|
Advanced Search Options
Income Tax - Case Laws
Showing 181 to 200 of 643 Records
-
2015 (4) TMI 947
Fulfillment of primary condition for claim of deduction under Section 801B(10) - whether ITAT failed to consider the fact that the area of the plot for Vidhi Complex is below 1 acre and as such the primary condition for claim of deduction under Section 801B(10) of the Income Tax Act, 1961 has not been fulfilled? - whether ITAT erred in coming to a conclusion that the exclusion of DP Road does not reduce the size of the plot, while on the contrary accepting the fact that the plot in question was originally a larger plot which was bifurcated with passing of two DP roads and thus, treating one of the 3 plots i.e. the plot in question being an independent plot with net area of 3461.68 sq.mtrs.? - Held that:- Orders passed by the Tribunal cannot be faulted. In the present case, we find that the assessee has complied with all the requirement of provisions of Section 80IB(10) of the Act since he has undertaken to commence the development project on 1st October, 1998 and completed the project on or before 31st March, 2008. Furthermore, it is seen that the project completion has been complied by by virtue of section 80IB(10)(d) on a plot of land which is 1.33 acres. The criteria of minimum area of 1 acre required under section 80IB(10)(a) had been met. It also complied with section 80IB(10) (c) of the Act since the area was situated within 25 kms. from the limits of Mumbai city and, therefore, the eligible for exemption of the flat of the size of 1,500 sq. ft. approximately. The Commissioner and the Tribunal also found that the commercial establishment in the present project was less than 2,000 sq. ft. Hence we are of the view that the no fault can be found with the order of the Tribunal. No substantial questions of law arise in the present case. - Decided in favour of assessee.
-
2015 (4) TMI 946
Taxability of goodwill - whether sum received by the company from its collaborators on account of goodwill not exigible to tax as held by Tribunal - Held that:- Basis for valuation of goodwill in this case was three fold: (a) the assessee, though established in 1984 in a sense was continually engaged in business since 1975, when Sehgal Cables started functioning (that concern’s business was assimilated by the assessee); (b) the assessee had unexecuted orders worth ₹ 4.87 crores in hand, when the collaboration agreement was signed; its profit for one year offset the loss for the previous year; (c) the assessee held a manufacturing monopoly over one product, i.e wireless harness. As is evident from the Supreme Court’s ruling in S. C. Cambatta, there is no stipulated matrix of factors which are to be taken into consideration. Whilst the length of time for which a business might operate, its profitability, etc. are relevant, equally whether, and to what extent it has competition in respect of the business activities it undertakes, the market acceptability and demand for the product or services in question, capital employed, unique expertise developed, etc. too are all relevant. The ITAT’s view therefore has some basis in law. It is worthwhile to recollect that the Supreme Court, in Commissioiner of Income Tax v. Srinivasa Setty [1981 (2) TMI 1 - SUPREME Court] held that since goodwill is a self-generating asset, its transfer would not give rise to a capital gain.
The weight attached by the ITAT to the monopoly enjoyed by the assessee in respect of the product manufactured, the continuous functioning - since the business of Sehgal Cables had been taken over by the assessee (thus „the probability that the old customers would resort to the old places‟ adverted to in Srinivasa Setty [supra]); the large volume of orders at hand when the collaboration transaction took place, were sufficient basis for valuation. This Court also notices that the AO and CIT (A) did not advert to the report of M/s R. K. Khanna nor cared to call that firm. In the circumstances, it cannot be held that the valuation of goodwill made by the assessee was unreasonable or untenable in law. - Decided in favour of assessee.
-
2015 (4) TMI 945
Disallowance under section 40(c) - Whether the commission on sales paid by the assessee constituted “the provisions of any remuneration or benefit or amenity” within the meaning of Section 40(c)(iii)? - Held that:- In order to attract ceiling under Section 40[c] of the Act, the payment in dispute must be shown to be a periodical payment. A lumpsum payment or one time payment does not fall in it. Here the fact that commission was payable only if annual turn over exceeded ₹ 2 Crores, is not in dispute. Facts show that payment was thus contingent upon turn over and also not periodical. Hence, following this law, we find that the commission on sales paid by the assessee could not have been subject to provisions of Section 40[c][iii] of the Income Tax Act, 1961. Here, we have to also take note of the finding reached by the CIT (Appeals), in paragraph no.4 that the commission paid was not excessive or unreasonable. Infact CIT (Appeals) has held that first limb of the counsel is arguments before it had succeeded. We therefore, find its disallowance under Section 40[c] not permissible. - Decided in favour of the assessee
-
2015 (4) TMI 944
Subsidy received from Government of Gujarat - capital receipts OR revenue receipts (Trade Receipts) - Held that:- The learned Tribunal has materially erred in not following and/or distinguishing the decision of the Hon'ble Supreme Court in the case of Sahney Steel and Press works Ltd. (1997 (9) TMI 3 - SUPREME Court) wherein held that if payments in nature of subsidy from public funds are made to the assessee to assist him in carrying on his trade or business, they are, therefore, trade receipts.
We are of the opinion that the substantial question of law raised/involved in the present tax appeal is squarely covered against the assessee and in favour of the Revenue in view of the decision of Sahney Steel & Press works Ltd. (supra). Under the circumstances, the learned Tribunal has materially erred in treating the amount of subsidy of ₹ 19,82,600/- as capital in nature and has materially erred in quashing and setting aside the order passed by the Assessing Officer confirmed by the learned CIT(A). - Decided in favour of revenue.
