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Showing 81 to 100 of 1594 Records
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2022 (3) TMI 1514
Revision u/s 263 - PCIT power to review that order of the CIT, Appeals.case was converted from “limited scrutiny to complete scrutiny” - Merger of order of AO with CIT - LTCG computation - assessee liability on MAT - HELD THAT:- Case of the assessee was converted to a complete scrutiny from limited scrutiny. In the assessment proceeding the ld. AO touched upon the various aspects issue of capital gain and has made adjustments to the returned income. Against the said order of the assessing officer the assessee has preferred an appeal before the Commissioner of Income Tax, Appeals- 2, Jaipur and the appeal of the assessee was dismissed vide order dated 31.01.2018. Whereas the order in question was passed on 08.03.2019.
Therefore, the order of the Commissioner of Income Tax, Appeals-2 order mergers with the order of the Assessing Officer. The Bombay High Court has also held in the case of Saraf Bandhu Private Limited [1992 (1) TMI 9 - BOMBAY HIGH COURT] that once the original order goes in appeal and the appeal is decided, the original order ceases to exist since it merged in the appellate order and hence the original order cannot be revised under the revisional jurisdiction of the Commissioner u/s 263 of the Act.
Similar view has been taken by the Honourable Calcutta High Court in the case of Oil India Limited [1981 (9) TMI 64 - CALCUTTA HIGH COURT] where in the court held that the order of the ITO having been merged in the order of the AAC on the question of allowability of depreciation, the Commissioner has no jurisdiction to pass an order of revision u/s. 263 of the Act. Appeal of the assessee is allowed.
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2022 (3) TMI 1513
TP Adjustment - characterisation carried out by the Ld.TPO of the assessee’s business - HELD THAT:- As submitted that for A.Y. 2010-11, assessee was identically characterised in the TP study which has not been disturbed by the transfer pricing officer therein. Subsequently, assessee has been characterised in different ways in the subsequent assessment years which needs to be verified at the end of Ld.TPO.
In the interest of justice and to remain consistent in the approach of characterisation of assessee’s business module, we remand the transfer pricing issues to the Ld.AO/TPO for de novo verification. Assessee is directed to file complete details regarding FAR analysis before the authorities in order to substantiate its arguments regarding the characterisation in the TP study.
TPO is directed to analyse the details so filed by assessee and to consider the international transactions in accordance with various principles laid down by this Tribunal as well as various High Courts on this issue. Needless to say that proper opportunity of being heard is to be granted to assessee.
Interest on receivables - As the Ld. Counsel has considered for the rate on receivables to be applied at LIBOR + 2%, respectfully following the view taken by the Coordinate Bench in case of Swiss Re Global Business Solutions India Pvt. Ltd. [2022 (1) TMI 1275 - ITAT BANGALORE] we direct the Ld.AO/TPO to compute the ALP of the transaction accordingly.
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2022 (3) TMI 1512
TP adjustment - adjustment made towards cost contribution charges - HELD THAT:- We notice that the coordinate bench of the Tribunal in the case of Ingersoll Rand India Ltd [2016 (4) TMI 202 - ITAT BANGALORE] has considered the similar issue wherein Tribunal has held the appeal in favour of the assessee by deleting the DRP adjustment made towards cost contribution charges.
As considered the submission of the Ld AR with respect to the cost contribution charges which is paid for cost allocation done by the group and that a similar cost is getting allocated to Ingersoll Rand India Ltd using the same allocation methodology. The contention of the Ld AR that the decision of the coordinate bench is applicable to the assessee’s case has merits. Decided in favour of assessee.
Treating cost construction charges as a separate class of transaction and applying CUP as the most appropriate method as against TNMM - Hon’ble Tribunal while rendering the decision in the case of Ingersoll Rand India Ltd (supra) has also addressed the issue of adopting CUP as the most appropriate method for the cost contribution charges - In assessee’s case the TPO has treated the cost contribution charges as a separate class of transaction quoting that there is no restriction that the TP should be done only at enterprise level and also on the basis that it is an intra group transaction. From the details of services and the benefits received from these services as submitted by the Ld AR, the payment made towards these charges are integral part of the core business of the assessee.
Thus we are of the considered view that the TPO is not justified in applying CUP is the most appropriate method for computing the ALP treating the cost contribution charges as the most appropriate method.
Disallowance made on non-production of invoices by the assessee - HELD THAT:- The assessee has produced as additional evidence, in the form of invoice copies before the Tribunal. The additional evidence now produced go to the root of the issue of disallowance - Invoice copies submitted by the assessee and taken as additional evidences require thorough examination to check the genuineness of the expenses and the allowability thereon. Hence, we remand the matter back to the AO - Grounds raised allowed in favour of the assessee for statistical purposes.
