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2022 (7) TMI 1409
Application for revival of Corporate Insolvency Resolution Process (CIRP) rejected - in the corporate insolvency process, settlement reached between the parties - HELD THAT:- The Consent Terms clearly entitle the Financial Creditor to revive the Section 7 petition in event any default of the terms of the Consent Terms - Further, the order dated 05.02.2020 cannot be read as an order by which Consent Terms has not been taken on record when by the said order application filed alongwith the consent terms under Rule 11 of NCLT rules, 2016 was taken on record and was allowed. When the application was allowed in terms of the consent terms, Clause 8 itself shall be treated to be part of the order which shall entitle the Financial Creditor to revive the petition in the event of any default.
Judgment of this Tribunal which has been relied by the Respondent in Krishna Garg and Anr. vs. Pioneer Fabricators Pvt. Ltd. [2021 (2) TMI 1344 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] was a case where neither settlement terms were filed nor the same were brought on the record - The facts in the present case are distinguishable from the above case as Consent Terms were filed and also were taken on record by the Adjudicating Authority. When the Adjudicating Authority allowed the application filed, the Consent Terms were also taken record and the Financial Creditor was fully entitled to seek revival of the Section 7 petition in event of default of consent terms.
The Section 7 petition is revived - appeal allowed.
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2022 (7) TMI 1408
TP Adjustment - MAM selection - assessee has taken on lease dredgers from its associated enterprises - TPO rejected the independent valuer certificate used by the assessee for benchmarking the transaction of charter hire of dredgers using cup as most appropriate method and proceeded to benchmark charter hire dredgers and payment to associate enterprises for sub-contract of specified dredging activities using TNMM and aggregating these transaction - HELD THAT:- As decided in assessee's own case [2019 (5) TMI 1978 - ITAT MUMBAI] the material facts permeating through different assessment years are more or less identical as the terms and conditions on which the dredgers are hired have not changed. That being the case, applying the rule of consistency, a different view cannot be taken in the impugned assessment year with regard to the benchmarking of lease rentals paid for charter hire of dredgers by applying CUP method. For the aforesaid reasons, we allow the grounds raised by the assessee with a direction to the Assessing Officer / Transfer Pricing Officer to accept the benchmarking done by the assessee under CUP method after verifying the fact that the independent valuer has made the valuation as per CIRIA norms.
Taxability of management service fees - Issue decided in favour of assessee as own case for A.Y. 2011-12 [2019 (5) TMI 1978 - ITAT MUMBAI] held that amount received is neither in the nature of royalty nor fees for technical services under Article–12 of India–Netherland Tax Treaty. That being the case, we delete the addition made by the Assessing Officer.
Taxability of salary received - This issue also covered in favour of the assessee by the decision of the ITAT, Mumbai, in the case of the assessee itself [2019 (5) TMI 1978 - ITAT MUMBAI] held that reimbursement of salary is not in the nature of fees for technical services as per Article–12(5) of India–Netherland Tax Treaty. Therefore we delete the addition made by the Assessing Officer. These grounds are allowed.
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2022 (7) TMI 1407
Writ petition maintainability against notice issued u/s 148 - Validity of reopening of assessment - petitioner seeks issuance of writ in the nature of certiorari for quashing notice issued to the petitioner u/s 148A (b) - Whether at this stage of notice under Section 148, writ Court should venture into the merits of the controversy when AO is yet to frame assessment/re-assemment in discharge of statutory duty casted upon him under Section 147 of the Act ?
HELD THAT:- The aforesaid question already stands answered by this Court in Gian Castings Pvt. Ltd. Vs. Central Board of Direct Taxes and others [2022 (6) TMI 246 - PUNJAB & HARYANA HIGH COURT] where the proceedings have not even been concluded by the statutory authority, the writ Court should not interfere at such a pre-mature stage - there is no reason to warrant interference by this Court in exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority. Also upheld by SC [2022 (7) TMI 1272 - SC ORDER]
Admittedly in the present case the procedure as contemplated of the 1961 Act was followed and the authority acted within jurisdiction though petitioner alleges that it erred as the petitioner claims that the order passed under section 148A (d) warrants interference owing to error of fact.
No reason to interfere at this stage.
