9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 18 - AT - Income TaxDeferred revenue expenditure deduction - Whether said claim is not allowable u/s 37(1)? - HELD THAT - As identical issue having similar facts has already been decided in favour of the assessee for the A.Y. 2004-05 in assessee s own case as find that the CIT (Appeals) by placing reliance on the relevant decision on the basis of uncontroverted finding of facts recorded therein, has rightly allowed the claim of the assessee. Deduction on account of pre payment charges paid to IDBI - HELD THAT - As decided in assessee own case AY 2004-05 this expenditure was incurred to save the interest costs for the company and wholly and exclusively for the purposes of the businesses. If the appellant had not done so, it would have paid interest on term loan @14% for the A.Y. 2003-04 and subsequent years.Since the expenditure has been incurred wholly and exclusively for the business purposes and same has been divided for in three years.Keeping in view the ratio laid down in the case of Madras Industrial Investment Corporation Ltd. Vs. Commissioner of Income Tax 1997 (4) TMI 5 - SUPREME COURT , the expenditure is fully allowable - Decided in favour of assessee. Transfer pricing (TP) adjustments - Adjustment made on account of International Transaction - MAM Selection - A.O enhanced the income of the assessee on account of adjustment in arm s length price in respect of excess cost prices paid by the assessee company to its AE and on account of other miscellaneous items - HELD THAT - The assessee in order to choose reasonable basis of comparing transactions, furnished additional evidences before the CIT(A) in the form of fluctuations in the price of the material purchased i.e. MICA, to supplement its CUP Data and the calculation of ALP. The assessee proposed two additional method being Profit Split Method (PSM) and Transactional Net Margin Method(TNMM), the assessee furnished the relevant additional data in the form of financial statements of the comparable companies. CIT(A) categorically stated that the TPO in his remand report did not raise any objection on the acceptability of additional evidence furnished by the assessee and had provided her comments on merits. Therefore, we do not see any merit in this ground of the Departmental appeal that the Ld. CIT(A) was not right in accepting the additional evidences. CIT(A) by following the judgment of the Special Bench of ITAT Chandigarh in the case of M/s Quark Systems Pvt. Ltd. 2009 (10) TMI 591 - ITAT, CHANDIGARH accepted the additional evidences in the interest of justice. In the instant case while accepting the additional evidences the Ld. CIT(A) not only adopted all fair procedure in granting the TPO sufficient and ample opportunity to examine the evidences, but the TPO also called further informations from the assessee and did not object to the additional evidences furnished by the assessee. Therefore, we are of the view that the Ld. CIT(A) was justified in admitting the additional evidence furnished by the assessee and there was no contravention of Rule 46A of the Income Tax Rule 1962. The method adopted by the TPO also suffered from the defect of the comparing uncomparable chemicals, using an average variation between the ALP and the actual price in two different chemicals, using the same as the variation in the ALP of the ten different chemicals. We are of the view that the CUP method suffered from multiple infirmities and was not a most appropriate method for the transactions pertaining to the year under consideration. Comparables selection - CIT(A) categorically stated that the assessee was manufacturing Cefixime API (Active Pharmaceutical Ingredient) which was also manufactured by those two comparable companies who were competent to the assessee in the open market, therefore, those should be taken as comparable. CIT(A) forwarded the comparable chart of the financial submitted by the assessee in respect of the comparables, to the TPO who in his remand report could not controvert this contention of the assessee that the three companies i.e; assessee and the two comparable namely M/s Aurobindo Pharma Ltd. and M/s Orchid Chemicals Pharmaceuticals Ltd. were in the similar range of turnover, in terms of size of the operation they were similar, therefore CIT(A) was fully justified in holding that those two companies were comparable to the assessee and as the mean margin of the above said two comparables was less than the margin earned by the assessee (PBT / sales). The International Transactions of the assessee were at arm s length. Accordingly, the addition made by the AO was rightly deleted by the Ld. CIT(A). We do not see any infirmity in the order of the Ld. CIT(A) on this issue. Non taxability of dividend received from Sri Lankan subsidiary of the assessee - HELD THAT - The issues for the AY 2005-06 and 2006-07 are exactly the same - the taxability of dividend received from Sri Lankan subsidiary company in the hands of the taxpayer. As agreed with the decision of the CIT (A)-XVI, New Delhi in the assessee's own case for the subsequent assessment year. Apart from the merits of the case, the consistency principle as enunciated in the ease of CIT vs LG Rarnamurthy (Madras HC) 1976 (10) TMI 18 - MADRAS HIGH COURT also demands that the decision of the CIT(A) XVI should be accepted - direct the AO to allow the claim made by the appellant in this regard. Dividend Income from its subsidiary company at Sri Lanka - HELD THAT - In the present case also as per the DTAA between India and Sri Lanka the dividend income would be taxable only in the contracting state where such income accrured and as the income accrued in Sri Lanka and the dividend income sourced from foreign subsidiary was to be considered as exempted in the hands of the Indian holding Company i.e; the assessee. We therefore considering the totality of the facts do not see any valid ground to interfere with the detailed findings given by the Ld. CIT(A) on this issue. Accordingly we do not see any merit in this ground of the Departmental appeal.
