAT:- Sum shown by the assessee as lorry hire charges payable and it appeared in its balance sheet as ‘’ freight payable’’. It is mentioned by AO in the remand report the such amounts were, even as per the assessee cleared only in April, 2014, which is more than two years after the end of the relevant previous year. Since the amount was represented by 117 entries all of which were below ₹ 20,000/-, it is clear that the concerned parties, if at all they were there, were all small business persons.
To presume that such small business people would have waited for more than 24 months for getting their payments is beyond preponderance of probability. Assessee was having a net profit of ₹ 19,39,154/- for the relevant previous year and a turnover of ₹ 9,46,63,745/-. Hence, there was no reason to postpone he payment to small parties for a period of 24 months. In my opinion, mere production of self vouchers and PAN will not be sufficient to believe an expenditure, which otherwise show by itself as quite against all reasonable probability. In such circumstances,lower authorities had every reason to disbelieve the claim and make the disallowance. - Decided against assessee.
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2017 (6) TMI 1311 - RAJASTHAN HIGH COURT
Allowable business expenses - HELD THAT:- Taking into consideration that the business has gone almost four time and payment was made through account payee cheque, in our considered opinion, the business expenses is wrongly disallowed. Hence, the first issue is required to be answered in favour of the assessee and he ought to have been allowed the expenses which is arising out of the business exigency and in that view of the matter, the observations made in case of S.A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) [2006 (12) TMI 82 - SUPREME COURT] the expenses are required to be allowed.
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2017 (6) TMI 1310 - ITAT JAIPUR
Rejection of books of accounts - estimation of net profit rate after the books of accounts have been rejected - assessee firm declared NP rate of 11.44% - HELD THAT:- Instead of specific disallowances, the ld CIT(A) as well as Tribunal have considered the position of net profit rate offered by the assessee and have thereafter directed to apply net profit rate of 11.5%. As we have held above, keeping the past history of the assessee into account, the net profit rate of 11.5% is upheld for the impunged assessment year.
Further, the past history of the assessee doesn’t suggest disallowance of third party interest either by the AO or by the Coordinate Benches. The Coordinate Benches have compared net profit rate as offered by the assessee which is claimed to be before depreciation, remuneration and interest payment to partners as well as interest to third parties and thereafter, directed to apply 11.5%. For the impunged assessment, we see no reason to deviate from the said settled position as both Revenue and the assessee has relied on the past history as we have discussed above. AO is directed to apply net profit rate of 11.5% before depreciation, remuneration and interest payment to partners and interest to third parties (bank). Accordingly, there would not be any further disallowance of interest paid to third parties - Appeal of the assessee is partly allowed.
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2017 (6) TMI 1309 - ITAT DELHI
Disallowances on telephone and vehicle maintenance and business promotion expenses. - allowable revenue expenditure u/s 37(1) - HELD THAT:- On going through the same we note that the disallowance has been made by the Assessing Officer merely on estimate basis
CIT (Appeals) has also confirmed the same holding that the entire expenses are not admissible as per the provisions of Section 37(1) of the Act.
Disallowance has been made merely by indulging into surmises. The appellant has been maintaining regular books of accounts. These books of accounts have been audited. None of the authorities below have given any instance of the personal expenditure having been recorded or any expenditure not being allowable under Section 37(1). In the absence of any specific finding, we are of the view that the CIT (Appeals) was not justified in confirming the disallowance made by the Assessing Officer. - Decided in favour of assessee.