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2022 (7) TMI 1406
Rectification u/s 154 - whether the AO while taking refuge of section 154 has rightly passed second order on the same application for rectification of the order which has already been decided on merit? - HELD THAT:- Section 154 of the Act mandates that an amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the Assessee or (the deductor) or (the collector), shall not be made under this section unless the authority concerned has given notice to the person(s) referred above of its intention to doso and has allowed a reasonable opportunity of being heard.
The rule of ‘Audi laterampartem’ says ‘hear the other side’. If the order is passed by the authority without providing notice or the reasonable opportunity of being heard to the person affected by it, if mandatorily required under the statute, then the same would be invalid and liable to be set aside.
Coming to the instant case, from the record and order u/s 154 of the ACT, it clearly appears that the AO has neither given any notice to the Assessee qua its intention to do such amendment, which has the effect of enhancing or reducing a refund or otherwise increasing the liability of the Assessee, nor provided any opportunity of being heard to the Assessee, while passing an order u/s. 154 of the Act, hence dents the roots of the case.
On the aforesaid analyzations, we are of the considered view that the order u/s. 154 of the Act by the AO, is unsustainable being invalid and void ab initio.
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2022 (7) TMI 1405
Validity of assessment - no proper service of notice u/s 143(2) - Addition on-money payment on purchase of a flat - HELD THAT:- Assessment record does not contain any proof regarding service of notice under section 143(2) to the assessee. There should not be any dispute that the AO would get jurisdiction over the return of income filed by the assessee only upon service of notice u/s 143(2) meaning thereby, the AO could not scrutinize the return of income without issuing notice u/s 143(2) in accordance with law.
We find support for this legal proposition from the decision rendered by Hon'ble Supreme Court in the case of ACIT Vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] Accordingly, in the present case, the impugned assessment order framed by the AO is liable to be quashed for want of jurisdiction - set aside the order passed by learned CIT(A) as well as AO.
We give liberty to the Revenue to seek recall of this order in accordance with law, if it is found subsequently that there was proper service of notice u/s 143(2) of the Act. Appeal filed by the assessee is treated as allowed.
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2022 (7) TMI 1404
MAT applicability on bank - Tribunal held that the assessee-Bank cannot be considered as a Company - Section 115JB applicability to assessee Bank for MAT purposes - HC decided issue in favour of assessee - HELD THAT:- Leave granted.
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2022 (7) TMI 1403
Disallowance of interest expenses on account of diversion of interest-bearing loan - HELD THAT:- As the impugned amount borrowed by the assessee has been diverted for making the contribution in the partner’s capital account, investment in the lands and interest free/interest bearing advances. As far as the contribution in partner’s capital account is concerned, we note that the assessee has shown interest income from the partners which is chargeable to tax. Assessee, against such interest income from the partners ship account, is eligible for deduction for the interest expenses. It is for the reason that there is direct nexus between the interest income and the interest expenses.
Interest expense on loan diverted to interest bearing loans and advances is also eligible for interest expenses. It is for the reason that there is direct nexus between the interest income and the interest expenses.
The amount of loan diverted for the investments in land and interest free loans and advances, the corresponding interest cannot be allowed as deduction against the interest income. It is for the reason that there is no direct nexus between the interest income and the interest expenses.
Such interest expenses cannot be allowed as deduction either under the provisions of section 36(1)(iii) or 57 of the Act. In view of the above, we set aside the order of the CIT (A) with the direction to the AO to calculate the amount of interest attributable to the investment made in the lands and interest-free loans and advances and make the disallowance proportionately. Hence the ground of appeal of the assessee to this extent is partly allowed.
