Advanced Search Options
Income Tax - Case Laws
Showing 1 to 20 of 747 Records
-
2018 (1) TMI 1733
TP Adjustment - TPO justification in treating the outstanding receivables from the overseas AEs as unsecured loans and to impute interest thereon - HELD THAT:- We find that the assessee’s own case for the assessment year 2010-11 [2015 (4) TMI 180 - ITAT DELHI] a coordinate bench of this Tribunal reached a conclusion that if the working capital adjustment takes into account the outstanding receivables, additional imputation of interest on the outstanding receivables is not warranted. This decision of the Tribunal is upheld by the Hon’ble Jurisdictional High Court in assessee’s own case [2017 (4) TMI 1254 - DELHI HIGH COURT] for this same assessment year by holding that no error was found in the order of ITAT giving rise to any substantial question of law for a determination.
We, therefore, hold that in case the working capital adjustment properly takes into account the outstanding receivables, no additional imputation of interest on the same is warranted.
As AR submitted that the working capital adjustment is worked out by properly taking into account the outstanding receivables. However from the order of the TPO, we do not find any mention of the Ld. TPO considering the same. We are, therefore, of the opinion that this fact needs verification at the end of the TPO - we set aside the issue to the file of TPO for verification of the fact, whether while making the working capital adjustment the outstanding receivables are taken into account or not. Appeal of the assessee is allowed for statistical purposes.
-
2018 (1) TMI 1732
Addition u/s 68 - unexplained cash credits - capital introduction by assessee’s partner - addition made in partner’s hands v/s firm’s case - HELD THAT:- We find no merit in Revenue’s instant argument since hon’ble jurisdictional high court’s judgment in M/s. Odedara Construction [2014 (2) TMI 130 - GUJARAT HIGH COURT] as relied upon by the CIT(A) settles the law that such an addition is to be made in partner’s hands instead of that in a firm’s case. CIT(A) has already issued necessary directions to this effect to the Assessing Officer. We therefore see no reason to accept Revenue’s instant sole substantive grievance.
-
2018 (1) TMI 1730
TP Adjustment - issuance of a corporate guarantee - HELD THAT:- We find that in the case of Everest Kento Cylinder Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] the Hon'ble Bombay High Court has dealt the identical issue and had decided it against the revenue as held that considerations which applied for issuance of a corporate guarantee are distinct and separate from those in a case of bank guarantee and, accordingly, the commission charged could not be called in question, in the manner the Transfer Pricing Officer had done. The comparison was not between like transactions but between guarantees issued by commercial banks as against a corporate guarantee issued by holding company for the benefit of its associated enterprise, a subsidiary company. Therefore, no transfer pricing adjustment could be made in respect of the commission charged. - Decided against revenue.
Addition notional interest - Buying back of share at higher rate than the purchase price - TPO had presumed that buy back of shares was not a normal business transaction, that he treated it as advancing of interest free loan by the assessee to the AE, that he charged notional interest not only for the year under consideration but upto the date of remittance - CIT(A) deleted addition - HELD THAT:- Purchasing the share @ 1 pound per share and selling at @ 0.8 pound per share cannot be the basis for presuming that the transaction was not a genuine transaction-especially when the valuation was as per the exchange regulations. Buying back of share at par or at higher or lower rate than the purchase price is one of the very common practice of the business world. Until and unless it is proved that such a transaction was not based on scientific basis or was against the provisions of exchange manual/regulation, it should be accepted. We find that the FAA has given a categorical finding that the TPO had not doubted the valuation. In these circumstances, we hold that there was no justification for the TPO to charge notional interest. As the order of the FAA does not suffer from any legal or factual infirmity, so, confirming the same, we decide ground No. 2 against the AO.
Allocation of R & D expense to the 80-IB and 80-IC qualifying units - HELD THAT:- Identical issue was decided by the Tribunal against the AO while adjudicating the appeal for the A.Y. 2005-06 [2012 (4) TMI 743 - ITAT MUMBAI] wherein held no justification to allocate proportionate expenses incurred on R & D and on interest for the purpose of computing deduction U/s. 80IB. The expenditure on R & D is for a specific purpose and there is no dispute in incurring of expenses for the specific purpose i.e., in the field of medical science etc., The expenditure incurred on R & D were not related to business of any existing units of the company or to the products manufactured by any of its unit in which the assessee has claimed deduction U/s. 80IB. The Research and Development Institute is a statutory institute of the assessee company which is situated at Aurangabad which deals with global research. There is no doubt that assessee's units got benefit from the research work done by the research at Aurangabad. Further the contention of the Assessing Officer that some part of the expenditure are liable to be considered in the units in which the deduction U/s. 80IB has been claimed, in our considered view, is not tenable.