-
2015 (4) TMI 943
Deduction under Section 43B - Tribunal held that principal sum waived, is offered to tax, and as such, the disallowance is to be subsumed into offer on waiver of Principal, which is against the sum and substance of the scheme of allowing deduction under Section 43B which is based on actual payment of interest and recorded perverse finding - Held that:- If out of the total sum of ₹ 257.08 Lakhs which has been offered and subjected to tax by the assessee in its return, the amount of unpaid interest of ₹ 193.96 Lakhs is deducted then the waived principal sum would come to ₹ 62.58 Lakhs (i.e., 441.30 minus 378.72). Either it is the interest which is to be waived, and if the same is not to be waived, then the waived principal amount of ₹ 257.08 Lakhs has to be reduced by the amount of interest of ₹ 193.96 Lakhs which is not permitted for deduction under Section 43B of the Act. In either case, the amount of deduction, as well as the amount which is subjected to tax, would come to the same. If we accept the argument of learned counsel for the appellant - revenue, then it would amount to the department having the cake as well as eating it, which would mean subjecting the assessee to double jeopardy. This cannot be permitted. Either the interest amount has to be allowed for deduction under Section 43B or the sum offered for tax (as waived by the Bank) has to be reduced by the amount of interest paid.
Thus we do not find that any infirmity with the order of the Tribunal of allowing the disallowance of interest under Section 43B of the Act to be subsumed into the offer of waiver of principal amount.
-
2015 (4) TMI 942
Reopening of assessment - deferred revenue concealed - notice issued under section 148 challenged on the ground of jurisdictional error - Held that:- In the instant case, the deferred revenue for the assessment year 2009-10 according to the Assessing Officer ought to have been admitted or included by the assessee in the assessment year 2010-11 and on account of same having not been offered, has given rise for reopening of the assessment. Nothing prevented the petitioner to place such material to establish that such deferred revenue totaling ₹ 216,89,00,773/- has been actually included as its income in the subsequent assessment year/s and if so, the details thereof with the break up, which the Assessing Officer had called for at the first instance. In that view of the matter, it cannot be held that the reasons assigned by the Assessing Officer by communication dated 25.04.2014 vide Annexure-M for reopening the assessment for the year 2009-10 suffers from any jurisdictional error.
It has also been specifically made clear thereunder by 1st respondent that deferment of revenue has not been accepted even by the DRP and what has been stated in the said communication is that reply submitted by petitioner does not demonstrate or establish that total amount of ₹ 216,89,00,773/- had been offered to tax in the assessment year 2010-11. The issue involved is the escapement of income to tax for the assessment year 2009-10. As such, the burden is on the assessee to demonstrate that said deferred revenue totaling to ₹ 216,89,00,773/- has been offered to tax in the assessment year 2010-2011 or in any subsequent year/s. In that view of the matter, do not find any jurisdictional error having been committed by the Assessing Officer to reopen the assessment for the assessment year 2009-10 by issue of impugned notice and also over-ruling of objections raised by the petitioner assessee to such notice. -
As decided in WHIRLPOOL CORPORATION VS. REGISTRAR TRADE MARKS, MUMBAI AND OTHERS [1998 (10) TMI 510 - SUPREME COURT] & T.T. PVT. LTD. Vs. INCOME TAX OFFICER, COMPANY CIRCLE-III, BANGALORE reported in (1978 (9) TMI 23 - KARNATAKA High Court) has held that availability of alternate remedy under the Act would not be a bar for this Court to examine the notice issued under section 148 of the Income Tax Act, 1961, if it is challenged on the ground of jurisdictional error. - Decided against assessee.
-
2015 (4) TMI 941
Application for notification under section 801A(4)(iii) rejected - application for approval of the Information Technology Park under the Industrial Park Scheme, 2008 - Non fulfillment of conditions - revenue contended that it is apparent that they have included the area of common facility and infrastructure facility and it is at variance with the conditions set out in the Industrial Park Scheme, 2008 - Held that:- That there is difference between the commencing of a work or grant of such certificates enabling the commencing of development and provided in section 347. Thus, the development permission is sought under section 44 of the Maharashtra Regional Town Planning Act, 1966. Accordingly, it may be granted as contained in the certificate conditionally or unconditionally. Once such certificates are issued by a Competent Authority and certifying the work has having been completed or the premises being fit to be occupied on the same being completed, then, it is not for anybody else to question the contents. They shall be under such circumstances taken as conclusive evidence of the commencement and completion of the work. Unless these certificates are obtained by perpetuating a fraud or they can be termed as suspicious, we do not see how the authorities like the Central Board of Direct Taxes or the Commissioner can question the contents and moreso by exhibiting their ignorance completely. If they have a doubt about the genuineness or authenticity of such certificates, nothing prevents them from seeking clarifications from the Municipal or Planning Authorities.
Therefore, when the Architect has issued a certificate, based on which the project is undertaken and completed, then, we do not see what more is needed. The Board should have been aware of the fact that no project or construction for development can be undertaken or completed unless the plans for the same are furnished in advance and approval and sanction thereof is obtained from the Municipal Corporation. They have a full set of engineers and experts who apply their mind and sanction and approve the building construction plans and in terms of the Development Control Rules, 1991 which are in place. In such circumstances, we do not see what discrepancy can be found with the Architect's certificate. However, in relation to that as well, we do not find any application of common area for use as industrial park.
There is further stipulation that no industrial unit, along with the units of an associated enterprise shall occupy more than twenty-five per cent of the allocable area for industrial activity or commercial activity. Thus, what has to be understood with reference to the definition of term allocable as above in sub-para (2A) of para 2 of the Scheme takes care and disentitles a person from a notification if the industrial park is not owned by only one undertaking and industrial unit did not undertake activity defined in para 2(j) of the Scheme. To facilitate industrial activity that these conditions are incorporated or inserted. In such circumstances, we do not understand as to how para 4(2a) and 4(6) of the Scheme have been violated.
As a result of the above discussion, we set aside the order dated 21st November, 2014. The application of the petitioners dated 22nd February, 2011 together with all further details and specifications provided by them shall be considered afresh and requisite order in accordance with law be passed as expeditiously as possible and within a period of four weeks from the date of receipt of a copy of this order. - Decided in favour of assessee for statistical purposes.