Unexplained cash expenses - assessee has incurred certain expenses on purchase of property such as stamp duty charges and registration charges but failed to explain the source of such expenses - HELD THAT:- We note that all the cash expenses incurred by the assessee have been duly incorporated in the cash book. No doubt raised by the authorities below with respect to the cash book filed by the assessee. Since, the expenses incurred in cash have been duly recorded in the books of accounts, the source of cash for such expenses cannot be doubted. The cash book is a summary of the transactions which are carried out in cash demonstrating the source of receipt of cash and payment of cash. Thus, it cannot be said that such expenses were incurred by the assessee outside the books of accounts. The issue on hand relates to the cash payment which was recorded in the cash book but corresponding receipt of cash was nowhere doubted by the authorities below, accordingly, we set aside the finding of the CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Addition on account of interest expenses on the car loan and the depreciation on the car - As found that the assessee is not carrying out any business activity and therefore such expenses cannot be allowed as deduction as business expenses under the provisions of income tax Act - HELD THAT:- Admittedly, the assessee is a partner in 5 partnership firm and drawing handsome amount of share of profit, remuneration and the interest. Indeed, the amount of share of profit is not chargeable to tax in the hands of the assessee but the remaining items of interest income and the remuneration are chargeable to tax under the head business and profession which have been duly disclosed in the income tax return.
Thus, in such a situation, the interest on the car loan and the depreciation thereon cannot be denied for the purpose of the deduction -
Admittedly, there is a flat rate of tax in the case of partnership firm whereas the rate of tax in the case of a partner is qualified for slab rate of tax besides the maximum exemption limit provided under the statute. As such, had the deduction been allowed to the partnership firm, there would have been less revenue in the hands of the partnership firm. Thus keeping in view the above principles, we are not convinced with the finding of the learned CIT-A and accordingly direct the AO to delete the addition made.
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2022 (7) TMI 1402
Reopening of assessment u/s 147 - Validity of notice of reopening - HELD THAT:- Petitioner seeks permission to withdraw the present petition.
Permission as prayed for is granted.
The petition stands disposed of as withdrawn. Notice is discharged. Interim-order is vacated.
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2022 (7) TMI 1401
TP Adjustment - Comparable selection - HELD THAT:- Exclusion of companies as functionally dissimilar with that of assessee need to be deselected from final list.
Adjustment on account of notional interest on outstanding receivables - Whether Outstanding receivables cannot be treated as a separate international transaction? - HELD THAT:- The assessee has provided IT enabled services to its AEs and amount outstanding as trade receivables merely represent the dues which are to be received by the Assessee against the services provided. As a business practice, the Assessee did not charge any interest on delayed realisation of invoice from AEs nor paid any interest on delayed payables.
Early or late realization of service proceeds is incidental to the transaction of sale/ service, and not a separate transaction in itself. These represent the consequence of an international transaction and not an international transaction per-se. If the ALP in respect of an international transaction of service is determined, then there can be no question of treating non-receipt of interest in such transaction as separate international transaction warranting any further adjustment. Once ALP is determined in respect of the sale/ service transaction, it would be deemed to be covering all the elements and consequences of such transaction of sale/ service.
Aggregation approach - All service related costs are embedded in the remuneration received from the AEs - It is to be appreciated that where companies are aware of the fact that customer will take longer than the agreed time to pay the outstanding dues, the same is factored in the price/ mark-up charged for the services rather than to levy of actual interest when the payment is eventually made by the customer. The principle of aggregation is well established rule in the transfer pricing analysis. This principle seeks to combine all functionally similar transactions wherein arm's length price can be conducted for a number of transactions taken together. The said principle is enshrined in the transfer pricing regulation itself.
As per the Hon’ble DRP’s directions, the notional interest computation must be made on an Invoice-by-Invoice basis. The Hon’ble DRP directed the Assessee to furnish the TPO with InvoiceIT( wise details of period of delay for the computation of notional interest which was submitted with the TPO vide submission dated 23 April 2021. However, the TPO has not provided any workings for computation of the notional interest on delayed receivables to determine whether the directions of the DRP to compute interest on a Invoice-by-invoice basis has been followed and accordingly the Issue is remitted to AO/TPO for fresh consideration.
Working capital adjustment appropriately takes into account the delayed/ outstanding receivable; separate TP adjustment is unwarranted - We direct the AO / TPO to redo the transfer pricing analysis in respect of interest on outstanding receivables by taking into account the directions of the Tribunal in assessee's own case.