Nothing has been brought on record that borrowed funds by the Head Office were transferred to the units on which the deduction U/s. 80IB has been claimed by the assessee. The onus lay upon the AO to discharge it by bringing some positive evidence to establish that some part of the expenditure on account of R & D and on account of interest has been incurred on these units because Assessing Officer, who is alleging that some part of expenditure incurred on R & D and interest are related to the units on which deduction U/s. 80IB has been claimed. This onus has not been discharged, therefore, allocation of the proportionate expenses at the end of the Assessing Officer, in our considered view were not justified. Decided against revenue.
Claim of weighted deduction made u/s. 35(2AB) - assessee placed reliance on the orders of the FAA for the earlier years, wherein the FAA had directed the AO to delete the disallowance where Form 3CL was issued by the Deptt. of Science and Industrial Research (DSIR) was received by the assessee after completion of the assessment order - DR stated that the Tribunal had decided the issue against the assessee in the earlier year holding that deduction was available for in house trials and RD research only - HELD THAT:- We are of the opinion that matter needs further verification. Therefore, we are remitting back the issue to the file of AO for deciding the issue afresh. He is directed to afford reasonable opportunity of hearing to the assessee and after considering the case laws relied upon by the assessee before us. Ground No. 4 is partly allowed.
TDS u/s 195 - Addition u/s. 40(a)(i) - AO found that the assessee was making payment to non residents on account of pilot-bio study and clinical research without deducting TDS - HELD THAT:- We find that the Tribunal vide its order [2012 (4) TMI 743 - ITAT has dealt the issue and decide it in favour of the assessee held assessee paid charges for testing at laboratories of CRO which used their own skills and equipments etc., to prepare the report. The Tribunal came to conclusion that there is no parting of skills or know-how by CRO and hence the service is not technical in nature, but was only a commercial service. Ground of appeal against the AO.
Disallowance of weighted deduction u/s. 35(2AB) - Form 3CL was not submitted by the assessee - HELD THAT:- We find that DSRI had not issued the Form 3CL in time, that the assessee could not file the same before the AO during the assessment proceedings, that the Form was submitted before the AO after DSRI issued the same, that AO himself had mentioned in the order deduction would be allowable on production of Form 3CL. In these circumstances, we are of the opinion that he was not justified in rejecting the application filed by assessee u/s. 154 - Decided against revenue.
-
2018 (1) TMI 1728
Validity of reassessment after a period of four years - reasons to believe - reliance on statement recorded in the course of survey u/s 133A of a partner as stated that there is an understatement of the cost of construction of a commercial building - power to examine a person on oath - HELD THAT:- As decided in S.Khader Khan Son [2007 (7) TMI 182 - MADRAS HIGH COURT] the statement recorded during the course of survey action u/s 133A of the Act shall not have any evidentiary value and solely based on the said statement given by one of the partners of the firm, the question of reopening cannot be done. Further, after taking note of the decision in the case of Dr.S.C.Gupta [1999 (11) TMI 9 - ALLAHABAD HIGH COURT] the Court held that the power to examine a person on oath is specifically conferred on the authorities only under Section 132(4) of the Act in the course of any search or seizure and Section 133A does not empower any income-tax officer to examine any person on oath.
Thus here is absolutely no basis for reopening of the assessment. That apart, though the second respondent seeks to bring out a case of underestimation in the cost of construction by referring to the statement of the partner, the second respondent himself called for a valuation report from the Public Works Department and find that the cost of the construction as disclosed in the return for the assessment year 1999-2000 and the valuation, which was done by the Public Works Department officials in the year 2003 has only marginal difference and the variation appears to be around Rs.1,00,000/-. Thus, on his own showing, the second respondent was not able to bring out a case of underestimation of the cost of construction. Thus, impugned reopening proceedings are wholly without jurisdiction and illegal. Thus the impugned reopening proceedings are quashed. Decided in favour of assessee.
-
2018 (1) TMI 1726
Exemption u/s 11 - Charitable activity - Whether benefit of Section 11 should be granted to the assessee in view of the proviso to Section 2(15) of the Income Tax Act, 1961? - HELD THAT:- As decided in favour of the assessee in view this Court to which one of us was a party in The Tribune Trust Vs Commissioner of Income Tax and another and in Commissioner of Income Tax (Exemption) Vs Improvement Trust, Moga [2017 (1) TMI 53 - PUNJAB AND HARYANA HIGH COURT]
We are informed that the revenue has challenged the judgement before the Supreme Court and that leave has been granted in those cases. The appeal is accordingly disposed of in terms of the aforesaid judgement.