-
2015 (4) TMI 940
Jurisdiction of CIT(A) to make a reference to DVO to determine the FMV of the property - The Revenue insists on the fact that the power is being exercised only under Section 250(4) of the Act alone. - Held that:- Power to make further enquiry under Section 250(4) of the Act can only be in respect of issues which arise under the Act and for which specific provision have been made and the Assessing Officer has failed to do what he ought to have done. Thus, this power of enquiry though very wide has to find its source in one of the substantive provisions of the Act. It is in the context of substantive provisions that the CIT(A) has to examine whether Assessing Officer either did no enquiry at all or made insufficient enquiry. This power cannot be exercised dehors the substantive provisions of the Act. We find that the only provisions then existing to make reference to the DVO for the purposes of determining the FMV to compute the capital gains was found in Section 55A of the Act.
It is undisputed that the power of a CIT(A) is coterminus with that of the Assessing Officer. In fact, the CIT(A) can do what the Assessing Officer can do and has failed to do as held by the Apex Court in Commissioner of Income Tax v/s. Kanpur Coal Syndicate [1964 (4) TMI 18 - SUPREME Court]. Thus, in this case, even according to the Petitioner, the Assessing Officer could make a reference to the DVO but he failed to do so during the assessment proceedings. it is undisputed that during the assessment proceedings before him, the Assessing Officer could have made a reference to the DVO and yet he choose not do or failed to do. This failure or conscious decision of not referring to the DVO could be a subject matter of examination by the CIT(A), in an appeal before him. In this case, the issue of the FMV as on 1st April, 1981 was admittedly raised by the Petitioner in its appeal before the CIT(A). Thus the CIT(A) during the appellate proceedings before him can exercise powers under Section 55A of the Act and can make such enquiry in terms of Section 250(4) of the Act, either himself or direct the Assessing Officer to do so and report in terms of Section 250(4) of the Act.
Thus, the CIT(A) can make further enquiries into FMV as on 1st April, 1981 in view of the Assessing Officer failing to make such enquiry under Section 55A of the Act while passing the Assessment Order. The only other provision to make a reference to a Valuation Officer is Section 142A of the Act introduced by Finance (No.2) Act 2004 with retrospective effect 15th November, 1972. Section 142A of the Act deals with determination of the FMV of investments referred to in Section 69 or 69B of the Act or to the value of bullion, jewellery or other valuable articles referred to Section 69A or 69B of the Act or in respect of FMV of any property referred to in Section 56(2) of the Act. In this case, the reference which had to be made by Assessing Officer to the DVO is under Chapter IV - part (E) of the Act while the reference which is to be made under Section 142A of the Act is in respect of Chapter IV - part (F) and Chapter VI of the Act. Therefore, Section 142A of the Act would have no application to the present facts. It is a settled position that the provisions of Section 55A of the Act which were amended in 2012 by substituting the following words “as it variance with its FMV” for “is less than its FMV” is clarifactory and not retrospective as held by this Court in CIT v/s. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT ]. Therefore, the Revenue did not contend that the provisions of Section 55A of the Act is retrospective. It, therefore, follows that where admittedly the value arrived at by the Registered Valuer of the land is more than its FMV, no jurisdiction is acquired by the authorities to invoke Section 55A of the Act.
We, therefore, find that the impugned notices dated 26th December, 2006 and 2nd February, 2007 of the DVO not having been issued under Section 55A of the Act according to the Revenue, are quashed and set aside. However, the CIT(A) is at liberty to exercise powers under Section 250(4) read with Section 55A of the Act, if he is of the opinion that the conditions for its invocation are satisfied after hearing the Petitioner's on the above aspect.
-
2015 (4) TMI 939
Computation of Capital gain in respect of sale of residential house - Deduction u/s 54 of Income Tax Act, 1961 - Correct Section for claiming exemption not mentioned in the return - Held that:- We are of the considered opinion that even if a wrong section was mentioned by the assessee in the return, it was the duty of the Assessing Officer to assist the tax payer in a reasonable way and to provide the relief if due to the assessee. This attitude rather will help the Revenue in assessing the income correctly. A correct advice by the Department would inspire the confidence of public at large. Even identical guidelines/instructions have been issued from time to time by the CBDT to its Officers (Circular No. 14(XL-35) dated 11.4.1955 and letter No. F.81/27/65-IT(B) dated 18.5.1965).
If due to ignorance a wrong section has been mentioned by the assessee, it is the duty of the Assessing Officer to advise the assessee about the correct claim and also to assess the tax legitimately. This is the clear intention of the legislature. Without adverting further, we deem it appropriate to remand this file to the file of the learned Assessing Officer to examine the claim of the assessee afresh under provisions of section 54F of the Act, after providing due opportunity of being heard to the assessee. The assessee is also at liberty to furnish evidence, if any, to substantiate his claim.
So far as the invocation of section 50C of the Act is concerned, the ld. CIT(A) held that the Assessing Officer rightly took the fair market value of the properties as adopted by the stamp valuation authority for computation of capital gain. Section 50C was inserted by the Finance Act, 2002 with effect from 1.4.2003. As per sub-clause (a) to sub-section (2) to section 50C, where the assessee claims before the Assessing Officer that the value adopted or assessed (or assessable) by the stamp valuation authority under sub-section (1) exceeds the fair value of the property as on the date of transfer, the Assessing Officer may refer the valuation of the capital asset to the Valuation Officer. Since we have remanded the issue of section 54F of the Act to the file of the learned Assessing Officer, therefore, the Assessing Officer is directed to examine the claim of the assessee on this point also. - Appeal of the assessee is allowed for statistical purposes.
-
2015 (4) TMI 938
Chit Fund Company - Disallowance of interest paid on deposits received from chit subscribers - Interest free advances given to sister concerns - AO disallowed interest expense on the basis of diversion of income for non-business purpose - CIT(A) disallowed interest expenses on account of non business expenditure - Disallowance u/s 14A - Disallowance of dividend paid to chit subscribers on non deduction of tax at source, treating it as Interest paid - Held that:- It is manifest from the relevant clause of the Byelaws governing the scheme of chit fund that the interest at the rate of 6% was payable by the assessee company on the instalments received in advance form the subscribers. Such interest was required to be calculated monthly and kept separately by the assessee, and accordingly in compliance with clause 5(d) of the Bye-laws, the amount of instalments received in advance from the subscribers was kept by the assessee separately in the form of bank deposits. In our opinion, receipt of advance instalments from the subscribers, payment of interest thereon at 6% per annum and investment of the amount of such advance subscriptions separately in the bank deposits in compliance with the bye laws of the chit fund scheme, thus was integral part of the business of the assessee of running the chit fund, and consequently, interest received by the assessee on such bank deposits constituted its business income.