Deduction u/s 10AA - HELD THAT:- The claim of assessee to be verified by the AO/TPO in accordance with the return of income filed by the assessee. Accordingly, we direct the AO/TPO to consider claim of assessee u/s 10AA of the Act in accordance with law. The issue remitted to AO/TPO for fresh consideration
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2022 (7) TMI 1400
TP adjustment in SWD segment - Comparable selection - application of different filters - assessee filed its objections before the DRP contending that the turnover filter should have an upper limit and the same is not applied by the TPO - DRP rejected the contention of the assessee stating that there is no correlation between the profit margins and the turnover of companies as far as service sector - HELD THAT:- We direct the AO / TPO to apply the appropriate upper turnover filter and exclude the companies having turnover in excess of Rs.200 crores.
Exclusion of Inteq Software Ltd. on the basis that the RPT filter for AY 2014-15 fails while computing the margin of the company on an average - Margin of Inteq Software Ltd. for AY 2014-15 should not be considered and therefore direct to exclude this company from the comparables.
Exclusion of Infobeans Technologies Ltd. on the basis that it is functionally not comparable for AY 2015-16 and therefore the margin of that year should be exclude while computing the average margin of that company - As relying on BORQS Software Solutions P. Ltd. case. [2021 (10) TMI 1351 - ITAT BANGALORE] we direct the AO to exclude the margin for AY 2015-16 of while arriving at the 3 year average profit of Infobeans Technologies Ltd.
Working capital adjustment - TPO did not allow any adjustment on the working capital as upheld by DRP - In the view of the ruling in the case of M/s. Huawei Technologies India (P) Ltd.[2018 (10) TMI 1796 - ITAT BANGALORE] the basis of rejection of the relief by the DRP is no longer valid -We therefore direct the AO/TPO to consider the working capital adjustment in the light of the aforesaid ruling and allow appropriate adjustment in arriving at an arm’s length price.
TP adjustment towards interest on outstanding receivables - TPO treated the outstanding receivables from AE as in the nature of loan facility given to the AE and imputed interest @ 6 months LIBOR plus 450 basis points which works out to 4.985% - HELD THAT:- Respectfully following the decision of the coordinate Bench of the Tribunal in the case of Barracuda Networks (I) P. Ltd. [2022 (5) TMI 322 - ITAT BANGALORE] we hold that interest on receivables is a separate international transaction and separate benchmarking is required to be done. We therefore remit the issue to the TPO for fresh examination and take into consideration the guidelines laid down in the aforesaid decision of the Tribunal. The TPO is also directed to verify and consider the fact that the payables from AE is more than the receivable from AE as submitted by the assessee.
Disallowance of Depreciation on Goodwill - HELD THAT:- We notice the coordinate Bench of this Tribunal in the assessee’s own case [2022 (5) TMI 722 - ITAT BANGALORE] depreciation claimed by the assessee on goodwill acquired deserves to be allowed in accordance with law. AO is directed to compute depreciation in accordance with the principles laid down in case of Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - We hold that depreciation on goodwill deserves to be allowed. We direct the AO to recompute the depreciation with similar directions as in AY 2015-16.
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2022 (7) TMI 1399
Maintainability of appeal against the intimation u/s 143(1) - Addition of interest income while processing the return u/s 143(1) - assessee preferred an appeal before the National Faceless Appeal Center Delhi which was dismissed as right course of action for the assessee to file rectification application u/s 154 instead of filing appeal u/s 246A - HELD THAT:- The provisions of section 246A of the Act gives right to the assessee to preferred an appeal to the learned CIT-A, if aggrieved, against the intimation issued by CPC Bangalore under the provisions of section 143(1) of the Act.
Thus we hold that the learned CIT-A/NFAC erred in not adjudicating the appeal preferred by the assessee on merit. Accordingly we set aside the issue to the learned CIT-A/NFAC to decide the grievance raised by the assessee on merit as per the provisions of law. Appeal of the assessee is allowed for the statistical purposes.
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2022 (7) TMI 1398
Refund claim u/s 54 of CGST Act - appeal dismissed only on the ground that requisite documents were not submitted at the adjudicating stage - HELD THAT:- Without entering into the dispute as to whether the petitioner/assessee was intimated as to the documents which are necessary to be submitted for claiming refund, this Court is of the considered view that the appellate authority ought to have taken note of the documents which were filed by the petitioner/assessee before the appellate authority in support of his claim for refund. Such finding is supported by the reasons assigned hereinafter.