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2022 (3) TMI 1511
TP Adjustment - Trading segment - non consideration of segmental margin as furnished by the Assessee - HELD THAT:- TPO’s observation that total expenses are to be taken into consideration for computing the operating margin is incorrect as costs pertaining to a totally unrelated segment cannot be taken into consideration while computing the margin of the trading segment - on the cost of Rs. 40.31 crores incurred while rendering the technical and marketing support services, the Assessee has charged a mark-up of 5%. More importantly, the TPO has taken the very same costs of Rs. 40.31 crores while arriving at the margin of the MSS segment after bifurcating the same into ITES segment and MSS segments. While the DRP directed the TPO to verify and reduce the costs if they were included by the TPO in the operating expenses while arriving at the margin of the trading segment, the TPO did not give effect to the same. If the segmental margin as furnished by the Assessee is taken into consideration, in terms of which the margin of the Assessee stands at 2.18%, the Assessee’s international transaction in this segment would be at arm’s length.
The transfer pricing adjustment in trading segment is set aside. The matter is restored to the files of A.O. / T.P.O. for fresh TP analysis taking into account the above mentioned mistake pointed out. TPO is directed to consider the assessee’s reply dated 25.01.2013 vide which it had furnished the segmental details reconciled with the financials. It is ordered accordingly.
Technical and marketing support services to the AEs in respect of their direct sales made by the AEs to customers in India - Bifurcation of this segment into ITES and MSS segment - TPO held that services under the technical and marketing services segment is essentially dissemination of information and the assessee is acting as communication channel between the customers and the AEs using IT medium - HELD THAT:- The functions performed by the assessee under this segment are prima facie identical for the concerned assessment year and for the assessment year 2013-2014. For assessment year 2013-2014, when the DRP had held that services rendered by the assessee are in the nature of marketing and support services and since no appeal preferred by the Revenue to the ITAT, the matter had attained finality. We are of the view that the entire TP issue raised under marketing support services segment needs to be examined afresh by the AO / TPO in the light of the DRP’s directions for assessment year 2013-2014. It is ordered accordingly.
Since assessee’s main issue relating technical and marketing support segments raised in grounds 8 and 8.1 are restored to the AO / TPO for fresh consideration, the other subsidiary grounds in this segment also needs to be restored to the TPO for fresh adjudication (As the same would be relevant if TPO rejects the assessee’s contentions in ground 8 and 8.1). Therefore, ground are restored to the files of TPO for fresh adjudication.
Warranty charges receivable determined by TPO - TPO was of the view that the Assessee had not taken note of warranty expenses while arriving at the margin of the technical and marketing support services and was of the view that no mark-up was received on expenses incurred in relation to support provided for the AE’s warranty obligation - HELD THAT:- The assessee had submitted that the amount of Rs.211.42 crore does not pertains to the sales made by the AEs in India and it pertains solely to the sales made by the assessee. The DRP in its directions held that the assessee was to show that expenses in relation to providing support services for AEs warranty obligation are either reduced from the cost or accounted for separately. The DRP in fact directed that since the services in relation to the warranty obligations are provided by third party service providers and the assessee is only coordinated for the same, no mark up is warranted.
In the light of the above directions of the DRP, which we are in consonance with the TPO, is directed to reexamine the issue raised in ground 10 afresh. It is ordered accordingly.
Disallowance of expenditure under section 40(a)(ia) - difference between the amount debited to P&L Account and the amount for which details of tax deducted at source was furnished - HELD THAT:- Reconciliation submitted needs to be verified by the TPO. The DRP in its order directed the A.O. to verify the details submitted by the assessee and wherever the tax has been deducted, the claim of the assessee was to be allowed. The DRP also directed the A.O. to verify as to whether the extent of Rs.10,38,82,844 has been subjected to double disallowance - The above directions of the DRP, we are in consonance with and the entire issue raised in ground needs to be reexamined by the Assessing Officer taking into consideration the additional evidences now filed before the Tribunal. It is ordered accordingly.
Difference between service income disclosed in the P&L Account and amount disclosed in the service tax returns brought to tax as undisclosed income - HELD THAT:- The detailed submission of the assessee and the reconciliations are not seen considered by the A.O. nor the DRP. Therefore, for fresh adjudication of the issue raised in ground the matter is restored to the A.O. The A.O. is directed to afford a reasonable opportunity of hearing before a decision is taken on the issue. It is ordered accordingly.
Disallowance of depreciation claimed on assets given on lease and taxation of future lease rentals - HELD THAT:- As per section 32 of the I.T.Act, for claiming depreciation, the assessee should be the owner of the asset and must have used the said asset for the purpose of its business. We find that the there is no distinction between an operating lease and finance lease for the purpose of the Act. The CBDT Circular No.2 dated 09.02.2001 provides that “AS 19 requiring capitalization of the asset by the lessees in a finance lease transaction will have no implication on the allowance of depreciation on assets under the Income-tax Act.