The learned CIT(A), therefore, was not justified in treating such interest as income from other sources. Similarly, the learned CIT(A), in our opinion, was not justified in confirming the disallowance made by the Assessing Officer on account of interest paid by the assessee on the instalments received in advance from the customers of the chit funds, as the said interest paid by the assessee as per the scheme of the chit funds, clearly constituted expenditure incurred by it wholly and exclusively for the purpose of its business. According to us, there was a direct nexus between the interest paid by the assessee on the said instalments deposited by the members with its business of running a chit fund, and the same, therefore, was allowable as business expenditure, as rightly claimed by the assessee. We, therefore, delete the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) on account of such interest and allow ground no.2 of the assessee’s appeal.
Disallowance u/s 14A - It is observed that investment in the range of ₹ 25 to 30 crores was made by the assessee company in the shares during the year under consideration and in order to manage the investment of this volume, which also involved taking decisions from time to time regarding change in the portfolio, certain expenditure was required to be incurred, which cannot be as low as 1 or 2% of the exempt dividend income, as claimed by the learned counsel for the assessee. Having regard to the facts of the case including especially the quantum of investment made by the assessee in the shares, the quantum of dividend income received during the year under consideration, etc., we are of the view that it would be fair and reasonable to estimate the expenditure incurred by the assessee for earning of exempt dividend income at ₹ 2,32,375 being 5% of the exempt dividend income. We accordingly restrict the disallowance made by the Assessing Officer and confirmed by the CIT(A) under S.14A to ₹ 2,32,375 and allow partly ground No.3 of the assessee’s appeal.
Disallowance of dividend paid to chit subscribers on non deduction of tax at source - As agreed by the learned representatives of both the sides, the issue involved in the appeal of the Revenue is squarely covered in favour of the assessee by the decision of the coordinate bench of this Tribunal in assessee’s own case [2012 (2) TMI 468 - ITAT HYDERABAD] for assessment year 2008-09 rendered vide order dated 24.2.2012, wherein a similar disallowance made by the Assessing Officer was held to be unsustainable, following the decision of the Madras high Court in the case of Bilahari investments (P)Ltd. [2006 (6) TMI 59 - MADRAS HIGH COURT], wherein it was held that the dividend distributed by the assessee did not part-take the character of interest and consequently, the assessee was not liable to deduct tax at source. Respectfully following these judicial pronouncements in assessee’s own case on similar issue, we uphold the impugned order of the learned CIT(A), deleting the disallowance made by the Assessing Officer under S.40a(ia) on account of dividend paid by the assessee to the chit subscribers for non-deduction of tax at source and dismiss the appeal of the Revenue. - In the result, appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.
-
2015 (4) TMI 920
Penalty u/s.271D - acceptance of loan in cash - violation of the provisions of section 269SS - Held that:- Respectfully following the decision of the Hon’ble jurisdictional High Court cited in Madhukar B. Pawar [2008 (6) TMI 321 - BOMBAY HIGH COURT ] we hold that penalty u/s.271D is not leviable on account of cash loan of ₹ 20,000/- received from Shri Ravindra by the assessee since the loan is not in excess of ₹ 20,000/-. The AO is accordingly directed to delete the penalty on this amount. We hold and direct accordingly.
So far as the amount of ₹ 80,000/- received in cash from Shri Balakrishna Nagmoti is concerned, it is the submission of the Ld. Counsel for the assessee that the seized diary does not contain name of the above mentioned person. We, therefore, direct the Assessing Officer to verify the notings in the seized diary found during the course of search. In case the name of the above mentioned person is not appearing in the notings in the seized diary, then the Assessing Officer has to delete the penalty u/s.271D on account of cash loan of ₹ 80,000/- received from the above mentioned person. We hold and direct accordingly.
So far as the cash loan of ₹ 1 lakh received from Shri Patil Saheb of Jalgaon is concerned, the Ld. Counsel for the assessee fairly conceded that there is violation of provisions of section 269SS. We, therefore, uphold the levy of penalty u/s.271D on account of acceptance of cash loan of ₹ 1 lakh from Shri Patil Saheb of Jalgaon. - Decided partly in favour of assessee.
Account payee cheques have been added by the AO u/s.68 - Held that:- So far as the amount of ₹ 20,000/- received in cash on 12-03-2004 from Smt. Kalpana R. Patil is concerned the same has to be deleted in view of the decision Madhukar D. Pawar (Supra). Penalty u/s.271D on this amount is directed to be deleted.- Decided partly in favour of assessee.
So far as the amount of ₹ 50,000/- received from Smt.Latadevi Malpani, ₹ 50,000/- from Smt.Neetadevi Malpani, ₹ 50,000/- from Smt.Rupali Malpani and ₹ 1,20,000/- from Shri Sonali Malpani are concerned in view of the submission of the Ld. Counsel for the assessee the amounts are taken from different persons not exceeding ₹ 20,000/- in each case, the same are restored to the file of the AO with a direction to verify from the seized diary and take appropriate decision as per law and facts after giving due opportunity of being heard to the assessee.
So far as the amount of ₹ 50,000/- received from Shri Ramesh D. Pawar and ₹ 1,30,000/- from Shri Shivaji Kothawade are concerned the same is restored to the file of the AO with a direction to verify the submission of the Ld. Counsel for the assessee that the above persons are agriculturists and have no banking facility at their respective villages. If the same is found to be correct, then in our opinion there exists reasonable cause for accepting such cash loan from the agriculturists having no banking facility and the Assessing Officer is directed to cancel the penalty u/s.271D.