Issues Involved:
1. Deduction of deferred revenue expenditure. 2. Deduction of prepayment charges. 3. Acceptance of additional evidence for determination of Arm's Length Price (ALP). 4. Deletion of addition made by AO due to determination of ALP by TPO. 5. Non-taxability of dividend received from Sri Lankan subsidiary. Detailed Analysis: 1. Deduction of Deferred Revenue Expenditure: - Facts: The assessee claimed Rs. 21,39,774/- as deferred revenue expenditure, which was disallowed by the AO on the grounds that such deferment is not allowed under the Income Tax Act, except for specific expenses like preliminary expenses under section 35. - Assessee's Argument: The expenditure was deferred over five years as per the accounting policy, and similar claims were accepted in prior years. - CIT(A)'s Decision: Allowed the claim, citing consistency in accounting policy and previous acceptance by the AO. - ITAT's Decision: Upheld CIT(A)'s decision, referring to the ITAT Delhi Bench's decision in the assessee's own case for A.Y. 2004-05. 2. Deduction of Prepayment Charges: - Facts: The assessee claimed Rs. 17,50,244/- as prepayment charges paid to IDBI, which was disallowed by the AO. - Assessee's Argument: The prepayment charges were amortized over three years, and similar claims were accepted in prior years. - CIT(A)'s Decision: Allowed the claim, following the ITAT's decision in the assessee's own case for A.Y. 2004-05. - ITAT's Decision: Upheld CIT(A)'s decision, referring to the ITAT Delhi Bench's decision in the assessee's own case for A.Y. 2004-05. 3. Acceptance of Additional Evidence for Determination of ALP: - Facts: The TPO rejected the CUP method and quotations submitted by the assessee for determining ALP. - Assessee's Argument: Submitted additional evidence and proposed using PSM or TNMM as the most appropriate method. - CIT(A)'s Decision: Admitted additional evidence, citing the ITAT Chandigarh Special Bench's decision in M/s Quark Systems Pvt. Ltd. vs. ITO. - ITAT's Decision: Confirmed CIT(A)'s acceptance of additional evidence, stating no contravention of Rule 46A. 4. Deletion of Addition Made by AO Due to Determination of ALP by TPO: - Facts: The TPO made adjustments based on CUP data, which the assessee contested. - Assessee's Argument: Proposed using TNMM and provided comparables like Aurobindo Pharma Ltd. and Orchid Chemicals Pharmaceuticals Ltd. - CIT(A)'s Decision: Accepted TNMM as the most appropriate method and deleted the addition, finding the comparables suggested by the assessee to be appropriate. - ITAT's Decision: Upheld CIT(A)'s decision, agreeing that TNMM was the most appropriate method and the comparables were suitable. 5. Non-taxability of Dividend Received from Sri Lankan Subsidiary: - Facts: The assessee received a dividend of Rs. 10,24,05,617/- from its Sri Lankan subsidiary, which was claimed as non-taxable. - Assessee's Argument: Cited the DTAA between India and Sri Lanka and the Supreme Court's decision in DCIT vs. Turquoise Investment & Finance Ltd. - AO's Decision: Rejected the claim, citing procedural issues and the need for a revised return. - CIT(A)'s Decision: Allowed the claim, stating that the dividend income from the Sri Lankan subsidiary was not taxable in India under the DTAA. - ITAT's Decision: Upheld CIT(A)'s decision, agreeing that the dividend income was not taxable in India as per the DTAA and the Supreme Court's decision. Conclusion: The ITAT upheld the CIT(A)'s decisions on all the issues, confirming the deductions for deferred revenue expenditure and prepayment charges, accepting additional evidence for ALP determination, deleting the ALP-related addition, and allowing the claim of non-taxability of the dividend received from the Sri Lankan subsidiary.
|