The right to inspect, right to return of equipment were the salient terms noticed by the Hon’ble Supreme Court in the case of ICDS [2013 (1) TMI 344 - SUPREME COURT] and it was held that the mere fact that the equipment could be transferred to the lessee at the end of the lease period for a nominal value would not take away the lessor’s right to claim depreciation - The test of ownership is discernible only on interpretation of various clauses in the lease agreement.
The entire lease rental income (subsisting during the lease period) does not accrue in the first year as the same ought to be taxed as and when they accrue over the lease period. When the A.O. has accepted that the interest component of lease would accrue as and when the same is due, the same principle would apply to the principle components as well. The stand of the assessee is supported by the judgment of the Hon’ble Punjab & Haryana High Court in the case of CIT v. Punjab Tractors Co-operative Multipurpose Society Ltd.[1997 (8) TMI 37 - PUNJAB AND HARYANA HIGH COURT].
AR, on directions from the Bench, had furnished primary entries for leasing. However, there is no clarity on the same. It is not clear how the A.O. has arrived at the figure of Rs.5,89,52,591 to be disallowed in the current year and how it pertains to the future lease rentals. Therefore, in the interest of justice and equity, we restore the issue of taxation of future lease rentals (also raised in the ground 13), to the files of the A.O.
Disallowance of provision for warranty and expenses incurred towards warranty obligation - HELD THAT:- Pursuant to the judgment of the Hon’ble High Court of Karnataka [2016 (5) TMI 114 - KARNATAKA HIGH COURT], dismissing the appeal filed by the Revenue - In view of the aforesaid reasoning and following the orders of the Tribunal in assessee’s own case for assessment years 2002-2003, 2003-2004 and 2005-2006, we direct the A.O. to allow provision for warranty as a deduction. It is ordered accordingly.
Disallowance for expenditure on warranty - It is stated by AR that the assessee had filed the details along with the submissions dated 08.10.2013 for a further sum of Rs.24.41 crore before the DRP. However, the same was not taken note by the DRP. Accordingly, the issue of actual expenditure on warranty for the disallowance of Rs.24.76 crore is restored to the files of the A.O. The assessee shall cooperate with the A.O. and shall furnish necessary evidence for having incurred the warranty expenditure failing which the A.O. shall make necessary additions.
The issue raised as regards the provision for warranty is allowed and the issue in respect of disallowance of warranty expenditure is allowed for statistical purposes.
Addition u/s 69C - unexplained expenditure incurred towards freight inwards, outwards or towards other logistic services obtained - HELD THAT:- A.O. is not justified in stating that the assessee has not produced necessary evidence in support of its objections. The assessee had given objections and necessary evidence before the AO and the DRP.Therefore, in view of the directions of the DRP, which we are in consonance with, we direct the A.O. to re-examine the issue raised in ground 15 afresh.
Addition of VAT refund offered to tax in other assessment years - HELD THAT:- It is the claim of the assessee that the entire amount has been offered to tax over a period of three years. The learned AR in his submission had stated that out of difference of Rs.43,77,219 brought to tax by the A.O., a sum of Rs.7,24,111 was offered to tax in the assessment year 2008-2009 and Rs.36,53,108 in the assessment year 2010-2011. It is the claim that the assessee had suffered losses to set off above income, hence, there is no loss to the Revenue on account of the same not been offered to tax during the relevant assessment year 2009-2010.
A.O. is directed to examine whether the assessee had offered to tax Rs.43,77,219 in the assessment year 20082009 and 2010-2011. If it is found that the assessee had offered to tax the said income, we direct the A.O. to grant corresponding deduction in the relevant assessment year (otherwise the addition of Rs.43,77,219 would lead to taxation of income twice). The assessee shall cooperate with the A.O. and shall provide the necessary details for the expeditious disposal of the issue.
Nature of expenses - Disallowance of capital expenditure on the erroneous basis that the same was claimed as a revenue expenditure - HELD THAT:- It is to be noted that in the final assessment order the A.O. observed that the ledger and other evidences collected during the course of assessment proceedings was thoroughly examined and specific inference was drawn that the assessee company had debited capital expenditure into profit and loss account. AO, pursuant to the DRP’s directions, has not verified again in view of the above said observations. The directions of the DRP we are in approval. In the interest of justice and equity, we direct the A.O. to verify once again the claim of the assessee.
Disallowance of expenditure disallowed u/s 40(a) in the previous years and reversed in the current assessment year - HELD THAT:- The additional evidence now submitted gives the details of the tax deducted at source along with sample invoice copies. For proper adjudication of the issue raised in grounds 18 and additional ground 24, the additional evidences are taken on record. Since the additional evidence had been admitted, necessarily, the same has to be examined by the A.O. A.O. after considering the submissions made before him, the DRP and the additional evidence filed before the Tribunal, shall take a decision in accordance with law after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly.