So far as the amount of ₹ 1,40,000/- received from Shri S.L. Patil is concerned it is the submission of the Ld. Counsel for the assessee that he has received an amount of ₹ 80,000/- by account payee cheque from Shri S.L. Patil and the loan of ₹ 60,000/- has been added by the AO u/s.68 of the I.T. Act. Similarly, it is the submission of the Ld. Counsel for the assessee that the amount of ₹ 1,60,000/- received from Mr. Jagannath Pawar is not correct and it is only ₹ 16,000/- as per the seized diary and the assessee has taken further loan of ₹ 1000/- which was also repaid. Thus restore this issue to the file of the AO with a direction to verify from the seized diary regarding the veracity of the above submission of the Ld. Counsel for the assessee and decide the issue afresh in accordance with law after giving due opportunity of being heard to the assessee.
So far as the amount of ₹ 50,000/- received from Shri Jambo Seth and ₹ 6 lakhs from Shri Jyoti Mahajan are concerned in absence of any satisfactory explanation given by the assessee regarding non levy of penalty u/s.271D we uphold the order of the CIT(A) confirming the levy of penalty on the above amounts. Since according to the Ld. Counsel for the assessee, no penalty has been levied in the case of loan from Smt. Sujata Bhamre, we are not dealing with this issue.
-
2015 (4) TMI 919
Transfer pricing adjustment - selection of comparable - Held that:- Infosys Technologies Ltd is not functionally comparable since it owns significant intangible and has huge revenues from software products. It is also seen that the break up of revenue from software services and software products is not available. In this view of the matter, we hold that this company ought to be omitted from the set of comparable companies. Thus we hold that Infosys Ltd. be excluded from the list of comparable companies.
KALS Information Systems Ltd. company is concerned, it is not in dispute before us that this company has been considered as not comparable to a pure software development services company.
Tata Elxsi Ltd. company is concerned, it is not in dispute before us that in assessee’s own case for the A.Y. 2007-08, this company was not regarded as a comparable in its software development services segment.
Comp-U Learn Global Tech India Ltd. the company has nil onsite revenue and satisfied all the filters applied by the TPO. We are of the opinion that some more analysis has to be done and we direct the TPO to look into the financial statement of the company and also provide an opportunity to the assessee to submit relevant details to substantiate its claim that Comp-U-Learn Tech India Ltd. is not a comparable company
Persistent Systems Pvt. Ltd.is engaged in product development and product design services while the assessee is a software development services provider. We find that, as submitted by the assessee, the segmental details are not given separately. Thus in the absence of segmental details / information a company cannot be taken into account for comparability analysis, we hold that this company i.e. Persistent Systems Ltd. ought to be omitted from the set of comparables for the year under consideration.
R Systems International ltd. Unless the financial year-end of a comparable case matches with that of the assessee, it cannot be considered as comparable because the figures of different financial year endings are distorted. He relied on an order passed by the Mumbai Bench of the Tribunal in case of Sandstone Advisors (P) Ltd. Vs. ACIT, [2013 (9) TMI 401 - ITAT MUMBAI], the Tribunal after considering the prescription of Rule 10B(4) has held that it is mandatory for the purposes of comparing the data of an uncontrolled transaction with an international transaction that the same must relate to the financial year ending similar to that of the assessee. Thus this case should be excluded from the list of comparables
Think Soft Global Services Ltd. cannot be treated as comparable to assessee as software testing services cannot be equated with software development services.
Thirdware Solutions excluded from the list of comparables the company is engaged in product development and earns revenue from sale of licenses and subscription. However, the segmental profit and loss accounts for software development services and product development are not given separately. Since the income of this company includes income from sale of licenses, it ought to be rejected as a comparable for software development services.
I-Gate Global Solutions Ltd. be excluded on the basis of high turnover.
Zylog Systems Ltd. excluded from the list of comparables as from the extracts of the annual report, it is seen that there is substantial increase in revenue in the impugned AY compared to the preceding AY. Therefore, considering the fact that the acquisitions made by the company during the relevant FY could have impacted the revenue earning and profitability of the company, it will not be safe to treat the aforesaid company as a comparable.
Sasken Communication Technologies Ltd the entire annual report has not been placed before us, we are not in a position to give a conclusive finding in this regard. We, therefore, remit the issue relating to comparability of this company for fresh adjudication by the AO/TPO.
Treating the deferred revenue expenditure as operating cost by TPO/DRP/AO - Held that:- We agree with the submissions of the ld. AR that every expenditure debited to the P&L account cannot be considered as operational in nature. From the observations made by TPO, it appears, he has rejected assessee’s claim only for the reason that no such entries were found in the annual report. The TPO has not properly examined the nature of expenditure. However, at the same time, assessee has to demonstrate that such expenditure was not claimed in any preceding assessment years. Therefore, considering the facts of the case, we are inclined to remit this issue back to the file of AO/TPO for deciding the issue afresh.
Non-exclusion of a reasonable amount of employee cost from the operating cost while calculating the operating margin - Held that:- The matter requires re-examination by AO/TPO after verifying the cause for quantum jump of salary in the impugned AY. If it is found that part of the employee cost is non-operational, then, suitable adjustment may be given from the operating cost.
Risk adjustment and negative working capital adjustment - Held that:- neither in its TP study nor before the TPO and DRP, assessee has submitted any computation made on a scientific basis towards risk adjustment. Though benefit of risk adjustment can be given in an appropriate case, but, it has to be on the basis of facts and evidence and cannot be granted in a routine manner. Though, it may be true, in case of a captive service provider AE takes all major risks. But, at the same time assessee also bears single customer risk, as in the event of any loss or damage to the business of AE assessee is also likely to suffer. Moreover, assessee has to demonstrate risk assumed by each of the comparable companies vis-à-vis the assessee. The basis for adjustment towards risk must come from assessee’s side. As assessee has not properly established its case either before the TPO or DRP by bringing facts and materials on record, we are inclined to remit this issue back to the file of AO/TPO for deciding afresh .
