2011 (2) TMI 1283 - AT - Income Tax

Expenditure incurred in relation to income not includible in total income, Business expenditure, Undisclosed investments, Transfer pricing - Computation of Arm s length price

Issues Involved:
1. Exemption of dividend income under section 10(33) of the Income-tax Act.
2. Disallowance of expenses under section 14A of the Income-tax Act.
3. Disallowance of deduction under section 80HHC on the sale proceeds of DEPB.
4. Levy of interest under section 234ABC.
5. Initiation of penalty proceedings under section 271(1)(c).
6. Addition of unexplained cash credits.
7. Disallowance of ISO certification expenses.
8. Disallowance of interest on interest-free advances.
9. Disallowance of interest expenses on security deposits.
10. Addition of difference in stock as per books and bank statements.
11. Disallowance under section 14A.
12. Addition due to difference in arm's length price on international transactions.
13. Exclusion of sales tax, excise duty, and turnover from total turnover for section 80HHC.
14. Exclusion of miscellaneous income from business profits for section 80HHC.

Detailed Analysis:

1. Exemption of Dividend Income:
The assessee's appeal regarding the exemption of dividend income under section 10(33) of the Income-tax Act was dismissed as not pressed due to the smallness of the amount involved.

2. Disallowance of Expenses under Section 14A:
Similarly, the assessee's appeal against the disallowance of expenses under section 14A was not pressed due to the small amount involved.

3. Disallowance of Deduction under Section 80HHC on DEPB:
The Tribunal restored the issue to the Assessing Officer to re-examine and re-adjudicate the claim as per law, following the decision in the assessee's own case and its associate concern.

4. Levy of Interest under Section 234ABC:
The appeal regarding the levy of interest under section 234ABC was treated as consequential and required no adjudication.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The appeal against the initiation of penalty proceedings under section 271(1)(c) was deemed premature and required no adjudication.

6. Addition of Unexplained Cash Credits:
The assessee admitted the addition of Rs. 15,00,000 as unexplained cash credits, and the Tribunal confirmed this addition.

7. Disallowance of ISO Certification Expenses:
The Tribunal upheld the CIT(A)'s decision to allow ISO certification expenses as revenue expenses, following the precedent set in the assessee's own case and other similar cases.

8. Disallowance of Interest on Interest-Free Advances:
The Tribunal found that the assessee had sufficient interest-free funds and upheld the CIT(A)'s decision to allow the interest expenses, following the decision in the assessee's own case.

9. Disallowance of Interest Expenses on Security Deposits:
The Tribunal upheld the CIT(A)'s decision to allow interest expenses on security deposits, noting that the assessee had sufficient interest-free funds and the deposits were for business purposes.

10. Addition of Difference in Stock as per Books and Bank Statements:
The Tribunal found that the Assessing Officer had failed to consider the stock of work in progress and upheld the CIT(A)'s decision to delete the addition, following the decision in the assessee's own case.

11. Disallowance under Section 14A:
The Tribunal upheld the CIT(A)'s decision to delete the disallowance under section 14A, noting that the Assessing Officer had failed to prove the nexus between the borrowed funds and the investments.

12. Addition due to Difference in Arm's Length Price on International Transactions:
The Tribunal upheld the CIT(A)'s decision to accept the Transactional Net Margin Method (TNMM) adopted by the assessee and rejected the Comparable Uncontrolled Price (CUP) method applied by the TPO, following the decision in the associate concern's case.

13. Exclusion of Sales Tax, Excise Duty, and Turnover from Total Turnover for Section 80HHC:
The Tribunal upheld the CIT(A)'s decision to exclude sales tax and excise duty from the total turnover, following the Supreme Court decision in CIT v. Lakshmi Machine Works. The issue of excluding the turnover of Dishman Business Centre and Adiman Travels was remanded to the Assessing Officer for verification.

14. Exclusion of Miscellaneous Income from Business Profits for Section 80HHC:
The Tribunal remanded the issue of excluding miscellaneous income from business profits to the Assessing Officer for verification, noting that the nature of the miscellaneous income was not clear.

Conclusion:
Both the revenue's appeals and the assessee's appeals were partly allowed for statistical purposes. The Tribunal's decisions were largely based on precedents set in the assessee's own case and related cases, emphasizing the importance of consistency in judicial decisions.

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