Short credit of TDS - HELD THAT:- We direct the A.O. to give correct credit for TDS in accordance with law.
Set-off of loss brought forward - HELD THAT:- We direct the A.O. to examine the issue whether the carry forward losses is to be set off or not. It is ordered accordingly.
Disallowing in payment for Microsoft Licenses - HELD THAT:- The assessee’s AE centrally procure licences from independent unrelated third party vendors on behalf of the Dell Group for their usage and for usage in the products sold. The cost incurred by the AE in this regard are allocated to each of the Dell group entities on the basis of usage of licences by them and are recovered from them at cost.The assessee had also paid Customs Duty on import of licences. The licences so procured by the assessee are used in the products sold by it. In absence of installing such licences, the product sold by the assessee cannot be utilized by the cutomers. Therefore, the usage of licences cannot be doubted. Allocation of cost is as per the usage and on the payment made, tax is deducted at source. In absence of any material, the TPO cannot determine an adjustment on the basis of mere conjecture and surmises. In any event, in an adhoc manner ALP cannot be determined at Nil. Moreover, the above transactions are undertaken by the assessee on a year to year basis and have not been questioned in any of the subsequent years by the TPO.
DRP’s action in upholding the objections of the assessee relating to mark up of warranty cost - HELD THAT:- It is to be noted that the DRP’s direction was not given effect to and therefore, ground is misconceived. However, this issue is connected with ground 10 raised in assessee’s appeal. Since we have directed the AO / TPO to reexamine ground 10 of the assessee’s appeal ground 4 raised in Revenue’s appeal is also restored to the files of the AO / TPO.
Disallowance of Forex loss - DRP deleted the addition - HELD THAT:- O completely ignored the detailed workings on forex loss. Having mentioned in the order that sample invoice copies were submitted, the AO erred in contending that no evidences were provided by the assessee. The DRP rightly appreciated that evidences demonstrating foreign exchange loss had been submitted and that the same cannot be said to be contingent liability.
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2022 (3) TMI 1510
Validity of order u/s 92CA(3) - period of limitation - Time limit for completion of assessments and reassessments - protection u/s. 292BB - HELD THAT:- Hon’ble Delhi Tribunal in case of Honda Trading Corporation Vs. DCIT [2015 (9) TMI 846 - ITAT DELHI] held that the time limit specified u/s 92CA(3A) is mandatory and not directory and therefore the Ld.TPO is bound by the time limit for passing of the order u/s 92CA (3) of the Act.
Thus we hold that the order of the Ld.TPO passed on 30.01.2015 is barred by limitation and liable to be quashed.
Therefore, consequently, the proposed addition on account of transfer pricing adjustment amounting to does not survive.
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2022 (3) TMI 1509
Income deemed to accrue or arise in India - royalty receipt - subscription fee received by the assessee from Indian customer for providing access to the database - India-Malaysia DTAA - PE in India - assessee submitted that subscription fees received by the assessee are in the nature of business income - HELD THAT:- Payments towards all kind of information would not be in the nature of Royalty. To determine the exact nature of the payment, the type of information passed on, needs to be verified.
A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. In our understanding Article 12(3) covers only those payments that allow a payer to use/acquire a right to use copyright in literary, artistic or scientific work are covered within the definition of 'Royalty'. Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt.Ltd.[2021 (3) TMI 138 - SUPREME COURT] has analysed the provisions of Income tax Act vis-a-vis provisions of DTAA.
AR produced the Master Service Agreement dated 01/04/2013 between EduNxt Global SDN BHD and Aditya Birla Management Corporation Ltd., we observe that this agreement has not been filed before the authorities below. The DRP categorically observed that except for the invoice, assessee did not produce any other relevant information. In the interest of justice it is appropriate to remit the issue in dispute to the file of the Ld.AO for deciding the comparability of these transactions in the light of the judgment of the Hon’ble Supreme Court in Engineering Analysis Centre of Excellence Private Limited (supra) and the decisions relied by the Ld.AR reproduced herein above. Accordingly, the issue in dispute is remitted to the Ld.AO for fresh decision with the above directions. Appeal of the assessee is partly allowed for statistical purposes.