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2017 (6) TMI 1305 - ITAT CHENNAI
Reopening of assessment - whether AO has rightly reopened the assessment by issuing notice under Section 148? - bogus purchase of diamonds - HELD THAT:- After processing u/s 143(1) of the Act, the Assessing Officer received a report from the Deputy Director of Income Tax (Investigation)-II, Mumbai regarding bogus purchase of diamonds from M/s Daksh Diamonds, Mumbai. Therefore, the report received from Deputy Director of Income Tax (Investigation)- II, Mumbai was the basis for reopening of assessment. Hence, it cannot be said that the reopening was made on the basis of the material already existed on record. This Tribunal is of the considered opinion that when the Assessing Officer received information with regard to bogus purchase of diamonds from M/s Daksh Diamonds, she rightly reopened the assessment by issuing notice under Section 148 therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Bogus purchase of diamonds - information provided by the Deputy Director of Income Tax (Investigation)-II, Mumbai was proved beyond doubt. When the assessee claims that the diamonds were purchased and produced the ledger and the details of payment made to M/s Daksh Diamonds, it is obligation on the part of the AO to examine the necessity of the assessee to make payment through banking channel. Merely because M/s Daksh Diamonds has not responded to the letters issued by the Assessing Officer under Section 133(6) of the Act, that would not create any doubt in the mind of the Assessing Officer that the information received from Deputy Director of Income Tax (Investigation)-II, Mumbai would be proved.
The Income-tax Act confers ample power and authority on the AO to enforce the attendance of M/s Daksh Diamonds and call for records from them to verify the transaction made by the assessee. The Assessing Officer is not expected to leave the matter as such merely because M/s Daksh Diamonds has not responded to her letters issued under Section 133(6) of the Act. If the Assessing Officer did not want to proceed after issuing letters under Section 133(6) of the Act, the assessee cannot be penalized on presumption.
The matter would stand differently in case the Assessing Officer proceeds further after issuing notice under Section 133(6) of the Act, and establish that the assessee has not purchased any diamond from M/s Daksh Diamonds. In this case, the Assessing Officer has not taken any further step after issuing the notice under Section 133(6) - This Tribunal is of the considered opinion that there cannot be any disallowance / addition on the basis of presumption that the information received by the AO was established beyond reasonable doubt. Therefore, this Tribunal is unable to uphold the orders of the authorities below. Accordingly, the orders of both the authorities below are set aside and the addition is deleted. - Decided in favour of assessee.
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2017 (6) TMI 1303 - ITAT JODHPUR
Assessment u/s 153A - additions in the absence of any incriminating material found during the course of search - HELD THAT:- We do not accept the submissions of the learned authorised representative that no incriminating material was found for the assessment years 2008-09, 2009-10 and 2010-11 for invoking the jurisdiction under section 153A as it is evident from the assessment orders for these assessment years, the addition in respect to share application, loose papers found from locker, etc., unexplained deposits, were made based on the material found during search - following the judicial principle laid down in Anil Mahavir Gupta [2016 (10) TMI 163 - ITAT MUMBAI] it is held that the AO was not justified for making additions in the absence of any incriminating material for the assessment years 2004-05 to 2006-07. However, this view, is not applicable for the assessment years 2008-09, 2009-10 and 2010-11 as the additions are based on the material found during search.
Challenging the assessment order being passed contrary to the provisions of the law, patently invalid, unjustified, illegal, arbitrary and bad in law - HELD THAT:- CIT(A) has legally erred in holding that issuance of notice under section 143(2) within statutory period is not required in the cases covered under section 153A of the Act. Thus, this ground of appeal is being decided in favour of the assessee and accordingly in the absence of issuance of notice u/S 143(2) within the statutory time limit, the assessment order is held void ab initio.
Assessment under section 144 is bad in law - enough opportunity has been granted to the assessee to defend its case, therefore the plea to annual the case on this aspect is dismissed. Further we are of the view that the averment made by the AO in proceeding under section 148 in the case of Shri Bharat Das Vaishnav is of no help to the assessee as these proceedings are separate proceedings. Thus, ground No. 3 is allowed.
No adequate opportunity of being heard was provided during assessment - We found that the assessee during course of assessment proceedings attempted to comply with the various notices issued by the AOr, however, on account of group assessment certain details were filed, which were not found to be acceptable by the AO. Since application for additional evidences has been accepted by the CIT (Appeals), which is not challenged by the Department before us ground of appeal bearing No. 4 is dismissed.
