2013 (9) TMI 339 - ITAT MUMBAI

Disallowance u/s 14A - no exempt income was realized - Held that:- It is observed that the Special Bench of the Tribunal in the case of Cheminvest Ltd. v. ITO [2009 (8) TMI 126 - ITAT DELHI-B] has held that the disallowance u/s 14A is warranted even if there is no exempt income. - In the case of Godrej & Boyce Mfg. Co. VS. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] - had held that the disallowance u/s 14A was required to be made as per Rule 8D in relation to the assessment year 2008-09 and subsequent years - For the earlier years, the direction was to compute the disallowance on some 'reasonable basis' - The disallowance u/s 14A was warranted even if there was no exempt income.

Treatment of Rental Income – Sub-letting of property - Held that:- The assessee was neither the owner nor the deemed owner of the house property, applying the provisions of section 22, the annual value of such property could not have been charged to tax under the head "Income from house property" - As it was a case of simple subletting or property, not facilitating the carrying on of the assessee's business in any manner, the rental income so realized by the assessee in the present circumstances cannot be considered as 'Business income' - In such a situation, it was directed that the same should be included under the head 'Income from other sources' - The impugned order on the issue was set aside and the matter was restored to the file of the AO for doing the needful accordingly - The Assessing Officer will allow eligible deductions and allowances as per the relevant provisions under Chapter IV-F - While allowing such deductions, the Assessing Officer will also ensure that no deduction is doubly claimed/allowed, firstly, in computing of income under the head "Profits and gains of business or profession" and then under the head "Income from other sources".

Transfer pricing adjustments – ALP - Reimbursement of expenses - Held that:- A pure reimbursement of expenses by one AE to another AE is very much a 'transaction' as per section 92F(v) and consequently was equally an international transaction as per section 92B requiring consideration as per section 92 of the Act - Be that as it may, the learned Departmental Representative could not demonstrate the fact that such reimbursement of expenses was without any markup - As the so called comparable case of Datamatics Financial Services Limited was included by the TPO in the final list of comparables, in our considered opinion, the same was liable to be excluded as it involves related party transactions at much higher level, as against the filter adopted by the TPO himself, being companies with less than 25% related party transactions – Following Assistant Commissioner of Income-tax, Circle 6(3) Versus Maersk Global Service Center (India) (P.) Ltd. [2011 (11) TMI 465 - ITAT MUMBAI] - the assessment order on this comparable case was also set aside and the matter was directed to be decided afresh by the AO/TPO in consonance with our ibid observations.

The relevant factor in choosing comparable cases is to find out similarity in the nature of services rendered - In that view of the matter a case in which services are outsourced and then provided to its customers cannot be compared with the rendering of in-house services. The pertinent criteria for selection of comparable cases should be similarity in the nature of services and not the higher or lower margin of profit in one case vis-à-vis the other. As there is a vast difference in the cases where the services are outsourced or provided in-house, in our considered opinion, there cannot be any comparison between such types of cases. - matter remanded back - Decided in favor of assessee.