-
2018 (1) TMI 1724
Disallowance u/s 14A r.w.r.8D - CIT(A) confirmed addition as assessee had not been able to demonstrate to have invested in the above tax free investments from its interest free funds only - HELD THAT:- AR states very fairly that the impugned disallowance ought not to have exceeded the entire exempt income amount as per judgment Joint Investments Pvt. Ltd. vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT
Revenue on the other hand strongly supports both the lower authorities’ action invoking the impugned disallowance, but however fails to rebut the above legal proposition as per hon’ble Delhi high court’s recent decision.
We therefore partly accept assessee’s grievance to restrict the impugned disallowance to the extent of exempt income figure - assessee submits that the instant concession of challenging the quantum of impugned disallowance instead of its correctness on merits be not taken as precedent in any preceding or succeeding assessment year. We accept the same to make it clear that our instant order shall not be treated as a precedent against the assessee. Assessee’s appeal is partly allowed.
-
2018 (1) TMI 1723
TP Adjustment - comparable selection - assessee had adopted TNMM as the most appropriate method to determine the arm’s length nature of its IT's - DRP observed that Resale Price Method (RPM) would be appropriate to determine as to whether the AE transactions were at ALP, that the mean of GP realised in the non-AE transactions would be appropriate benchmark to examine arm’s length price of each of the AE transactions, that GP realised on non-AE exports would be an appropriate internal cup for the AE exports - HELD THAT:- The method adopted by the TPO was faulty from the very beginning. The TIPS data contained price of iron ore exported from Vishakhpatanm port for two categories- i. e. having iron content 62% and having iron content 62% or less. The assessee had exported iron ores to its AE's having FE contents of 63. 01%, 63. 38%, 60. 16% and 50. 60%. Export details clearly show that in three consignments FE content was less than 62% and only in on consignment FE was more than 62%.
Even in three consignments having FE content less than 62% in one case iron ore content is 50. 60%. There is no need to quote any authority to hold that market value of the ore having 50. 60% FE would be less than the ore having 62% FE. Besides, price of iron ore, like any other exported commodity, is highly sensitive and has wide fluctuation depending upon demand and supply. Considering these peculiar facts, we are of the opinion that the DRP had rightly held that TIPS data was not a reliable tool to determine the ALP of the IT's of the assessee.
TP provisions try to bring parity between the controlled and uncontrolled IT. s of similar nature. For that matter some methods have been incorporated in the IT Rules, 1962. The method is procedural part of the TP exercise, but the substantive law is Chapter X of the Act. What has to be seen in such proceedings that IT. s are valued in a reason ably fair manner. TP provisions are not based on some arithmetic or scientific formulas that would always give similar results in similar conditions. They find place in statute to take care of various and different situations and circumstance of dynamic business world. The method adopted by the DRP, in our opinion, was quite appropriate considering the peculiarities of the facts of the case. It did not result in deleting the entire adjustment proposed by the TPO/AO-it resulted in lower adjustment.
AO had used the TIPS data but it had so many lacunas. The DRP, therefore, after obtaining details of all the seven AE and non-AE transactions, directed the AO to follow a particular method. Thus, there is no basic difference in the approach of the TPO and DRP. Certain modifacations, were made by it and we hold that same were required to decide the ALP.
We would also like to mention that the cases relied upon by the DR are not relevant to decide the issue before us. Considering the above, we confirm the directions of the DRP and hold that same are not suffering from any legal or factual infirmity. Effective ground of appeal, filed by the AO, is decided against him.
-
2018 (1) TMI 1722
TP Adjustment - Comparable selection - HELD THAT:- We find that the assessee is a wholly own entity of Singapore base parent company, that the AE was providing CRS for Airline ticket bookings, that CRS was being used by the Travel Agents for booking of Air Tickets, that the main source of income of the AE was the commission received by it from Airline companies whose tickets were booked using the CRS.
Thus we are of the opinion that all the five comparables-i.e. AL,CLL, GITL, Rites and WL, selected by the TPO for benchmarking the IT's of the assessee are not providing MSS, that there functionally dissimilar, that they have to be excluded from the final list of the valid comparables. There is nothing on record to prove that support services provided by the above five comparables were also associated with marketing function. There is no doubt that the support services provided by the assessee were directly associated with marketing. We find that if these five comparables are excluded from the list the valid comparables, the assessee will be in the safe zone of +/- 5% the OP to OC of the assessee is 5.18% whereas OP to OC of the remaining comparables is 3.01%. In the circumstances, we hold that the IT's entered into by the assessee with its AE was at arm’s length. Decided in favour of the assessee.