Cash seized during the course of search at Sadar Bazar Branch of the assessee-bank - HELD THAT:- Without going into the merits of the addition we hereby set aside the order of the CIT (Appeals) as well as the AO and remand the issue back to the file of the Assessing Officer with the direction to adjudicate the issue on the merits after considering the evidences furnished by the assessee-bank.
Deduction under section 80P to the assessee-bank - HELD THAT:- CIT(Appeals) has correctly interpreted the provisions of section 80P for the benefit of the assessee engaged in the business of banking or providing credit facilities to its members - the assessee is engaged in the business of banking and holding banking licence and the said licence has not been revoked/cancelled, therefore, in the absence of any contrary evidence being put forth, we are of the view, the assessee-bank is eligible for deduction under section 80P
Addition on account of depreciation, repair and maintenance expenses - HELD THAT:- CIT (Appeals) has given a categorical finding regarding the verification of amounts of depreciation from the books and the available record. Department has not brought on record any material to dislodge the findings of the CIT(Appeals) allowing the claim of depreciation and other business expenditure, viz., repair and maintenance expenses to the assessee is upheld.
Addition in relation to salary and incentive payments to Shri Mukesh Modi - HELD THAT:- The salary and incentives to Shri Mukesh Modi were on account of linking of incentives with the increased profits of the assessee-bank on year to year basis, therefore, incentives were linked to the performance. Further, we concur with the finding of the CIT(Appeals) that AO has not justified the basis of salary of ₹ 8 lakhs to Shri Mukesh Modi, thus, no comparison made. Further, since the provisions of section 40(A)(2)(b) are not applicable in the instant case as discussed above, there is no legal justification for making disallowance of salary and incentive payments by assuming the reasonable salary . Addition to be deleted
Addition u/s 68 in relation to share application money - HELD THAT:- Once the burden casted upon under section 68 is discharged, there remain no case of addition being confirmed in the hands of the assessee-bank for the share application money received from various members, whose identity remains proved by the assessee-bank as a few members presented themselves before the AO and the statement of Shri Mahendra Singh Chauhan, Sukh Devi and Aarif and other members were recorded during assessment proceedings, wherein they have owned up the investment in share application money made by them. Further all the members shareholders has given their confirmations, which remain uncontroverted by the Department. In our considered view, the provisions of section 68 cannot be applied in the same manner in the case of the assessee- bank as in the case of non-bank assessees as held in the judgment of CIT v. Pragati Co-operative Bank Ltd. [2005 (6) TMI 26 - GUJARAT HIGH COURT]
Addition of provisions for bad and doubtful debts claimed by the assessee- bank as deduction under section 36(1)(viia) - HELD THAT:- As considered the legal position under section 36(1)(viia) of the Act relating to deduction of the provision for bad and doubtful debts to the extent of 7.5 per cent. of the total income before claiming deduction under sub-clause (viia) of section 36(1) - provisions of section 36(1)(viia) are made applicable to co-operative banks by the Finance Act, 2007. Assessee-bank is legally entitled to claim such deduction within the legally permissible limits. We further find that claim of ₹ 1,00,00,000 by the assessee-bank is within the statutorily available limits, therefore, no interference is required in the decision of the CIT (Appeals)
Disallowance made under section 40(a)(ia) - DR argued that the provisions of section 40(a)(ia) does not apply to expend- iture already paid - CIT- A deleted the addition - HELD THAT:- In view of the recent judgment of Palam Gas Service v. CIT [2017 (5) TMI 242 - SUPREME COURT] we do not concur with the decision of CIT (Appeals) and the order of the Commissioner of Income-tax (Appeals) in this respect is set aside and the order of the Assessing Officer is restored. Accordingly, the addition confirmed in the hands of the assessee-bank.