-
2015 (4) TMI 918
Claim of expenditure against payment of compensation - revenue expenditure or capital expenditure or otherwise - Short notice payment for termination of Toll Manufacturing Agreement - Held that:- The tax authorities must not look at the matter from their own view point, but that of prudent businessman. In any case if the assessee took a decision to discontinue the arrangement under the TMA with CCL in its best business interest then, such decision of the businessman cannot be questioned without doubting the genuineness of the arrangement and consequent payment of compensation. It is none of the job of the tax authorities to see how the assessee does business, in the best interest of its business. The payment in question has a direct nexus with the business activity of the assessee and, therefore, it was incurred for the business of the assessee and for commercial expediency.
In the case of Sales Magnesite Pvt. Ltd. [1994 (11) TMI 38 - BOMBAY High Court], it was held that the question whether it was necessary for commercial expediency or not, is a question that has to be decided from the point of view of the businessman and not by subjective standard of reasonableness of the Revenue. Also in case of Bombay Steam Navigation Co., it was held that Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts an circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regard as an integral part of the profit-earning process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure.
In view of the above discussion, and facts and circumstances of the case, we find that the payment of compensation was a business contractual obligation of the assessee and therefore, the expenditure was incurred for business as well as commercial expediency of the assessee. Accordingly the payment is an allowable business expenditure. - Decided in favour of assessee.
-
2015 (4) TMI 917
Initiation of proceedings u/s 153C of the Income Tax Act, 1961 - Company non-existent on account of its merger - Notice not served to amalgamated company - Held that:- In the present case it is an admitted fact that the assessee company amalgamated with M/s Windchimes Constructions Pvt. Ltd. w.e.f 01.04.2008 vide order dated 16.08.2010 of the Hon’ble Jurisdictional High Court and the assessee informed the AO about this fact vide letter dated 27.08.2010 (copy of which is placed at page no. 3A of the assessee’s paper book) and the letter dated 23.08.2010 filed on 27.08.2010 with the Income Tax Department (copy of which is placed at page no. 3 of the assessee’s paper book). Therefore, this fact was in the knowledge of the AO that the assessee was not inexistence at the time of preparation of the satisfaction note dated 05.07.2010 (copy is placed at page no. 1 of the assessee’s paper book) for issuing notice u/s 153C of the Act. From the above facts, it is clear that the notice u/s 153C of the Act by the AO was not issued to M/s Windchimes Constructions Pvt. Ltd. with which the assessee company i.e. M/s Mevron Projects Pvt. Ltd. amalgamated. Therefore, the assessment framed vide order dated 31.12.2010 u/s 153C/143(3) of the Act on the assessee was not valid.
Similar issue had been adjudicated in the case of M/s Micra India Pvt. Ltd. [2013 (11) TMI 679 - ITAT DELHI] and Khurana Engineering Ltd. [2013 (2) TMI 128 - GUJARAT HIGH COURT].
In view of the aforesaid discussion and keeping in view the ratio laid down in the above said judicial pronouncements, we are of the view that for making the assessment, it is absolutely essential that the person so to be assessed should be in existence at the time of making the assessment. In the present case the assessment has been framed by the AO on a date when the present assessee was not in existence and M/s Windchimes Constructions Pvt. Ltd. was fastened with the liability of the assessee but no notice was issued to the said amalgamating company i.e. M/s Windchimes Constructions Pvt. Ltd., therefore, the assessment framed by the AO vide assessment order dated 31.12.2010 was not valid. - Decided in favour of assessee.
-
2015 (4) TMI 916
Transfer Pricing adjustment in relation to International Transactions - Inclusion of certain companies by TPO in the list of comparables for ALP - Denial of deduction u/s 10A of the Income Tax Act, 1961 - Held that:- The Mumbai Bench of the Tribunal in Petro-Aroldite (P) Ltd. [2015 (3) TMI 1010 - ITAT MUMBAI] has held that a company cannot be considered as comparable because of exceptional financial results due to mergers/demergers etc. Similar view has been taken by the Delhi Benches of the Tribunal in several cases including Toluna India Pvt. Ltd. [2014 (10) TMI 424 - ITAT DELHI]. It is patent that the mergers/demergers largely influence the profitability of a company during the year of happening of such event, which makes it incomparable. As there have been acquisitions by Aftek Infosys Ltd. in the year in question and the financial results of the erstwhile company stand included in the overall profitability of this company, we hold that the same cannot be considered as a comparable.
We find that the predominant view of the Tribunal across the country in several cases is that the transactions of a company having more than 25% of Related Party Transactions (RPTs) are considered as controlled, thereby failing the test of comparability. This view has been taken in several decisions including by the Delhi Bench in Toluna India Pvt. Ltd. [2014 (10) TMI 424 - ITAT DELHI] and Actis Advisers Pvt. Ltd. [2012 (10) TMI 779 - ITAT, DELHI] and Mumbai Bench in Stream International Services Pvt. Ltd. [2014 (10) TMI 393 - ITAT MUMBAI]. The mechanism for calculating the percentage of Related Party Transactions has been broadly laid down in Nokia India Private Ltd. [2014 (11) TMI 101 - ITAT DELHI]. Since the authorities below have not examined the extent of the RPT percentage of this company, which the learned AR is claiming to be in excess of 25%, we set aside the impugned order and remit the matter to the file of AO/TPO for fresh determination of the percentage of Related Party Transactions of this company in consonance with the broader principles laid down in the case of Nokia India Private Ltd (supra), to the extent these are applicable. If the Related Party Transactions of this company are found to be more than 25%, then this company should be excluded from the set of comparables and in the otherwise situation, it should continue in the list of comparables.