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2022 (3) TMI 1508
Short Term Capital Gains u/s. 50 - assessee submitted before the AO that the sold property was part of block of assets as defined u/s 2(11) of the Act and that the assessee was claiming depreciation on the said building until the previous financial year - CIT(A) upheld the decision of the AO stating that the asset sold is no longer part of the block of assets, as no depreciation was claimed on the asset and hence the gain arising out of the sale of asset has to be treated as short term capital gains - HELD THAT:- From the definition it is clear that all the assets falling under the same class and for which the same rate of depreciation is prescribed, constitute one block of asset. In assessee’s case, the let out building against which no depreciation is claimed i.e. the building with NIL depreciation is grouped under the block. The income from letting out of these buildings is already assessed as income from house property against which statutory deduction u/s 24 is already allowed. Hence in our considered view buildings that are let out cannot be part of the block of assets as defined u/s.2(11) of the Act.
The asset other than the asset sold in the block is the ‘Factory Building’. The rate of depreciation for factory building is same as that of the other building used for the purpose of the business and the factory building belongs to the same class of asset. Therefore it is correct to group the factory building as forming part of the block of assets along with other building used for the purpose of business. In the fixed asset schedule submitted, we notice that that the value of the factory building and that the value of the block is not exhausted after reducing the sale value of the building Dalamal Towers. The contention of the AO and CIT(A) that there is no depreciation asset appearing in the block is not correct basis the fact that the factory building belonging to the same block is a depreciable assets in the block.
The fact that no depreciation is claimed during the year under consideration for the assets in the block viz., Dalamal Towers & Factory Building, does not remove the assets from the block. An asset gets removed from the block when the asset was sold or discarded or demolished or destroyed during the relevant previous year as provided in sections 43(6)(c)(i)(b) and 32(1)(iii) of the Act.
The value of the block of asset under the class of assets ‘Building’ is more than the sale value of building Dalamal Towers, we hold that the assessee is right in reducing the sale value of the building from the value of the block of assets u/s.32 of the Act and that no short term capital gain arises on sale u/s.50 of the Act. Hence we allow the appeal in favour of the assessee.
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2022 (3) TMI 1507
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee, a captive service provider, rendering Software Development Services to its parent company need to be deselected.
Admittedly the turnover of Infosys Ltd., R S Software India Ltd., and Sasken Communication Technologies Ltd are more than 200 crores. Considering the assessee being a captive service provider, aforesaid three companies should be excluded from the list of comparable companies.
Working Capital Adjustment - It is settled principle that working capital adjustment cannot be restricted or can be negative. The assessee placed reliance on the decision in the case of Huawei Technologies India [2018 (10) TMI 1796 - ITAT BANGALORE] wherein coordinate bench of this Tribunal held that working capital should be allowed as per actuals. Respectfully following the view taken by coordinate bench of this Tribunal, we direct the Ld.AO/TPO to grant the WCA on actuals
Depreciation on Software cannot be disallowed due to non-deduction of TDS - HELD THAT:- We note that the Ld.CIT(A) given direction to the Ld.AO to verify the TDS payments and allow the payments, which has not been implemented, till date. We direct the Ld.AO to follow the directions of the CIT(A) in light of the principles laid down by decisions referred to herein above and to consider the claim of assessee in accordance with law.
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2022 (3) TMI 1506
Disallowance u/s 40(a)(ia) - proceedings initiated u/s 201(1) / 201(1A) - AO disallowed the deduction claimed stating that the assessee did not furnish a one-to-one correlation of the provisions created with the invoices subsequently raised and TDS is remitted - HELD THAT:- The amount which was disallowed earlier by the assessee is claimed as a deduction u/s.40(a)(ia) in the year under consideration based on the fact that the assessee has deducted and remitted the TDS on the amount in year under consideration. There is no other condition attached while claiming the expenditure in the year of TDS remittance under the law. Hence the reasons given by the AO for disallowance that one-to-one matching with the provision made for the previous not done and that the invoices pertain to previous year are not tenable. The fact as submitted by the AR that the said details are duly verified and taken into account for computation of interest u/s.201(1A) in the previous assessment 2010-11 also merits consideration. Considering the provisions of the Act and the facts we are of the considered view that the assessee has rightly claimed the deduction u/s 40(a)(ia).
Relief on account of deferred revenue expenditure - adjustment of TDS credit and negative movement in the deferred revenue - HELD THAT:- We notice that the same issue is pending before the coordinate bench of the Tribunal for adjudication against the order of the CIT(A) for various assessment years from 2009-10 in assessee’s own case. The issue can be decided for the year under consideration only based on the outcome of the other appeals pending for the earlier years as the decision will have a cascading effect on the issue for the year under consideration. At this point in time we can only issue a direction to the AO to follow the decision that would be adjudicated by the coordinate bench of the Tribunal for assessment year 2009-10 & 2010-11 on this issue. The AO is directed to grant consequential relief in accordance with the decision of the coordinate bench of the Tribunal in terms of adjustment of TDS credit and negative movement in the deferred revenue. The AO is directed accordingly and that a reasonable opportunity of being heard to be given to the assessee before the final decision.