Addition in respect of the contents in loose papers found from locker during the course of search - HELD THAT:- It is evidently clear that these are basically rough notings/calculations made by the account holders/depositors themselves on the reverse of the counter foils. No adverse inference can be drawn against the appellant in the absence of corroborative evidence to establish any unaccounted receipts or expenditure of the assessee-bank because none of these documents indicates whether it at all relates to the assessee and if any income or expenses of the appellant can at all be inferred. Even the Assessing Officer is not sure whether the contents mentioned on the same are relating to any receipts or expenditure of the appellant-bank therefore, he has made an addition without invoking any provision of the Income-tax Act. CIT-A was justified in deleting the addition
Addition in respect of property which has been made on substantive basis in the hands of the assessee and on protective basis in the hands of Smt. Meenakshi Modi - HELD THAT:- Documents placed on record relating to charge created in favour of the assessee-bank it is evident that charge was created on in favour of the assessee- bank over an agricultural land and thus the assessee-bank was merely a mortgagee and property never belonged to the assessee, therefore, the role of the assessee-bank was nothing more than mortgagee and this fact is acknowledged by the Assessing Officer. Therefore, there remains no reasons to confirm the addition in the hands of the assessee-bank. Source of property in the hands of Smt. Meenakshi Modi is also evident and explained. Thus, in view of the facts and circumstance of the case, we find that there is no merit in the ground raised by the Department in its appeal before us.
Disallowance of loss on sale of assets and deduction of service tax liability - HELD THAT:- Provision for service tax is ascertained liability as the fact of liability has been mentioned in the notes to accounts and further the asses- see being engaged in the business of banking is liable for service tax, therefore, there is no merit in the ground raised by the Department - amount regarding loss on sale of assets has already been added in the returns of income by the assessee therefore, this addition is also uncalled for.
Addition u/s 68 in respect of deposits and peak credit amount in the accounts of customer of the assessee-bank - HELD THAT:- Applicability of the provisions of section 68 in the context of the assessee-bank vis-a-vis the burden of the asses- see-bank under section 68 the issue involved in this ground raised is fundamentally similar as the addition has been made by invoking the provisions of section 68 in respect of the amount credited in the accounts of the customers of the assessee-bank, therefore, we upheld the CIT(A) order and his findings given
Determination of the status of the assessee-bank - AOP [association of persons] determined by the Assessing Officer as against the co-operative society within the meaning of section 2(19) claimed by the assessee - HELD THAT:- We hold that the assessee-bank is co- operative society within the meaning of section 2(19) therefore, the assessment made by the AO considering it to be an asso- ciation of persons is uncalled for. As far as the contentions regarding alleged violation of various laws is concerned, we find no infirmity in the order of the CIT (Appeals) negating the various such alleged violation which are based on incorrect and misconceived interpretation and beyond the domain of the AO. Thus, this ground of appeal is decided in favour of assessee
Provisions of section 167B of the Act are not applicable to the assessee and accordingly, there is no merit in the various other grounds of appeal raised by the Department relating to various addition deleted by the CIT (Appeals) as the same are the result disallowance and addition made by the Assessing Officer as a consequence of treating the assessee as an association of persons by disturbing its legal status
Allowable business expenditure - commission and incentive payment made to agents/advisor by the asses- see-society - HELD THAT:- Without incurring such expenditure, the assessee cannot run its business, therefore, we hold that commission and incentive payment made to agents/advisor by the assessee-society is business expenditure deductible under section 37 of the Act
Addition in relation to FDR and consequent deletion of estimated interest - HELD THAT:- There is no justification of making addition in the hands of the assessee-society as the same would otherwise amount to double addition. In view of the above, the addition and consequent estimated interest income is not justified in the hands of the assessee and the same is directed to be deleted
Addition in respect of interest expenditure in relation to FDR made by Smt. Sushila Modi - HELD THAT:- We find no merit in the ground raised by the Department as interest income from FDR has been shown in the returns filed by Smt. Sushila Modi available in the paper book - interest on FDRs is a deductible expenditure for the appellant society carrying on the business of providing credit facilities. Therefore, disallowance of the interest expenses on FDRs is not legally sustainable. Thus, ground No. 2 is dismissed.
