2021 (9) TMI 1122 - AT - Income Tax

Disallowance of bad debt written off - AO's contention is that such bad debts relate to the amalgamating company, i.e., Cadence AMS Design India Pvt. Ltd. and the provision for doubtful debts was to be allowed only in respect of the assessee and none else - HELD THAT - DRP directed the ld. AO to verify the claim of the assessee regarding allowance for provision for doubtful debts in the case of amalgamating company in the earlier years and to verify the allowability of the same in the hands of the assessee in terms of the conditions laid down in section 36(2). Ld. Assessing Officer, however, apart from stating that income was booked in the account of another entity, i.e., Cadence AMS Design India Pvt. Ltd., which is not the assessee, does not give any reason, whatsoever, for making the relevant disallowance - direct the ld. Assessing Officer to verify the claim of the assessee regarding the disallowance of the provision for doubtful debts in the case of amalgamating company in the earlier years and if he finds them to be proper, allow the deduction in the hands of the amalgamated company. This ground is, accordingly, allowed for statistical purposes. Incorrect assessed income - AR prayed that directions may be given to the ld. Assessing Officer to dispose of the rectification application on due verification of the claim of the assessee in respect of the assessment of total income, non-grant of MAT credit and short grant of advance tax and TDS - HELD THAT - DR fairly concedes that the matter may be sent back to the ld. Assessing Officer for taking a view while disposing of the rectification application. We, therefore, direct the ld. Assessing Officer to consider the grievance of the assessee in respect of the assessment of income at ₹ 1,15,72,72,280/- in the computation sheet instead of ₹ 1,11,96,13,210/-; in respect of grant of MAT credit; and in respect of short grant of advance tax and TDS. Accordingly, grounds allowed for statistical purposes. Education cess allowability - HELD THAT - As assessee does not raise this issue at any stage before the authorities below. We, therefore, find force in the arguments of the ld. AR that this issue may be restored to the file of ld. Assessing Officer to take a view after giving opportunity to the assessee. Needless to say, the Assessing Officer shall give an opportunity to the assessee and take a view according to law. This ground is, accordingly, allowed for statistical purposes. Transfer pricing adjustment - bench marking of the interest outstanding on receivables - assessee entered into Bilateral Advance Pricing Agreement(BAPA) with CBDT on 03.03.2021 which covers the present assessment year and certain transactions (software development segment) and has already filed its modified return under section 92CD(1) on 28.06.2021 - HELD THAT - As directions of ld. DRP were to calculate interest on net basis whereas the ld. TPO has ignored the amounts payable while doing the computation and if the net receivables are considered then no addition would arise - Learned DR fairly concedes the request of the assessee. We, therefore, set aside the impugned assessment order and direct the ld. Assessing Officer to take plausible view in compliance with DRP directions in the light of the decision of Hon'ble Delhi High Court in CIT vs. Kusum Health care 2017 (4) TMI 1254 - DELHI HIGH COURT and also BAPA.

Summary

Issues:
1. Disallowance of bad debts written off.
2. Incorrect assessed income, MAT credit, and advance tax.
3. Claim for deduction of education cess.
4. Transfer pricing adjustment on interest outstanding on receivables.

Issue 1: Disallowance of Bad Debts Written Off:
The appellant challenged the disallowance of bad debts written off by the Assessing Officer, contending that the amalgamated company is entitled to claim deduction for bad debts relating to the predecessor entity before amalgamation. The appellant relied on legal precedents to support their claim. The Tribunal directed the Assessing Officer to verify the claim regarding the provision for doubtful debts in the case of the amalgamating company in earlier years and allow the deduction if found appropriate. This ground was allowed for statistical purposes.

Issue 2: Incorrect Assessed Income, MAT Credit, and Advance Tax:
The appellant raised concerns regarding the assessment of total income, non-grant of MAT credit, and short grant of advance tax. Despite filing rectification applications, the Assessing Officer did not address the matter. The Tribunal directed the Assessing Officer to consider the appellant's grievances and dispose of the rectification application, allowing grounds 4 to 6 for statistical purposes.

Issue 3: Claim for Deduction of Education Cess:
The appellant claimed a deduction for education cess, citing legal precedents supporting their position. The Assessing Officer argued that the cess levied under the Income-tax Act is not deductible as it forms part of income tax itself. The Tribunal noted that the appellant did not raise this issue before the lower authorities and directed the Assessing Officer to reconsider the matter after providing the appellant with an opportunity to present their case.

Issue 4: Transfer Pricing Adjustment on Interest Outstanding on Receivables:
The appellant contested the transfer pricing adjustment on interest outstanding on receivables, citing a jurisdictional High Court decision and a Bilateral Advance Pricing Agreement (BAPA) with the CBDT. The Tribunal set aside the assessment order and instructed the Assessing Officer to consider the issue in compliance with the directions of the Dispute Resolution Panel and in light of relevant legal decisions.

In conclusion, the Tribunal addressed various issues raised by the appellant concerning the assessment order for the year 2016-17. The Tribunal allowed certain grounds for statistical purposes, directed the Assessing Officer to verify claims, reconsider deductions, and comply with legal precedents and agreements. The appeal was allowed for statistical purposes, and the order was pronounced on September 20, 2021.