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2022 (3) TMI 1505
Seeking export of 3006.110 M.T. of broken Rice - prohibited goods or not - applicability of notification dated 8.9.2022 to the broken rice procured by petitioner No.1 prior to the date of the notification - applicability of principle of promissory estoppel and doctrine of legitimaye expectation - HELD THAT:- The challenge to the policy of prohibition brought into force by notification dated 08.09.2022 would stand weak before the Court. It is trite principle that the Court will not enter into the wisdom of the policy in the economic area as may be envisaged and applied by the Governmental authorities. The field of the policy makers is different than the functions of the courts. The courts, unless the policy is manifestly arbitrary or mala fide, could not interfere. This dictum is applicable stricter when it comes to the framing and/or amending the policies in the economic area, to scuttle the scope of judicial review even further.
For whatever considerations the change in the export policy of broken rice has been introduced banning the export, the area is not one to be probed by the Court. Although the petitioner has sought to contend that the ground of food security in the country put forward by the respondents to justify the change in the policy, to be factually incorrect, the Court would not substitute its own consideration against that of the policy makers. There may be host of considerations which may have actuated the respondents to prohibit the export of the broken rice - The principle of promissory estoppel also cannot be applied when there has been a change in policy to contend that the changed policy should continue. The policy, the policy considerations and the change and alteration in the policy is the domain of Executive.
The doctrine of legitimate expectation has a play in the facts and circumstances obtained. The measure of change of policy prohibiting the export of broken rice was a sudden measure which unsettled the regular affair of the exporters who were engaged in the exporting of the commodity in question. The prohibitory policy, therefore, was required to be preceded with certain regulatory or adjustive measures at the end of the authority in order to create minimal adverse effect on the class of exporters - When the notification dated 12.10.2022 was issued and quota of broken rice was offered for export to the exporters, notwithstanding the policy of prohibition, the petitioner was entitled to seek such benefit. The petitioner was within its right to assert its claim. He could be said to be the first amongst the equals within the class of the exporters who were to be permitted to utilise the said export quota as the petitioner had altered its position to put itself to detriment by procuring the rice under contract to export.
The respondent authorities are directed to treat the petitioner at par with those other exporters whose cases are to be considered on pro-rata basis for the purpose of permitting the export of broken rice HS CODE 1006 40 00 within the quota of 3,97,267 MT stipulated under Notification dated 12.10.2022 - Petition disposed off.
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2022 (3) TMI 1504
TP Adjustment - assessee has given loan to its A.E. and hence, the TPO has adopted prime lending rate prescribed by the State Bank of India - HELD THAT:- We notice that the TPO has adopted external CUP for making this transfer pricing adjustment. Before us, the assessee could not furnish any material to controvert the reasoning given by the TPO.
AO has computed interest on the closing balance - The ledger account of Eurocor - We notice that there was opening debit balance and during the year under consideration, the assessee has advanced further amounts on various dates. Hence, in our view, the TPO should have computed interest on time basis. Accordingly he was not justified in computing interest for the entire year on the closing balance. Accordingly, while upholding the view of TPO that transfer pricing adjustment is required to be made on the loan given to the AE, we restore this issue to the file of AO/TPO for re-computing interest on time basis. Appeal filed by the assessee is treated as partly allowed for statistical purposes.
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2022 (3) TMI 1503
TP adjustment - interest imputed on outstanding receivables - TPO computed interest on outstanding receivables at the rate equal to 5.87 % PLR (6 months LIBOR +400 basis points) - DRP directed the Ld.AO to apply short term deposit rate of SBI prevailing for financial year relevant to assessment year under consideration that lead to enhancement - HELD THAT:- We note that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. As argued that insertion of Explanation with retrospective effect covers Assessment Year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP.
This Bench referred to decision of Special Bench of this Tribunal in case Of Instrumentation Corpn. Ltd. [2016 (7) TMI 760 - ITAT KOLKATA] held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92B of the Act. We also perused decision relied upon by the Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by the Ld.AR.
Alternatively, it has been argued that working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to international transaction would amount to double taxation.
We deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment ORANGE BUSINESS SERVICES INDIA SOLUTIONS PVT. LTD. VERSUS DCIT, CIRCLE-3, GURGAON [2018 (2) TMI 1151 - ITAT DELHI] Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Appeal filed by the assessee stands allowed for statistical purposes.
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2022 (3) TMI 1502
Blocking electronic credit ledger of the petitioner - Challenge to blocking order on the ground that the period of validity of such blocking is one year only as per sub-rule (3) of rule 86A of the Central Goods and Services Tax Rules, 2017 - It is submitted on behalf of the petitioner that one year has already expired from the date of blocking of the electronic credit ledger - HELD THAT:- This writ petition is disposed of by declaring that the impugned order of blocking of the electronic credit ledger of the petitioner has lost its force and cannot be continued now as per sub-rule (3) of rule 86A of the 2017 Rules and the legal consequence will follow automatically.
