9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (1) TMI 837 - AT - Income TaxTransfer pricing adjustment - Arms length price - adjustment to the interest charged by the assessee company in respect of short term facility granted to its subsidiary - Held that - As the assessee has advanced the loan in foreign currency PLR rate of interest will not be applicable. Moreover, since the AE is situated at Belgium EURIBOR rates would be more appropriate. Thus we direct the AO to accept EURIBOR rate at which the interest has been charged by assessee. Accordingly, we delete the addition made on account of TP adjustment to the arm s length rate of interest. - Decided in favour of assessee. Transfer of know-how - dis-allowance as capital receipts - Held that - On a perusal of the auditor s certificate dated 2nd February, 2010, it is to be noticed that the auditor has merely certified that assessee has not transferred through sale or outright licencing any technical know-how in relation to four ARVs to any other third party during the period from 1st April, 2005 to 30th September, 2009. However, such non-transfer of technical know-how by assessee to any other party in no way proves the fact that technical know-how relating to the four products was absolutely transferred to Astrix by assessee without retaining any right thereof. In fact the certificate supports the fact that the assessee has rights on the know-how, but has not transferred to any other party. As far as supplementary agreement dated 01/01/2010 is concerned, a perusal of the same brings out some interesting facts. As can be seen from the agreement, the shareholders agreement between assessee and AspenSA was terminated on 09/10/08 as a result of which Astrix has ceased to be a joint venture between Matrix and AspenSA. Even though such event occurred in October, 2008, but on perusal of draft assessment order as well as other materials on record, it appears, this fact was not brought to the notice of AO. Furthermore, assessee and Astrix never thought it expedient or necessary to enter into a supplementary agreement immediately upon termination of joint venture, but, waited for more than a year to enter into such agreement. Therefore, the supplementary agreement entered into between the parties in 2010 after the draft assessment order was passed, appears to be an afterthought not only to get over the hurdle created by the original agreements executed in 2005 and to dilute the view taken by the AO but an attempt made for establishing the fact that Astrix shall be treated as the exclusive owner of know-how in respect of the four ARVs. Thus the supplementary agreement being a self-serving document to help assessee get over the addition made by AO, cannot be given much importance. Thus we hold that there being no transfer in terms of section 2(47) of the Act, the amount received towards allowing Astrix to use the technical know-how has to be treated as business income. - Decided against assessee. Superannuation contribution paid to LIC in respect of the working directors of the company disallowed - Held that - The expenditure incurred is allowable as deduction if not u/s 36(1)(iv) but u/s 37 of the Act as it is exclusively incurred for the purpose of business. Moreover, it is not disputed that assessee has deducted tax at the time of making contribution to the superannuation fund and has treated it as part of salary of the concerned directors. That being the case, the expenditure incurred should be allowed as a deduction. Accordingly, we delete the addition made by the AO - Decided against revenue. Reduction from taxable income the amounts of interest granted u/s 244A and subsequently withdrawn - Held that - When the assessee has shown the income which was subsequently withdrawn by the department effectively no income on account of interest granted under section 244A accrues to the assessee. Therefore, the income already shown by the assessee by taking into account the interest granted earlier under section 244A requires to be reduced from the taxable profit for assessment year 2006-07. In fact, this is the precise direction of the DRP to the assessing officer. However, the A.O. has exceeded his brief by not complying to the directions of the DRP by observing that assessee s appeal for the relevant A.Y. are still pending. The action of the A.O. cannot be appreciated. We, therefore, direct the A.O. to allow assessee s claim after verifying the fact as to whether the assessee has shown the interest income which was subsequently withdrawn by the department. - Decided in favour of assessee for statistical purposes. Employee stock option scheme - AO disallows such amount debited to Profit & Loss - Held that - Remit the matter back to the file of Assessing Officer for considering afresh keeping in view the decision of the ITAT Bangalore Special Bench in the case of M/s. Biocon Ltd., (2014 (12) TMI 838 - ITAT BANGALORE).- Decided in favour of assessee for statistical purposes. Apportionment of common corporate overhead expense to all the units of the company including 100% Export Oriented undertakings eligible for deduction u/s 10B of the Act - Held that - Allocation of expenditure by the assessee between the EOU units is required to be upheld.- Decided in favour of assessee. Reworking of R&D expenditure relating to the units claiming deduction u/s 10B for allowance of weighted deduction u/s 35(2AB) - Held that - When a particular assessee is claiming deduction under section 10A/10B, it cannot claim weighted deduction under section 35(2AB). As in the present case, the assessee has claimed deduction under section 10B, no deduction under section 35(2AB) can be allowed to the assessee - Decided against assessee. Computation of book profit under section 115JB - A.O. restricted the deduction under section 10B to the amount arrived at under normal computation - Held that - The minimum tax is to be computed with reference to book profits as per the audited accounts of the company. Consequently the export profits computed under the provisions of sec. 80HHC based on 'profits of business or profession' cannot be substituted into the computation scheme as prescribed in sec. 115JB which is an alternative computation to the normal computation of income. Deduction under clause (iv) of Explanation for the export profits should not be phased out as provided in sub-section (1B) of sec. 80HHC because, 115JB is an independent code and it covers full export profits as the eligible profits for the purposes of book profits tax and no phasing is required to be carried out. Thus we direct the Assessing Officer to compute the book profit under section 115JB accordingly. - Decided in favour of assessee.