Addition in respect of entries in a diary seized from the premises of the Adarsh Society - HELD THAT:- The name of the asses- see-society is not mentioned and also the same is not signed. Further it is seen from the affidavit of Shri Prakash Suthar, it has been confirmed that the amount mentioned on the relevant page of the diary does not relate to the affairs of the assessee-society and a perusal of the records shows that it was the diary of the employee only. These findings have not been dislodged by the Assessing Officer and the learned Departmental representative.
Addition in respect of purchase of gold coins - HELD THAT:- Purchase bill for purchase of gold, stock registers and other details/ information were available for verification of the AO during proceedings, and no contrary evidences has been brought on record to reject the explanation of the assessee. We find that investment/purchase of gold coins is duly recorded in the books of account, therefore, there is no case of any unaccounted/unexplained investment. The challan receipt found during the course of search is duly accounted for in the stock register and is also supported with the bill of purchase of Swarnparbha Jewellers. The purchase of gold coin is recorded in books account of the assessee, therefore, we find no merit in the appeal of the Department
Addition in relation to non-charging of interest income on certain accounts - issue arose due to the observations of internal auditor - HELD THAT:- We find with the help of the learned authorised representative that interest on various accounts has been duly accounted for in the accounts of the assessee and there is no non-charging of interest.
Addition of donation expenditure - HELD THAT:- It is seen that the amount of donation of ₹ 92,72,012 is added back in the computation of total income. Further the amount of ₹ 11,00,000 of donation paid to Mahaveer Public School (Mahveer Sansthan) is included in the total amount of donation of ₹ 92,72,012 as verifiable from the donation receipts and ledger accounts placed on record. In view of the above, we confirm the deletion of donation
Provisions of section 69C does not apply as the expenditure has been duly recorded in books of account of the assessee
Expenses on bonus on Bitiya Samridhi Yojana should be spread over the tenure of the deposit and the assessee has accepted the order of the CIT(Appeals) upholding the view of the Assessing Officer. Even otherwise, considering the availability of deduction under section 80P this addition does not affect the total income of the assessee
Exemption under section 10(38) of the Act on sale of long-term shares - HELD THAT:- Shares in question were held for considerable period and was not purchased during this year and was purchased in earlier assessment year. Therefore, following Circular No. 4 of 2007 dated June 15, 2007 we hold that the assessee was an investor in the shares for the year under consideration, which he sold during year under consideration. Further, as evident from the order of the Commissioner of Income-tax (Appeals), the claim has been allowed to the assessee after due verification. Therefore, in the absence of any contrary evidence brought on record, the claim of exemption under section 10(38) is allowable to the assessee
Disallowance u/s 14A - shares held as stock-in- trade - HELD THAT:- As decided in case of CIT v. India Advantage Securities Ltd. [2015 (6) TMI 140 - BOMBAY HIGH COURT] no disallowance under section 14A read with rule 8D can be made on shares held as stock-in- trade. AO has not given any specific findings in his order for his dissatisfaction as to correctness of the accounts maintained by the assessee and prove the claim of the assessee wrong. AO has not discharged his burden as to whether borrowed funds were utilised for purchase of shares. It is seen from the balance-sheet of the assessee that the assessee has sufficient surplus funds to purchase shares for trading, further shares were held as stock-in-trade and dividend income earned was incidental to shares purchased and held for trading. We also note that rule 8D is applicable from the assessment year 2008-09 only.
Addition of property purchased - HELD THAT:- We hold that the order of the CIT (Appeals) need no interference as definite finding as to verification of source of purchase of land and reflection of the same in the profit and loss account of the assessee has been recorded which has been verified by us from the record available before us. We find the same in the order and thus, ground No. 1 is dismissed.