Addition made on account of mismatch in AIR data - AO observed that data available with the Department indicated that the assessee had not shown income received by it from Yatra Online.com and Arzoo.com respectively - HELD THAT:- We find that rectification application was filed before the AO by the assessee stating that there were certain mistakes in his order, that Yatra had filed a fresh statement of tax deducted at source, that the AO had not passed the rectification order in that regard. Therefore in our opinion, the addition made by him in respect of Yatra Online.com cannot be endorsed. Reversing the order of the FAA, we allow ground number 3.1.
Income from Arzoo.com we find that the assessee had claimed that there was dispute about the sum, that Arzoo had disputed the liability. The AO is directed to pass order u/s.154 of the Act within a month of receipt of this order. If he finds that claim made by the assessee about Arzoo.com is not supported by documentary evidences, he can add the disputed amount i.e. for Rs. 6.64 lakhs to the income of the assessee. But he will give credit to the taxes deducted at source as per AS 26.GOA 3.2 is allowed partly.
Disallowance of Foreign exchange loss - We find that the AO on one hand would tax gain on FE earnings but would not allow loss arising on FE loss. In our opinion, the stand taken by the AO is not justified in any manner. If the gains of FE fluctuation had to be taxed then the loss arising out of such fluctuation has to be allowed. We find that in the case of Oil and Natural Gas Corporation [2010 (3) TMI 81 - SUPREME COURT] has held that the loss claimed by the appellant on account of fluctuation in the rate of FE as on the date of the balance-sheet was allowable as expenditure u/s 37(1).
Addition made on account of Marketing Service Fee (MSF) - assessee had claimed an expenditure under the head payment of dealer incentive, that it had claimed receipt as additional Marketing Service Fees(MSF)from its parent company, that the figures included amounts pertaining to period 01.01.2008 to 31.12.2008 - whether the transaction in question was at arm’s length? - HELD THAT:- In our opinion, it was a clear case of reimbursement by the AE of the expenditure incurred by the assessee. For the incentive scheme it should have charged full amount to its AE i.e.Rs.34.61 crores. If the agents would use the software of the AE it would result in higher income for the AE to the extent of 75% , whereas the assessee would get 25% of the booking. Thus, the direct and major beneficiary is AE. Because of proximity between them the AE and assessee could enter in to an agreement to suit their requirements. But, that would not take away the right of the TPO to determine the ALP of the transaction considering the market value of such a transaction. He had considered all the aspects of the transaction and had held that the assessee should have received Rs.2 crores more from the AE.
Here,an incentive scheme was introduced by the assessee and the AE makes part payment for the expenditure incurred by the assessee for the scheme. Advertisement expenditure cannot be compared with introduction of an incentive schemes that would increase the revenue of the AE. Here it is not a case of incidental benefit to AE-it is a case of major benefit to the AE and fringe benefit to the assessee.TP provisions were introduced to take care of such eventualities i.e. determine the market value of transactions had they been entered in by two independent entities. Therefore, in our opinion, the order of the DRP does not require any interference from our side. Main argument of the assessee stands dismissed.
Disallowing the expenditure while computing the taxable income of the assessee - As we would like to hold that the DRP was not justified in disallowing the same. There is no doubt about incurring of expenditure by the assessee, as stated earlier. The assessee had introduced an incentive scheme and had incurred the expenses - Whether the money received from AE was at arm’s length or not is a separate issue. But, incurring of expenditure was never in doubt. So, in our opinion, the alternate argument raised by the assessee has to allowed.
-
2018 (1) TMI 1721
Assessment u/s.144 - disallowance at 10% of the total receipts, relying on tax audit report and copies of some alleged accounts - CIT(A) has reported that during remand proceedings, the books of account were not called for verification and directed the AO to apply net profit at 3.5% of the total receipts and deleted the disallowance made by the AO - HELD THAT:- Before us, D.R. could not point out any specific mistake in the order of the CIT(A) - we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed. Ground No.1 of appeal is dismissed.