Application disposed off.
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2022 (3) TMI 1501
Assessment passed in the name of a non-existent entity - notice in the name of company amalgamated - HELD THAT:- In spite of intimation to the TPO and the Assessing Officer regarding the amalgamation of ‘Honda Motor India Pvt. Ltd.’ to ‘Honda Cars India Ltd.’, not only the order under section 92CA(3) of the Act was passed in the name of the amalgamated company, but even the final assessment order was also passed in the name of erstwhile company, viz., ‘Honda Motor India Pvt. Ltd.’ and mentioning its PAN. Thus, there cannot be any manner of doubt that the impugned order has been passed in the name of an entity which after amalgamation was not in existence.
Thus it has to be held that the final assessment order, having been passed in the name of a nonexistent entity, is invalid in the eyes of law. As regards the contention of learned Departmental Representative that the assessee has not come with clean hands, having not raised this issue in its objection before learned DRP, we do not find any merit in such submission. Appeal of assessee allowed.
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2022 (3) TMI 1500
Unexplained deposits in bank account - mismatch of denominations - amount was withdrawn with the denomination of notes 500 X 3000 WHILE when deposited the denominations were 500 X 1600 and 1000 X 700 - HELD THAT:- The amount as not lying with the assessee for the unreasonable period after withdrawal and also there was a reason out of legal compulsion to deposit the demonetizes currency notes in the bank. Had there been no such legal requirement, assessee may not have deposited the amount back and may have used it for the purpose for which it was allowed to be withdrawn by its bankers in KCC Limit account.
Since before demonetization, there was no reason to deposit back the currency notes so there could have been no prudent reasoning for the assessee to have kept the same currency notes of the denominations as received from bank. Ld. F.A.A. has appreciated the facts and circumstances while giving a finding and appreciable reasons for change in the denominations of the holding but restricted relief to Rs. 3,50,000/-.
The Bench is of the considered view that when the onus casted on the assessee is considered to be plausible then it has to be accepted on the whole unless there are legal and factual grounds to disbelieve the explanation in part. The aforesaid discussion of the facts and circumstances, leaves no doubt in the mind of the Bench that assessee had successfully discharged its onus of explaining that the deposit of Rs. 15,00,000/- in the bank account were his own funds, as withdrawn form the same bank account and no considerable reason has been cited by the Ld. F.A.A. to have partly allowed the appeal, while reducing the addition from Rs. 7,00,000/to Rs. 3,50,000/-, and same needs interference in this appeal - AO is directed to delete the complete addition of Rs. 7,00,000/- made u/s 69A - Appeal of the assessee stands allowed.
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2022 (3) TMI 1499
TP adjustment in Specified Domestic Transactions - Upward adjustment u/s 92 BA (i) - TPO based on the comparative chart filed by the assessee found that there were instances wherein the difference between the actual price of the assessee and the comparable cases is more than the acceptable range of +(-) 3% of the ALP - HELD THAT:- the impugned transaction has been removed from the scope of Specified Domestic Transactions by way of an amendment by the Finance Act, 2017 with effective from 01/03/2017. Accordingly, once the provision of section 92BA(i) of the Act, has been deleted from the statute, then it has to be construed as if such provision has never existed under the provision of law. Accordingly, no upward adjustment can be made.
We note that the identical issue has been decided by this Tribunal in favor of the assessee in the case of Ammann India (P) Ltd. [2022 (1) TMI 411 - ITAT AHMEDABAD] no justification in passing the impugned order by the Transfer Pricing Officer/Assessing officer in making upward adjustment invoking section 92- BA (i) of the Act in the present facts and circumstances of the case particularly when the said section stood omitted with effect from 1-03-2017 from the statute itself. Appeal of assessee allowed.
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2022 (3) TMI 1498
Convening a meeting of seven debenture holders to consider the Resolution Plan approved by the ICA lenders - meeting put to vote such resolution as may be necessary in terms of the Debenture Trust Deed - HELD THAT:- Having considered the submissions, it would be appropriate following the law laid down by this Court in Rajkumar Nagpal [2021 (10) TMI 1311 - BOMBAY HIGH COURT] to grant ad-interim relief in terms of prayer clause (c). Accordingly, Defendant No.2 is directed to call meeting of the seven Debenture Holders under the three Debenture Trust Deeds within two weeks of this order. The calling, conducting and voting at such meetings shall be governed by the terms of the respective Debenture Trust Deeds. At such meetings, the second Defendant will place for consideration and approval of the beneficial owners or debenture holders the settlement offer / compromise / arrangement / Resolution Plan approved by ICA lenders on 19th June, 2021 and put to vote such Resolution Plan.