Addition u/s 69 - unexplained investment - HELD THAT:- Addition is in relation to sales made by the appellant during the year under consideration, which is not sustainable under section 69 of the Act since the said section is applicable for unexplained investment made. Similarly, the appellant has shown the net income from real estate business on sales of ₹ 6,35,000 shown in the audited profit and loss account. Thus, it is clear that the sales of plot during the year is included in books of the appellant and thus, this addition is also not justified
Acceptance of additional evidence by the Commissioner of Income-tax (Appeals) under rule 46A(1)(c) - HELD THAT:- We hold that the Commissioner of Income-tax (Appeals) was justified in admitting the addi- tional evidence, further it is not a case where the Assessing Officer was not granted opportunity to rebut the evidences filed by the assessee as remand report was called for
Addition in respect of rebate claimed under section 88E - HELD THAT:- Addition on the face of it is misconceived as the amount of rebate claimed under section 88E in respect of securities transaction tax paid on share transaction cannot be added to the total income of the assessee. As the claim of securities transaction tax paid has been duly substantiated with form No. 10DB submitted during proceedings before the CIT (Appeals). No merit in the ground raised by the Department as form No. 10DB is prescribed form for proof of payment of securities transaction tax and we find that the submissions of the same with return is just a procedural requirement, which in the instant case is not applicable, in view of the fact that return being filed electronically, the fact which is not dislodged by the learned Departmental representative Even otherwise, as the rebate claimed under section 88E cannot be added to income of the assessee.
Loss on sale of car - Held that:- Addition is totally unjustified. Similarly the loss is verifiable from the return of income and computation thereof and also from the audited balance-sheet ; therefore, the disallowance of loss is also not justified.
Addition in respect of deposits balances - HELD THAT:- Amount of account balances mentioned in the seized paper are not related to the assessee and belong to the family members/relatives of the assessee whose accounts confirmation and statement of accounts with Adarsh Society are placed - as regards, the payment of life insurance, we hold that the transaction is not related to the year under consideration and accordingly we upheld the findings of the CIT (Appeals).
Addition in respect of entries in SMS printout - HELD THAT:- As perused the certificate issued by Adarsh Society, bank account statements with reference to SMS print out, which forms part of the paper book filed. We find that various entries mentioned in the SMS print out are just balances in various banks and deposit position of Adarsh Society, for which certificate issued by Adarsh Society is available in record clarifying that amount of ₹ 488.06 is actually ₹ 488.06 crore and the same is deposit position of Adarsh Society as on February 8, 2010. The said certificate has not been rebutted by the Department by bringing on record any contrary evidences.Thus, addition made is not justified
Enhancement of income - HELD THAT:- Commissioner of Income-tax (Appeals) has erred in law in enhancing the income for new source of income, which was not disputed by Assessing Officer, we also follow a recent judgment inRam Infrastructure Ltd. v. Jt. CIT [2017 (1) TMI 1057 - ITAT PUNE] to support our decision. Thus, ground No. 8 is allowed.
Investment in FDR - HELD THAT:- It is settled judicial principle that suspicion howsoever strong cannot be made the basis for addition. It is obvious that for making FDR, transfer to amounts from one account to another is made as the FDRs in the instant case, is undisputedly not made in the name of the assessee. Further, we see that dates of transfer and dates of investment are the same, therefore, there is no reason to reject the explanation of the assessee.