Addition u/s 68 - assessee has failed to substantiate the identity and creditworthiness of the creditors and genuineness of transaction, the AO disallowed the same - CIT(A) observed that the assessee has furnished compete postal address and PAN particulars of the creditors and address of the creditors to the Assessing Officers with whom the creditors are assessed to tax, thus deleted addition - HELD THAT:- We find that the assessee has furnished the details of the income tax returns alongwith PAN. It has also been informed that the lenders have given confirmation. Therefore, the assessee has complied with the conditions prescribed in the provisions of Sec. 68 of IT Act. Considering all especially when no adverse remarks is on record, we find no reason to reverse the findings of the ld CIT(A). Hence, we reject the ground of appeal taken by the revenue.
Appeal filed by the revenue is dismissed.
-
2018 (1) TMI 1720
Disallowance on account of expenses claimed in P&L account - assessee has failed to produce books of account but the assessee has claimed to have audited the books of account - CIT(A) relying on various judgements held that the accounts are audited to which, AO ought to have given due consideration but to meet the ends of justice he estimated the net profit @ 2.75% of gross contract receipts and sustained addition - HELD THAT:- Before us, ld D.R. could not point out any mistake in the order of the CIT(A). We find that the books of account of the assessee are audited and the assessee has furnished the tax audit report to which no adverse inference was drawn by the AO. We find that the CIT(A) has dealt on the issue and relied on various judicial pronouncement on this matter and estimated the net profit @ 2.75% of gross contract receipts and sustained addition - Hence, we uphold his order and dismiss the ground of appeal of the revenue.
Disallowance out of interest expenses made by the AO on account of interest on fund diverted for non-business purposes - assessee firm has advanced various amounts to different parties, therefore, the assessee was required to explain the mode of advance - CIT(A) deleted the disallowance by observing that the AO has not brought on record any evidence to demonstrate nexus of the assessee with five parties - HELD THAT:- IT(A) has relied on various judicial pronouncements including the decision of Hon’ble Supreme Court in the case of S.A. Builders, [2006 (12) TMI 82 - SUPREME COURT], wherein, it was held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest free loan to a sister concern as a measure of commercial expediency. The assessee has adopted the alternative of borrowing money from the market instead of liquidating its own assets.
We find that except relying on the order of the Assessing Officer, ld .D.R. could not point out any specific error in the order of the CIT(A) and could not controvert the findings of the CIT(A) by bringing any positive material on record that the advances were not made to five parties for normal course of business. In view of above, we confirm the order of the CIT(A) in deleting the addition.
Appeal filed by the revenue is dismissed.
-
2018 (1) TMI 1719
Provision of warranty expenses - Lesser amount of warranty claims registered on the assessee - provision of warranty expenses have been made by the assessee @0.75% in earlier years, however, in Assessment Year 2010-11 and 2011-12 it was reduced to 0.5% - HELD THAT:- In the present case as per annexure- A it seems that assessee has made ad hoc provision on the sales as a fixed percentage. The ld CIT (A) has also allowed the claim of Rs 3.5 lakhs without giving any cogent reason. Further looking at the chart titled as Annexure A by the Ld. CIT (A) which shows that the amount claimed by the assessee in the profit and loss account is a net result of opening balances of the provision for warranty added thereto amount credited in provision for warranty account during the year and reduced by the provision utilized during the year for meeting the expenditure out of the opening balances and actual warranty expenses incurred during the year over and above provision utilization.
Assessee is entitled to the deduction of warranty expenses provided for, if it is made based on history and some scientific methodology but not on ad hoc basis. Therefore, we set aside the whole issue back to the file of the Ld. assessing officer with a direction to the assessee to provide the methodology of making provision of warranty expenditure which should be based on some scientific and historical basis and then grant deduction of the appropriate amount to the assessee in terms of the decision of Rotorok Controls India Pvt. Ltd. [2009 (5) TMI 16 - SUPREME COURT] In the result ground No. 1 of the appeal of the assessee is allowed with above direction.
-
2018 (1) TMI 1716
TP Adjustment - determining of ALP of transaction of payment of trademark fees paid by the taxpayer to its AE - HELD THAT:- We are of the considered view that since there is a direct nexus between the revenue earned by the taxpayer and the payment made by the taxpayer on account of royalty, the transaction of payment of royalty cannot be analyzed in isolation. Furthermore, the doctrine of benefit test applied by the TPO cannot be invoked as it is prerogative of the businessman to see if any service is beneficial to the promotion of its business or not. So, consequently, the AO is directed to delete the adjustment made on account of ALP of international transaction of payment of trademark fees.