It is made clear if there is any further or later or supplementary trust deed, then the provisions of that supplementary trust deed will also be taken in to account.
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2022 (3) TMI 1497
Revision u/s 263 - development fees from its students had been directly carried to the balance sheet under the nomenclature “Development Fund’ instead of being routed through the income and expenditure account and this was then treated as part of the Revenue and therefore the taxable income u/s 11 (1) - HELD THAT:- CIT (E) simply stated that the impugned assessment order was erroneous and prejudicial in the interest of Revenue.
ITAT has in the impugned order discussed in detail the explanation offered by the Assessee regarding application of funds. Inter alia, it was noticed that CIT (E) had taken the total revenue earned, granted 15% accumulation, without considering the capital expenditure to the tune of Rs.258 crores. As noted by the ITAT, if the said bill taken into account the taxable income would be a loss. It would have been observed the 15% accumulation granted to the Assessee. Further, even after treating the development fees of Rs.111 crores as revenue income, the net figure would still be a loss.
As noted by the ITAT, if only the CIT (E) had undertaken an inquiry, he would have come to the above conclusion and there would have been no need to act to the taxable income of the Assessee. The Court is satisfied that no error has been committed by the ITAT in concluding that the order of the CIT (E) is unsustainable in law. No substantial question of law arises.
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2022 (3) TMI 1496
Maintainability of appeal - HELD THAT:- We are not persuaded to consider interference in this matter, particularly when it is noticed that the employees are a part of the Stakeholders’ Committee, in terms of Regulation 31A of the Insolvency and Bankruptcy Code of India (Liquidation Process) Regulations, 2016.
Appeal dismissed.
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2022 (3) TMI 1495
TP Adjustment - referring the transaction to the TPO for determining the ALP - mandatory conditions have not being satisfied or complied with by the AO while making a reference to the TPO - HELD THAT:- Once an assessee enters into an international transaction, the AO has to make a reference to the TPO and the fact that he made a reference in the present case can only go to show that the AO is satisfied that it was necessary or expedient to make a reference to the TPO for determination of ALP of international transaction entered into by an assessee. The order passed in section 92CA of the Act clearly spells out that prior approval of the CIT, Karnataka Central Bengaluru, dated 10.09.2008 has been obtained by the AO before making a reference under section 92CA of the Act to the TPO. In these circumstances, we are of the view that there is no merit in ground No.3.1 raised by the assessee. Consequently, grounds 3.1 is held to be without any merit and is dismissed.
Section 92CA(1) requires an Assessing officer to refer an International Transaction for determination to the TPO if he considers it "necessary or expedient" to refer the mater to the TPO - The exercise of finding out whether any income arises and/or is affected or potentially arises and/or is affected by the International Transaction would certainly be a factor to determine whether or not it is necessary or expedient to refer the matter to the TPO. Since no objection was raised by the assessee to the applicability of Chapter X then the prima facie view of the Assessing officer would be sufficient before referring the transaction to the TPO for determining the ALP. Consequently, there is no merit in Grd.No.3.2 raised by the Assessee.
Validity of search action - We do not find any merit in ground Nos.10 as without calling for the reason to believe recorded u/s.132 of the Act before issuing an authorization to search a person and property, one cannot come to a conclusion whether the condition precedent for issue of warrant of authorization to search u/s.132 of the Act are satisfied or not.
No attempt by appellant company to shift profits outside of India - Special Bench of the ITAT, Bengaluru, in the case of Azetec Softech Technology [2007 (7) TMI 50 - ITAT BANGALORE] has laid down proposition that there is no requirement of establishing that there has been an attempt to shift profits out of India before making a reference to the TPO and that before making a reference to the TPO, there is no requirement of affording assessee opportunity of being heard.
Powers of AO to examine the issue without regard to ALP in the proceedings under section 153A - Ground raised by the assessee are without any merit because the assessee did not file a transfer pricing analysis alongwith the returns filed under section 139(1) of the Act and therefore the AO was well within his powers to examine the issue without regard to ALP in the proceedings under section 153A of the Act. These grounds are accordingly dismissed.
Determination of ALP in respect of the international transaction of rendering software development services by the assessee to its AE - Comparable selection - HELD THAT:- Four comparable companies whose turnover is above Rs.100 crores should be excluded from the list of comparable companies.
Remaining six companies be excluded on the ground that these companies are not functionally comparable.
Computation of deduction u/s10A - AO reduced delivery charges from the export turnover without excluding the same from the total turnover - HELD THAT:- This issue is no longer res integra and has been settled by the Hon’ble Karnataka High Court in the case of Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein it was held that whatever is excluded from the Export turnover should also be excluded from the total turnover. Moreover, the order of the Hon’ble Karnataka High Court has been upheld by the Hon’ble Supreme Court in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT]
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