Expenditure on visit to US/ Canada - HELD THAT:- Addition is on estimate basis only as the Assessing Officer could not bring on record any evidence/material to establish incurring of any expend- iture by the assessee. On the other hand, no expenditure was incurred by assessee gets established from the certificate of Adarsh Society placed on record, the expenditure on foreign visit to US/Canada was borne by Adarsh Society as the assessee had been the managing director of the Adarsh Society
Addition in respect of estimated expenditure on medical treatment - HELD THAT:- No addition can be sustained merely on suspicion. Revenue has not discharged its burden under section 69C of the Act to prove that any expenditure was incurred since the primary burden is not discharged, addition is not justified. Since amount is estimated amount only, we hold that it cannot be added as taxable perquisite in the hands of assessee. We have not examined the explanation by the assessee that Hinduja Hospital is an approved Hospital in terms of the proviso to section 17(2)(viii)
Addition of gift - HELD THAT:- We note that the assessee has declared the sources in her SBI bank statement to make any such gift being incentives from Adarsh Society is credited therein. Therefore, in any case, the question of non-availability of source does not arise. The assessee has discharged its burden by putting forth the evidences to rebut the fact of making gift as mentioned in the gift deed seized during search. We find no justification for sustaining the addition
Dividend income from co-operative society is taxable and reflected in the return of income. The same is not exempt as Adarsh Society is not a company. Therefore, the stand taken by CIT(Appeals) is legally not tenable and therefore disallowance under sections 14A and 57(iii) of the Act is unwarranted.
Enhancement of income in respect of agriculture income by treating the same to be income from other sources - HELD THAT:- Assessee furnished evidences in the form of Khasra Girdhawari and some sample sales bills and copy of completed assessment orders under section 143(3) of the Act during proceedings, therefore, earning of agricultural income is established. Therefore, we direct deletion of the addition
Addition in respect of certain investments - HELD THAT:- Source of investment as capital contribution with the part- nership firm is interest earned on FDRs as reflected in SS-477 account of the assessee. Thus, the source is established. Further, the investment of ₹ 8,919 is not made during year under consideration, it is just an amount of renewal of FDRs made earlier on which interest accrued regularly. CIT (Appeals) was justified in deleting the additions
Addition in respect of property on the basis of the report of the Valuation Officer - HELD THAT:- An assessing authority cannot refer any matter to DVO without rejecting the books of account. Therefore, following the judgment of Sargam Cinema [2009 (10) TMI 569 - SC ORDER] we hold that in the present case, the report of Valuation Officer cannot be the basis of addition as reference under section 142A of the Act is itself not legally justified. Addition directed to be deleted on this count itself.
Addition u/s 69 - Ownership of property - documentary evidence placed on, viz., the copy of electricity bill, the statement of the assessee recorded under section 132(4) of the Act, we find that the property under reference belongs to Smt. Ramila Vaishnav and further since the expenditure of construction are duly reflected in the books of account and the balance-sheet filed of Ramila Vaishnav, there fore, in the instant case the provisions of section 69 are not attracted
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2017 (6) TMI 1298 - ITAT PUNE
TP Adjustment - benchmarking of transactions involving the Manufacturing segment of the assessee - non-requirement of furnishing of the audited accounts of the segmental accounts and subsegmental accounts - HELD THAT:- Bringing our attention to various sub-paragraphs Ld. Counsel demonstrated that the allocation of expenses was mostly based on the actual expenditure with the exception of expenditure relating to “other expenses” and “General Admin expenses”. These are allocated based on production units and sales basis respectively. Ld. Counsel for the assessee is of the opinion that expenditure relating to payment of employees and selling and marketing expenses is allocated based on cost centres. The expenditure, which is allocated not based on the actual, is extremely negligible against ₹ 55 crores out of gross expenditure of ₹ 106 crores determined by the TPO. Thus the same constitutes a patent mistake which requires amendment. This mistake has driven the officers to the wrong conclusions in the matter.