TP adjustment of Advertisement, Marketing and Sales Promotion (AMP) - HELD THAT:- As it is not in dispute that there is no change in the business model of the taxpayer so far as AMP expenses are concerned since AYs 2007-08, 2008-09 & 2009-10. The coordinate Bench of the Tribunal in taxpayer’s own case (supra) proceeded to hold that incurring of AMP expenses by the taxpayer is not an international transaction of brand building of Goodyear brand undertaken by the taxpayer with AE and as such, no adjustment can be made.
Netting off of export incentive from the cost of goods sold and set aside the issue of netting off of rebate/ discount from the cost of goods sold to the file of AO/TPO for verification of the claim in view of the decision rendered by the Tribunal for AY 2006-07 [2012 (12) TMI 1166 - ITAT DELHI] by providing an opportunity of being heard to the taxpayer.
Disallowance of provision made by the taxpayer for replacement loss - taxpayer has not incurred expenditure on account of replacement of goods in the subsequent years; that the same is not ascertained and is contingent in nature - HELD THAT:- The taxpayer has filed complete details on the basis of past trends and experience of actual guarantee claims on a scientific and actual basis, we are of the considered view that provision for warranty made by the taxpayer is allowable one.
Disallowance being 30% of the total expenditure - taxpayer has incurred the said advertisement and publicity expenditure for brand building for the entities owning the brand - HELD THAT:- We are of the considered view that when the Bench has already held that the taxpayer has incurred advertisement expenses wholly for the purpose of business and profession, the same are required to be allowed in full. So, in the given circumstances, ad hoc disallowance of advertisement expenses incurred by the taxpayer is not permissible under law. So, AO is directed to delete the same accordingly.
Disallowance on account of shortfall on interest of provident fund - failure of the taxpayer to file clarification or supporting documents - HELD THAT:- When the provident fund dues are not deposited by the employer in time, the interest payable thereon would become part of the provident fund dues and section 43B of the Act would be attracted. However, when the taxpayer has actually paid the interest, section 43B would not be attracted and the taxpayer is entitled to claim deduction thereof. So, we are of the considered view that AO/DRP have erred in making disallowance allegedly on account of shortfall of interest of provident fund. Consequently, the AO is directed to allow the same after verifying the facts as to the payment of dues paid along with interest by the taxpayer.
Addition being the misc. charges and service tax written off out of misc. expenditure - expenditure were not supported by vouchers and the taxpayer has failed to prove that the expenditure were incurred wholly and exclusively for the purpose of business; that the taxpayer has failed to deduct tax at source on certain expenditure and that some of the expenditure are in the nature of capital expenditure - HELD THAT:- Undisputedly, accounts of the taxpayer are audited by the statutory auditor, tax auditors as well as cost auditors which are substantiated with necessary documents. When the accounts of the taxpayer are duly audited by the statutory auditors and proves to be supported with documents discussed in preceding paras, the Income-tax authorities are not only required to accept auditor’s report but also to draw the proper inference from the same. Reliance in this regard is placed on the decision rendered in the case of Jay Engineering Ltd. [1978 (2) TMI 94 - DELHI HIGH COURT]
When the taxpayer raised specific objection before the ld. DRP qua disallowance of the aforesaid expenses, the ld. DRP has issued specific direction to the AO to allow these expenses if the same are found to be genuine on filing necessary evidence in support of its claim by the taxpayer. When the accounts are audited and duly supported with evidences discussed in the preceding paras, the AO is to allow the same after verifying its genuineness and to proceed accordingly. Decided in favour of the taxpayer.
Disallowance being the provision for obsolete stocks and spares - it was only a provision and not an actual write off and on the ground that the taxpayer has failed to provide the basis and working of the provision of the obsolete stores and spares - HELD THAT:- The taxpayer has brought on record the complete details of obsolete stocks and spares, available - DRP directed the AO to allow the provision of obsolete stocks and spares in case the same has been scientifically worked out. However, the AO proceeded to disallow the same on the ground that the taxpayer has failed to produce the details of the stocks and spares written off. When the taxpayer has brought on record details of amount and items of slow moving article and the Revenue has not disputed that this system is being followed bonafidely by the taxpayer, the AO was required to follow the rule of consistency. So, in view of the matter, AO is directed to delete the disallowance on account of stores and spares written off after verifying the documents available.
Ad hoc disallowance being 50% of the salary of administrative staff of the taxpayer - as attributed to capital work-in-progress and was required to be capitalized along with capital work-in-progress - HELD THAT:- As taxpayer carried out the expansion of the existing business for which services of Managing Director and Plant Supervisor who have also monitored and ensured day-to-day running of the factory and production along with capital work-in-progress for expansion of the same unit were availed of, which satisfies the test of unity of control, interlacing of funds, common management etc. and as such, their salary to the extent of 50% capitalized because the salary drawn by them is revenue expenditure. Consequently, we order to delete the disallowance made by the AO and determine this ground in favour of the taxpayer.
