9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (2) TMI 924 - AT - Income TaxExcusion of Exchange Rate Fluctuation from the total turnover for the purpose of the deduction u/s. 80HHC. Transfer pricing adjustment - Held that - The assessee has paid commission to its AE and we find that the basis for the payment of commission has also been given to justify it to be at arm s length. The TPO/A.O has nowhere denied that the weighted average rate of commission paid by the assessee is 7.84% as against 11% paid to unrelated party. We also find that in his appellate order, the First Appellate Authority has observed the rate of commission ranging from 0.38% to 33.33%, the assessee s rate is at 3%. We also find that none of the revenue authorities below have brought any comparable case on record to show that the payment of commission by the assessee is not at arm s length. On the contrary, we find that the A.O. has disallowed merely because he was of the opinion that no services have been rendered. This finding is beyond the provisions of Chapter 10 of the Act in as much as under chapter 10, the TPO/A.O. has to see whether the international transaction entered by the assessee is at arm s length or not. There are other provisions in the act wherein the A.O. can test the genuineness of the transaction but in any case not under Chapter 10 of the Act. As mentioned elsewhere, no comparable case have been brought on record which could justify that the payment of 3% 1% overriding commission is not at arm s length, we set aside the findings of the ld. CIT(A) and direct the A.O. to delete the entire transfer pricing adjustment made by it Disallowance of investment written off in MJPL for computing profits u/s. 115JB - Held that - . There is no doubt that the assessee has written off the investments made in MJPL. Thus, it can be said with certainty that no provision has been made and it is a case of write off only. Therefore in our considered opinion, the amended provisions do not apply on the facts of the case. Accordingly, we set aside the findings of the ld. CIT(A) and direct the A.O to delete while computing the book profit u/s. 115JB of the Act. Inter unit transactions cannot be considered as sales to form part of the total turnover for the computation of deduction u/s. 80HHC of the Act Disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries taking recourse to the provisions of section 40(b) - Held that - In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee and not for the purposes of earning profit. As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Thus, it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee s business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition
Issues Involved:
1. Disallowance of Unabsorbed Depreciation for computing deduction u/s. 80HHC. 2. Inclusion of Exchange Rate Fluctuation in total turnover for deduction u/s. 80HHC. 3. Reduction of unrealized export proceeds from export turnover for deduction u/s. 80HHC. 4. Inclusion of Sale of scrap in total turnover for deduction u/s. 80HHC. 5. Reduction of deduction u/s. 80HHC as per Section 80IA(9). 6. Allocation of R&D expenses for determining profits eligible for deduction u/s. 80IB and Section 10B. 7. Allocation of selling and distribution expenses for determining profits for deduction u/s. 80IB and Section 10B. 8. Disallowance of expenses incurred for increase in share capital. 9. Disallowance of Public issue expenses and Amalgamation expenses u/s. 35D and 35DD. 10. Disallowance of Trade Mark Registration and Overseas Product Registration Charges. 11. Transfer pricing adjustment for overriding commission paid to Associated Enterprise. 12. Computation of deduction u/s. 80HHC on the basis of book profit for computing MAT. 13. Non-allowance of deduction of book losses u/s. 115JB(2)(iii). 14. Addition of Deferred Tax Provision u/s. 115JB. 15. Disallowance of investment written off for computing profits u/s. 115JB. 16. Non-adjudication of certain grievances by the CIT(A). 17. Inclusion of income from scrap sale, miscellaneous income, and interest on loans to employees from profits computed u/s. 80IB. 18. Grant of deduction u/s. 80HHC after excluding excise duty and sales tax from turnover. 19. Grant of deduction u/s. 80HHC without including insurance claim in total turnover. 20. Consideration of net lease rent instead of gross lease rent for computing deduction u/s. 80HHC. 21. Computation of deduction u/s. 80HHC by netting of interest income. 22. Reallocation of corporate office expenses for computing profits eligible for deduction u/s. 80IB. 23. Exemption u/s. 10B for Panoli and Ahmednagar units. 24. Adjustment of brought forward depreciation of Phlox Pharmaceuticals u/s. 72 for computing profits of the business for the purpose of section 80HHC. 25. Disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries. 26. Addition made on account of sales to Sun Pharmaceutical Industries. 27. Exclusion of income of Ahmednagar and Panoli units for computing book profit u/s. 115JB. Detailed Analysis: 1. Disallowance of Unabsorbed Depreciation for computing deduction u/s. 80HHC: - The assessee conceded that the issue should go against them. Consequently, the ground was dismissed. 2. Inclusion of Exchange Rate Fluctuation in total turnover for deduction u/s. 80HHC: - The Tribunal had previously decided this issue in favor of the assessee. Following the Tribunal's earlier decision, the AO was directed to exclude Exchange Rate Fluctuation from total turnover. 