We find from its Annual report, which is available in the paper book, that the business acquisitions of three firms in USA were undertaken by this company giving a substantial boost to its operations. When we come to the Schedule of fixed assets of this company, which is available on page 523 of the paper book, it can be seen that there is an entry with the narration “Business acquisitions”, during the year with the value of ₹ 8,47,18,999/-. These facts abundantly show that this company undertook acquisitions in the relevant year making it incomparable in the light of the reasoning given above while dealing with Aftek Infosys Ltd. We, therefore, order to delete this company from the list of comparables.
Section 10A dis-allowance - The only objection taken by the Assessing Officer for refusing deduction under Section 10A is that the registration was granted by the STPI Society and not the Inter-ministerial Standing Committee. We find that this issue is no more res integra in view of the judgment dated 26.2.2013 of the Hon’ble Delhi High Court in Technovate E Solution Pvt. Ltd. [2013 (3) TMI 372 - DELHI HIGH COURT], a copy of which has been placed on record by the ld. AR. In this judgment, it has been held that the approvals given by the Directors of Software Technology Parks of India are valid having the authority of the Inter-ministerial Standing Committee. This position was fairly accepted by the ld. DR also. In view of the binding precedent of the Hon’ble jurisdictional High Court, the facts of which are on all fours with those of the assessee company, we are of the considered opinion that no exception can be taken to the view canvassed by the learned CIT(A) on this score. - Decided partly in favour of assessee.
-
2015 (4) TMI 915
Addition u/s 69C of the Income Tax Act, 1961 on account of unexplained investments - Transactions recorded in regular books of accounts - Assessee paid taxes on profit earned on all transactions - No expenditure incurred or found incurred by the assessee - Held that:- There is no dispute to the fact that transactions entered into by the assessee with the Litika Group were mere paper transactions as accepted by the AO. There is also no dispute to the fact that all the amounts of such paper purchase/sale transaction were routed through banking channels. No transaction of cash dealing was found either during the course of search at Litika Group nor during the course of survey at assessee’s premises. It is also a matter of record that all these transactions were entered by the assessee in its regular books of accounts. Such circuitous transactions were entered into books of accounts and the profit earned thereon had been duly shown in the Profit and Loss account. There is also no dispute to the fact that on entire profit earned on actual transactions as well as circuitous transactions of purchase and sales, the assessee had paid due taxes on profit earned on all these transactions.
In the instant case the assessee has neither incurred any expenses nor was not found to have incurred any expenditure, therefore, there is no question of explanation regarding source of such expenditure. Accordingly, there was no justification on the part of the AO’s action for making any addition u/s.69C. Neither during the course of search at Litika Group nor during the course of survey at assessee’s premises nor during the enquiries made after survey reveal that assessee had transferred cash of ₹ 3.99 crores to Litika Group. There is also nothing on record to suggest that assessee and Litika Group were involved in some scam/scandal involving money laundering or violation of any law. After considering all these factual position, the CIT(A) recorded detailed finding at para 3.3 of his appellate order and held that provisions of Section 69C are not attracted.
It is also not the case of the department that excess payment received during the year amounting to ₹ 3.99 crores was not forming part of the gross results of the assessee on which profit was earned and taxes were duly paid. The detailed finding recorded by the CIT(A) at pages 10 to 14, para 3.3 have not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the findings recorded by the CIT(A) resulting into deletion of addition made u/s.69C of the Act. - Decided against the revenue.
-
2015 (4) TMI 914
Penalty for undisclosed income u/s 271(1)(c) of Income Tax Act, 1961 - Explanation 5 to section 271(1)(c) does not cover any immovable property - Principle of ejusdem generis - Assessee fulfilled all the conditions specified in explanation 5(2) to section 271(1)(c) - Held that:- In the instant case, in relation to the assessment year under consideration, the assessee was found to be the owner of 'construction on agriculture land (Rs.12,54,780/-) and membership of VLCC (Rs.1,95,220/-) during search. The impugned investments were duly shown by the assessee in her return of income for the assessment year 2007-08. As discussed above, the ownership of the assessee in construction of agriculture land could not be termed as ownership of 'any money, bullion, jewellery or other valuable article or thing' as envisaged under Explanation 5 in view of the judgements of Cochin Bench in case of South India Fiance [1991 (8) TMI 135 - ITAT COCHIN]. Therefore, so far as investment in 'construction on agriculture land' was concerned, the Explanation 5 to Sec.271(1)(c) was not applicable in the assessee's case and accordingly, penalty to that extent was not leviable. The learned C.I.T.(A). wrongly took the contradictory stand. On the one hand he held that the assessee was not entitled for immunity provided under Explanation 5(2) because the undisclosed income consisted of investment in construction on agriculture land and therefore, not covered by the term 'any money, bullion, jewellery or other valuable article or thing' as held by the honourable Cochin Bench, at the same time he confirmed penalty levied by the A.O. under Explanation 5 to Sec.271(1)(c). Once it was held that Explanation 5 was not applicable on the facts of the assessee's case, penalty could have not been imposed under the said Explanation. Moreover, the CIT(A) wrongly considered payment towards membership of VLCC as immovable property and confirmed the levy of penalty.
Furthermore, the assessee’s case was covered under exceptional circumstances provided under clause (2) of Explanation 5 to Sec.271(1)(c) as all the conditions specified in Explanation 5(2) to Sec.271(1)(c) were satisfied fulfilled as evident from the following facts: (a) Shri Purnandu Jain, head of the family, in his statement recorded u/s.132(4) on 27.04.2007 offered ₹ 20 crores as additional income for and on behalf of various members of his family.In view of the above discussion, we do not find any merit in the action of AO levying penalty u/s.271(1)(c) of the Act, as the assessee had fulfilled all the conditions specified in explanation 5(2) to section 271(1)(c) of the I.T.Act. - Decided in favour of assessee.
-
2015 (4) TMI 913
Calculation of Capital gain - Non consideration of the holding period of previous owner - Befefit of indexation - inherited the property - assessee entered into a collaboration agreement with a builder - assessee ground floor out of the building made by the builder and in addition to that builder also paid ₹ 21 lacs to the assessee - Held that:- Almost similar were the facts in the case of Janhavi S. Desai [2012 (7) TMI 496 - BOMBAY HIGH COURT] - the actual date of acquisition must be considered for calculating the capital gain. - the date on which the assessee inherited the property to be the relevant date and accordingly recomputed the capital gain.