Disallowance on account of stores and spares written off - details and supporting evidences of the written off stores and spares have not been furnished and the same was not verifiable with reference to physical disposal - HELD THAT:- When we examine profit and loss account of the taxpayer, it shows that the taxpayer is a growing company having gross sale of Rs. 1167 crores as on March 31, 2010 as against Rs. 980 crores in the earlier years with gross profit of Rs. 734 crores as against Rs. 329 crores in the previous year and in the given circumstances, to write off useless stores is a business decision of the management which cannot be questioned particularly when the accounts of the taxpayer are audited one with supporting evidence. The taxpayer has brought on record the complete details of the written off stores and spares,. So, disallowance made by the AO on account of stores and spares written off is not sustainable, hence disallowance is ordered to be deleted - Decided in favour of assessee.
-
2018 (1) TMI 1712
Revenue receipts - income of cane society - Anshdan & Nirman Yojna Fund received for the sanctioned project and spent by the assessee - Tribunal come to the conclusion that grant in aid that was extended is for a specific purpose and expenditure, therefore, could not be termed as a revenue receipt so as to form part of the total income - HELD THAT:- As decided in UP. UPBHOKTA SAHKARI SANGH LIMITED. [2006 (8) TMI 148 - ALLAHABAD HIGH COURT] the amount in question was given by the State Government for specific purpose. It did not partake of the nature of income of the respondent-assessee. Even if it is to be treated as an income, it would not be liable to be taxed as it is stated that there was diversion of the income by way of overriding title on the said amount by way of a condition to distribute it as the salary to the employees of the bhandars.
The assessee in that case was also Cane Cooperative Society. In view of above, the questions of law are answered in favour of the assessee.
-
2018 (1) TMI 1711
TP Adjustment - additions in respect of MSS fee paid by the assessee to its AEs - AR submitted that the assessee has entered into Advance Pricing Agreement (APA) u/s. 92CC of the Act with CBDT - contentions of the assessee is that in the past as well in the subsequent assessment years payment of MSS fee by the assessee to its AE has been accepted by the TPO/DRP at arm’s length and only for the assessment year under appeal that the TPO has raised doubt over rendering of such services by AE to assessee - HELD THAT:- There is no impediment on department in applying the terms and conditions of APA while considering international transactions in the assessment year not covered by the APA, but subject to the condition that the nature of international transactions should be identical in both the situations.
In view of the fact that the assessee has entered into APA with the Board, for the subsequent assessment years, without commenting on the merits of the adjustment made, we deem it appropriate to remit this file back to Commissioner of Income Tax (Appeals) to re-adjudicate the issue, in accordance with the aforesaid directions. Accordingly, the appeal of the assessee is allowed for statistical purpose.
-
2018 (1) TMI 1709
Deduction u/s 80IB - exclusion only the net interest income after adjusting the interest expenditure from the profit eligible for deduction - HELD THAT:- It is observed that the case of Spring Merchandisers Pvt. Limited [2012 (8) TMI 1215 - ITAT AGRA] decided by the Agra Bench of this Tribunal and cited by the ld. D.R. is distinguishable on facts, inasmuch as, the interest income earned on FDRs in the said case was held to be chargeable to tax under the head “income from other sources” while interest expenditure constituted the business expenditure of the assessee.
In these facts and circumstances of the case, it was held by the Tribunal that netting of the income under one head of income against expenditure under the different head of income is not possible as per law. In the present case, interest income was offered by the assessee to tax as business income and even the interest expenditure was also claimed under the same head as business expenditure. As regards the case of Asian Cement Industries [2013 (1) TMI 178 - JAMMU AND KASHMIR HIGH COURT] cited by the ld. D.R., it is observed that even though the issue relating to the netting off interest was raised as question no. 3, the same apparently was not decided by the Hon’ble Jammu & Kashmir High Court specifically by giving any finding or conclusion.
On the other hand in the case of CIT –vs.- Warren Tea Limited [2015 (8) TMI 465 - CALCUTTA HIGH COURT] relied upon by the ld. CIT(Appeals) in his impugned order has upheld the principle of netting off of interest income against interest expenditure and although the said decision of the Hon’ble jurisdictional High Court was rendered in the context of computing business income of the term manufacturing unit as per Rule 8, we are of the view that the same analogy can justifiably be applied even in the present case to hold that only net interest income after adjusting the interest expenditure is liable to be excluded while computing the profit eligible for deduction under section 80IB.