3. Reduction of unrealized export proceeds from export turnover for deduction u/s. 80HHC: - The Tribunal had previously set aside this issue to the AO for fresh consideration. The same direction was given for the current year. 4. Inclusion of Sale of scrap in total turnover for deduction u/s. 80HHC: - The Tribunal had previously directed the AO to exclude the sale amount of scrap from total turnover. The same direction was followed. 5. Reduction of deduction u/s. 80HHC as per Section 80IA(9): - The CIT(A) had confirmed the AO's action based on his own order for A.Y. 2000-01. The Tribunal upheld this decision, citing the jurisdictional High Court's ruling in Atul Intermediates. 6. Allocation of R&D expenses for determining profits eligible for deduction u/s. 80IB and Section 10B: - The Tribunal found that the allocation should be restricted only to raw material expenses, not generalized. The AO was directed accordingly. 7. Allocation of selling and distribution expenses for determining profits for deduction u/s. 80IB and Section 10B: - The Tribunal found no error in the assessee's method of allocating expenses based on turnover. The AO was directed to accept the assessee's methodology. 8. Disallowance of expenses incurred for increase in share capital: - The CIT(A) had followed the findings for A.Y. 2000-01, which had been quashed by the Tribunal. The Tribunal directed the AO to delete the addition. 9. Disallowance of Public issue expenses and Amalgamation expenses u/s. 35D and 35DD: - The CIT(A) had confirmed the AO's action based on the order for A.Y. 2000-01. The Tribunal directed the AO to delete the disallowance. 10. Disallowance of Trade Mark Registration and Overseas Product Registration Charges: - The CIT(A) followed the findings for A.Y. 2000-01. The Tribunal directed the AO to delete the disallowance, following the Mumbai Bench's decision in USV Ltd. 11. Transfer pricing adjustment for overriding commission paid to Associated Enterprise: - The Tribunal found that the TPO's findings were beyond the provisions of Chapter 10 of the Act. The AO was directed to delete the entire transfer pricing adjustment. 12. Computation of deduction u/s. 80HHC on the basis of book profit for computing MAT: - The Tribunal referred the issue back to the AO to be decided as per law and past Tribunal directions. 13. Non-allowance of deduction of book losses u/s. 115JB(2)(iii): - The assessee conceded that the issue should be decided against them. Consequently, the ground was dismissed. 14. Addition of Deferred Tax Provision u/s. 115JB: - Due to retrospective amendment, the issue was decided against the assessee. 15. Disallowance of investment written off for computing profits u/s. 115JB: - The Tribunal found that the amended provisions did not apply as it was a write-off, not a provision. The AO was directed to delete the addition. 16. Non-adjudication of certain grievances by the CIT(A): - The Tribunal restored the issues to the AO, directing them to decide afresh after giving a reasonable opportunity to the assessee. 17. Inclusion of income from scrap sale, miscellaneous income, and interest on loans to employees from profits computed u/s. 80IB: - The Tribunal directed the AO to decide the issue in line with the Tribunal's earlier directions and the Supreme Court's decision in Liberty India. 18. Grant of deduction u/s. 80HHC after excluding excise duty and sales tax from turnover: - The Tribunal confirmed the CIT(A)'s decision, following the Supreme Court's ruling in Laxmi Machine Works. 19. Grant of deduction u/s. 80HHC without including insurance claim in total turnover: - The Tribunal directed the AO to decide the issue following the Tribunal's earlier directions. 20. Consideration of net lease rent instead of gross lease rent for computing deduction u/s. 80HHC: - The Tribunal confirmed the CIT(A)'s findings, following the Tribunal's earlier decision. 21. Computation of deduction u/s. 80HHC by netting of interest income: - The Tribunal confirmed the CIT(A)'s findings, following the Tribunal's earlier decision. 22. Reallocation of corporate office expenses for computing profits eligible for deduction u/s. 80IB: - The Tribunal decided the issue in line with its earlier discussion. 23. Exemption u/s. 10B for Panoli and Ahmednagar units: - The Tribunal found no merit in the revenue's grievance, as the issue was accepted in A.Y. 2002-03. 24. Adjustment of brought forward depreciation of Phlox Pharmaceuticals u/s. 72 for computing profits of the business for the purpose of section 80HHC: - The Tribunal directed accordingly, following its earlier discussion. 25. Disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries: - The Tribunal found that the expenditures were for the purposes of business and directed the AO to delete the addition. 26. Addition made on account of sales to Sun Pharmaceutical Industries: - The Tribunal found no justification for the addition and directed the AO to delete it. 27. Exclusion of income of Ahmednagar and Panoli units for computing book profit u/s. 115JB: - The Tribunal treated the grievance as consequential to other grounds and decided accordingly. Conclusion: The appeals were decided with several issues being allowed in favor of the assessee, some being dismissed, and others being remanded back to the AO for fresh consideration. The Tribunal's decisions were largely guided by its earlier rulings and relevant High Court and Supreme Court judgments.
|