Issues Involved:
1. Transfer Pricing Adjustment. 2. Treatment of Consideration Received on Transfer of Know-How. 3. Disallowance of Superannuation Contribution. 4. Reduction of Interest Granted Under Section 244A. 5. Disallowance of Employee Stock Option Scheme (ESOP) Expenses. 6. Apportionment of Common Corporate Overhead Expenses. 7. Weighted Deduction Under Section 35(2AB). 8. Computation of Book Profit Under Section 115JB. Issue-wise Analysis: 1. Transfer Pricing Adjustment: The Dispute Resolution Panel (DRP) directed the Assessing Officer (AO) to adjust the interest rate charged by the assessee on a short-term loan to its subsidiary in Belgium from 3.3336% to 7.2476%. The assessee argued that the interest rate should be based on the currency and jurisdiction of the borrowing, supporting their rate with a similar transaction involving ABN Amro Bank. The Tribunal agreed with the assessee, directing the AO to accept the EURIBOR rate and delete the addition made on account of Transfer Pricing (TP) adjustment. 2. Treatment of Consideration Received on Transfer of Know-How: The AO treated the consideration received from the transfer of know-how to Astrix Laboratories Ltd. as business income, arguing that the assessee retained rights over the know-how and did not completely transfer ownership. The assessee claimed it as a capital receipt, arguing there was no cost of acquisition, thus no capital gain could be computed. The Tribunal upheld the AO's view, stating there was no complete transfer of rights, and the amount received was for imparting special knowledge, thus taxable as business income. 3. Disallowance of Superannuation Contribution: The AO disallowed the superannuation contribution of Rs. 32,40,000 paid to LIC for directors, arguing it should be claimed under section 36(1)(iv) and not section 37. The Tribunal allowed the deduction under section 37, noting the expenditure was incurred for business purposes and tax was deducted at source, treating it as part of the directors' salary. 4. Reduction of Interest Granted Under Section 244A: The AO rejected the assessee's claim to reduce taxable income by the interest granted under section 244A and subsequently withdrawn. The Tribunal directed the AO to verify if the interest was shown as income and subsequently withdrawn, and if so, to allow the reduction from taxable profits. 5. Disallowance of Employee Stock Option Scheme (ESOP) Expenses: The AO disallowed the ESOP expenses of Rs. 5,72,19,461, considering them contingent and notional. The Tribunal remitted the issue back to the AO to reconsider in light of the ITAT Bangalore Special Bench decision in M/s. Biocon Ltd. 6. Apportionment of Common Corporate Overhead Expenses: The AO reallocated the corporate overhead expenses based on turnover, reducing the deduction under section 10B. The Tribunal upheld the assessee's method of allocation based on material cost, staff strength, and sales, directing the AO to accept the assessee's allocation. 7. Weighted Deduction Under Section 35(2AB): The AO disallowed the weighted deduction under section 35(2AB) due to the absence of Form No.3CL and considered it inapplicable to units claiming section 10B deduction. The Tribunal upheld the disallowance, referencing the ITAT Bangalore decision in M/s. Biocon Ltd., which stated units claiming section 10B cannot claim weighted deduction under section 35(2AB). 8. Computation of Book Profit Under Section 115JB: The AO restricted the deduction under section 10B to the amount computed under normal provisions, not book profit. The Tribunal followed the Supreme Court decision in Ajanta Pharma Ltd. vs. CIT, directing the AO to compute book profit by allowing deduction based on book profits, not normal computation. Conclusion: The Tribunal provided detailed rulings on each issue, often referencing prior decisions and legal principles, ensuring a thorough and fair adjudication.
|