Business of the assessee as eligible for deduction under section 80IB.
Disallowance under section 14A read with Rule 8D only on the investment in shares of Punjab National Bank
-
2018 (1) TMI 1708
Non appearance by Assessee - neither the assessee nor its Authorised Representative attended the hearing; not filed any Application for adjournment by the Assessee - whether assessee is not interested in prosecution of its Appeals? - HELD THAT:- No useful purpose would be served to serve the notice again and again to the assessee. In view of above, it is thus inferred that the assessee is not interested in prosecution of its Appeals.
Having regard to Rule 19(2) of ITAT Rules and following various decisions of Delhi Bench of the Tribunal including that of Multiplan India Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] and Estate of Late Tukojirao Holkar [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] we treat these appeals as unadmitted and dismiss the same. We would like to clarify that subsequently if the assessee explains the reasons for non appearance and if the Bench is so satisfied, the matter may be recalled for the purpose of adjudication of the Appeals.
Appeals of the assessee are dismissed in limine.
-
2018 (1) TMI 1707
Liability of tds - payments were made to Government - whether the external development charges are payable by the petitioner under the Haryana Development and Regulation of Urban Areas Act, 1975 to the Government of Haryana or to any other party? - If it is to the Government of Haryana, it is possible that the exemption under Section 196 of the Income Tax Act, 1961 would apply - HELD THAT:- The petitioner states that it entered into the agreements in Forms LC-IV and LC-IV A. Prima facie, the agreements are with the Governor of Haryana.
In these circumstances, the petitioner shall pursuant to the impugned notice dated 22.01.2018 appear before the officer. Till further orders, the order, if any, however, shall not be given effect to.
-
2018 (1) TMI 1706
Depreciation and society charges claimed on Housing accommodation - Disallowance made as these expenses are not incurred wholly and exclusively for the purpose of the Appellant's business - HELD THAT:- We find that the “E” Bench of the Tribunal in [2016 (2) TMI 1356 - ITAT MUMBAI] for the assessment year 2009-10 as held claim of the assessee was denied by the authorities below in the absence of the particulars of the person having not been provided by the assessee. In all fairness we are of the view that the matter needs to be looked into by the AO, in order to verify claims of the assessee. Following the principles of natural justice we may it fit deem to the restore this issue back to the file of the AO to verify the names of the employees to whom the premises have been allotted and in whose hands the perk has been offered. Reasonable opportunity of hearing shall be afforded to the assessee. The ground of appeal no. 4 raised by the assessee is thus allowed for statistical purposes
Adhoc disallowance being 5% of various expenses debited to the Profit & Loss A/c as not incurred wholly and exclusively for business purpose - HELD THAT:- While deciding the issue of ad–hoc disallowance of 5% out of various expenses, the Tribunal did not interfere in the matter and upheld the disallowance. Following the order of the Tribunal For assessment year 2008–09 we uphold the disallowance by dismissing the ground raised by the assessee.
-
2018 (1) TMI 1705
Income chargeable to tax in India - Income attributable on account of PE - Transaction between the assessee and its AE found at arms length price on the issue of agent for space selling - HELD THAT:- Once no income chargeable to tax in India is attributable to the assessee for the reason that the transaction between the assessee and its AE has been found at arms length price, no further income chargeable to tax in India can be said to be attributable on account of PE. Accordingly, this issue is squarely covered in favour of assessee by the decision of Hon’ble Supreme Court in the case of E-Funds IT Solution Inc. [ [2017 (10) TMI 1011 - SUPREME COURT] and alsocase of Taj TV Ltd. [2016 (12) TMI 1291 - ITAT MUMBAI] and ZEE TV USA INC[2017 (11) TMI 1642 - ITAT MUMBAI]. Respectfully following the same, we allow the cross objections of the assessee.
-
2018 (1) TMI 1704
Disallowance of loss on foreign exchange forward contract loss - Whether the said loss was a notional loss and hence cannot be allowed? - HELD THAT:- It is an agreed position between the parties that the issue raised herein stands concluded against the Revenue and in favour of the Assessee by the decisions of this Court in CIT v/s. M/s. D. Chetan & Co. [2016 (10) TMI 629 - BOMBAY HIGH COURT] and CIT v/s. M/s. Chaitya[2017 (7) TMI 1439 - BOMBAY HIGH COURT]
No substantial question of law.
........
|