Statutory audit - We understand the requirement of auditing the accounts of the assessee and it has the strength of the provisions of Section 44AB of the Act. But when it comes to the TP study matters, there is responsibility cast on the assessee to conduct TP study and there is a role/participation of the assessee. As in the matter DRP should have given reasons as to how the TP study also demands the Auditing of the segmental accounts or sub-segmental accounts. As such, it is not clear as to why the contents of page 492 of the paper book is not audited before filing the same before the lower authorities or the Tribunal. Assessee is under obligation to discharge the onus as to how said artificial allocation of expenses does not constitute a self-serving exercise rather than the reliable/credible TP study needed for benchmarking of the International transactions under consideration. In the absence of the same, the role of the AO or the TPO in making adjustments is sustainable in law. However, holding this view at this point of time constitutes premature. It is also noticed that the decisions furnished by the assessee’s counsel regarding the non-requirement of furnishing of the audited accounts of the segmental accounts and subsegmental accounts, were ignored by the TPO/DRP without giving reasons.
Allocation of interlaced expenditure, such as Employees cost, Selling and Marketing expenses, General Admin Expenses etc., we are of the opinion that basis for allocating the said expenses among the 4 sub-segments does not appear to be the actual expenditure although they were argued by the Ld. Counsel for the assessee as actuals. There is some adhoc allocation based on certain keys/parameters such as sales, cost centres, production units is involved. In our view, prima facie, the decisioin of the TPO/DRP constitutes reexamination. Therefore, issue of adjustment to the manufacturing segment is required to be remanded to the file of AO/TPO/DRP for fresh adjudication of the issue. AO is directed to grant reasonable opportunity of being heard to the assessee in accordance with the principles of natural justice. Thus, the relevant issue raised in Ground No.2 with its sub-grounds are allowed for statistical purposes.
Most appropriate method in case of the trading activity of the assessee - it is settled legal position at the various Benches of the Tribunal that, in case of distribution activity, even when there are selling and marketing expenses are borne by the assessee, there cannot be any value addition to the product in question. In such cases, Resale Price Method is the most appropriate one and accordingly we reverse the decision given by the AO/TPO/DRP in thrusting on the assessee the TNM method to the transaction under consideration. In any case, it is not the case of the Revenue the assessee is not into distribution activity. Accordingly, in principle, Ground No.3 raised by the assessee is allowed.
Admission of additional ground - benchmarking study of the international transactions in the trading segment applying Resale Price Method - HELD THAT:- Additional ground, being legal in nature, are required to be admitted and should be remitted to the file of the AO/TPO/DRP for considering his benchmarking studies applying Resale Price Method. We find these grounds relate to the aspects of benchmarking of International transactions of trading activity. In our view, TPO should be directed to apply Resale Price Method as most appropriate method for the reasons discussed above and undertake the exercise of benchmarking them as per the rules on the subject.
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2017 (6) TMI 1297 - ITAT VISAKHAPATNAM
Penalty u/s 271AAB - assessee has disclosed undisclosed income towards cash found during the course of search and also admitted such undisclosed income in his return of income filed for the specified previous year - assessee not maintained regular books of accounts till the date of search, although the assessee being a professional is obliged u/s 44AA read with rule 6F of the Income Tax Rules, 1962 to maintain regular books of accounts on day to day basic - HELD THAT:- Assessee has explained cash found during the course of search as his professional income of the current year relevant to assessment year 2013-14. The assessee also specifies the manner in which such income has been derived. We further observed that the assessee is not maintaining regular books of accounts for the current financial year and also for the previous financial years.
Had he been maintained books of accounts for the current financial year and not included cash found during the course of search in his books of accounts, then definitely the said cash comes within the purview of undisclosed income of specified previous year as defined u/s 271AAB.
Since, the assessee did not maintain regular books of accounts and also the time limit for filing of return of income for the specified year is not expired as on the date of search, the cash found during the course of search cannot be considered as undisclosed income for the purpose of levy of penalty u/s 271AAB. Therefore, the explanations offered by the assessee that he would have disclosed cash found during the course of search as his professional receipts for the year 2013-14, even no search would have been taken place, appears to be reasonable and bonafide. A.O. was erred in imposing penalty u/s 271AAB - direct the A.O. to delete penalty levied u/s 271AAB - Decided in favour of assessee.
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