Scope of sec. 2(42A) of the Act - Explanation I only determines the holding period of an asset for the purpose of short term capital gains and has no application to long term capital gain for the assessee to get the benefit of indexation? - the period of holding shall be from 01.04.1981 in respect of the entire property where property was acquired by the previous owner before 1.4.1981.
Similar view has been expressed by the Hon'ble jurisdictional Delhi High Court in the case of Arun Shungloo Trust [2012 (2) TMI 259 - DELHI HIGH COURT]holding that the assessee trust having acquired the property in trust on 05.01.1996, which property was acquired by the previous owner sometime before 01.04.1981 on sale of property by the assessee in 2001-02, it was entitled to the benefit of indexed cost of acquisition from 01.04.1981 and not for the period on or after 05.01.1996.
The ratios laid down in these decisions also support the finding given by the Learned CIT(Appeals) on the issue. We thus do not find any reason to interfere with the first appellate order in this regard. The same is upheld. The grounds are accordingly rejected. - Decided against the revenue.
-
2015 (4) TMI 912
Condonation of delay in furnishing the appeal - Mistake found in order of CIT appeal - Bonafide belief for not to claim deduction under section 80P of the Income Tax Act,1961, resulting in delay in appeal - Held that:- The assessee has in the appeal filed against the order of CIT(A) raised preliminary issue against the dismissal of appeal in limine. The CIT(A) had dismissed the condonation petition moved by the assessee holding that there was no merit in the claim of the assessee vis-à-vis deduction claimed under section 80P of the Act. The CIT(A) has further noted that the assessee by way of ground of appeal No.1 had raised the issue of deduction under section 80P of the Act. However, we find that the CIT(A) by mistake has made the said observation. The perusal of the ground of appeal filed with the Form No.35 reflects that one issue raised by the assessee i.e. while taxing the interest on Government Securities as an independent taxable income at ₹ 95,77,140/-, the learned AO erred in not setting off the loss on sale Government Securities amounting to ₹ 214,17,311/- against the profit on sale of units of mutual funds as stated earlier. The assessee had not raised any issue with regard to denial of deduction under section 80P of the Act. The order of CIT(A) on such surmises was thus, incorrect.
The second aspect of the issue is whether the assessee is entitled to the condonation of delay in filing the appeal late before CIT(A). The Hon’ble Supreme Court in MST. Katiji & Ors. [1987 (2) TMI 61 - SUPREME Court] had laid down the proposition that while considering the application for condonation of delay, sufficient cause pleaded by the party should be considered. The Hon’ble Supreme Court further held that sufficient cause for the purpose of condonation of delay should be interpreted with a view to do even-handed justice on merits in preference to approach which scuttles a decision on merits.
The assessee before us has pleaded for the condonation of delay in filing the appeals late before the CIT(A), especially in the circumstances where the assessee was initially under the bonafide belief that it was not entitled to the deduction under section 80P of the Act and hence, the appeals were not filed in time. However, the issue now raised is the correct computation of income in the hands of the assessee i.e. where on the one hand, the Assessing Officer had taxed gains arising on sale of securities in the hands of the assessee, similar loss arising on the sale of securities merits to be considered to the set off against the said gains on sale of securities. The second aspect pointed out by the assessee was the status of the assessee society wherein though it was formulated by the State government to carry on the specific purpose, but same could not be carried on as necessary approvals were not granted to the assessee. Thereafter, there was a decision to wind up the affairs but same could not be wound up because of holding up of money with cooperative societies which in turn, were in liquidation. In the entirety of the above said facts and circumstances, we are of the view that there was a reasonable cause for the delay in filing the appeals in time before the CIT(A) and since the assessee society was operating under the supervision of State government, we are of the view that the said delay in filing the said appeal late by 1178 days in assessment year 2006-07, before the CIT(A), merits to be condoned. Accordingly, we condone the same. - Decided in favour of assessee.
-
2015 (4) TMI 911
International transaction with Associated Enterprises - Adjustment in Arm length Price - Comparables rejected - Software Technology Parks of India Scheme - Short credit of TDS - Interest u/s 234B and 234C - Held that:- Eclerx Services Ltd. - The Bangalore Bench of the Tribunal in the case of Symphony Marketing Solutions Pvt Ltd. [2014 (2) TMI 83 - ITAT BANGALORE] has followed the decision of Hyderabad Bench in the case of Capital IQ Information Systems (India) Pvt Ltd. [2014 (9) TMI 125 - ITAT HYDERABAD], wherein the Tribunal has held that extraordinary event occurred during the previous year makes the company incomparable. As mentioned here in above, the extraordinary even has taken place in the case of Eclerx Services Ltd which excludes this company as a comparable. We, therefore, hold that this company cannot be considered as comparable.
Mold-Tek Technologies Ltd - The appointed date for amalgamation and the demerger were 1.10.2006, and 1.4.2007 respectively. The business and the assets and liabilities of Tech-men Tools Private Limited stand transferred to and vested in Mold Tek Technologies Limited w.e.f.1.10.2006. In our considered opinion, this is definitely an extraordinary event which make this company excluded from final list of comparables on similar lines as discussed by us in the case of Eclerx Services Ltd and the same judicial decision as considered in the case of Eclerx Services Ltd. - The appeal filed by assessee is allowed.
Short credit of TDS - In our considered opinion, this issue needs to be verified at the assessment level. We, therefore, restore this issue to the file of AO. The AO is directed to grant credit for the TDS as per TDS certificate furnished by the assessee in the light of the provisions of law. This ground is treated as allowed for statistical purposes.
Interest u/s 234B and 234C of the Income Tax Act - In our humble opinion charging of interest is mandatory though consequential in this case. The AO is directed to levy interest as per the provisions of law. - Decided partly in favour of assessee.
............
|
9911796707