Rule 112 (1) of the Central Goods and Services Rules, 2017 (for short, “CGST Rules, 2017”) permits an appellant to produce additional evidence before the appellate authority under certain circumstances. Sub-Rule (4) of Rule 112 starts with a non-obstante clause and provides that nothing contained in Rule 112 shall affect the power of the appellate authority to direct the production of any document or the examination of any witness to enable it to dispose of the appeal. Thus, the appellate authority has the power to permit the appellant to produce documents which will enable it to dispose of the appeal effectively - the learned Advocate for the respondents also could not satisfy this Court that the documents produced by the petitioner before the appellate authority are not necessary for the effective disposal of the appeal. The appellate authority, in the considered view of the Court, failed to exercise the jurisdiction vested in him by law in refusing to consider the documents filed by the petitioner/assessee before the appellate authority.
Impugned order set aside - appeal allowed.
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2022 (7) TMI 1397
Rectification of mistake u/s 154 - Late filing fee u/s. 234E - levy late filing fee prior to 01.06.2015 - intimation u/s 200A - Diversified views - HELD THAT:- ITAT Mumbai Bench in the case of Rose Rock Real Estate India Pvt. Ltd [2021 (9) TMI 621 - ITAT MUMBAI] and Srinivasamurthy Kolhially Yalakaiah [2020 (6) TMI 700 - ITAT BANGALORE] as held the issue is debatable then the same takes the adjustment out of the jurisdiction of CPC Bangalore. As debatable issues cannot be decided under computerized adjustment. Hence to conclude since it has been held by higher courts that prior to enabling provision to levy interest under section 234E, the interest for earlier period return due cannot be upheld we set aside the order of learned CIT(A) and decide the issue in favour of assessee
Thus we hereby allow the appeals of the assessee.
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2022 (7) TMI 1396
Income taxable in India - Fabrication charges Receipts as fees for technical services - DTAA between India and Singapore - taxability under Article 12(4)(a) on the ground that one of the group companies, i.e. OC-US, has received such payments from the Indian affiliate - HELD THAT:- There is no dispute that the assessee is entitled to the benefits of the Indo-Singapore tax treaty, that the assessee does not have any permanent establishment in India, and that, accordingly, income earned by the assessee cannot be taxed as business profits under article 7 of the Indo Singapore tax treaty.
The OC US and the assessee, a Singapore-based entity, are distinct entities and, they have distinct legal existences. The mere fact that these entities are part of the same multinational group does not require, or justify, ignoring the distinct identities of these entities, or the fact that the operations of these entities are in different jurisdictions. It is also not even the case of the revenue authorities that the refurbishing work is not carried out in Singapore.
While a lot of emphases is paid by the revenue authorities on the fact that on the same transaction the assessee had paid taxes in India in the immediately preceding year, and the fact that it is part of overall common arrangements that the leasing is done from one jurisdiction and the refurbishing or bushing is done is another jurisdiction. Nothing, however, turns on these arguments also.
The acceptance of tax liability in one year does not constitute estoppel against the assessee for the other years, and it is for the group to organize a multinational group to organize its activity, as long as it is a bonafide arrangement, in a manner as deemed commercially expedient.
We are satisfied that so far as the income of the assessee from the refurbishing of the bushes is concerned, it is not taxable in India as the provisions of Article 12(3) cannot be invoked in this case, and that, so far as the provisions of Article 12(4)(a) are concerned, these provisions cannot be invoked as the assessee has not rendered these services in connection with the services “for which a payment described in paragraph 3 is received” by the assessee. As also bearing in mind the entirety of the case, we uphold the plea of the assessee, and delete the impugned addition - Decided in favour of assessee.
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2022 (7) TMI 1395
Validity of reopening of assessment - assessment barred by limitation - Time limit for notice u/s 149 - HELD THAT:- As decided in BRAHM DATT case [2018 (12) TMI 832 - DELHI HIGH COURT] that the amendment of Section 149 of the Act by Finance Act, 2012, which extended limitation for reopening assessment to sixteen years could not be resorted for reopening proceedings concluded before amendment came into effect. Admittedly the amendment came into effect on 1st July, 2012 and the notice under Section 148 was issued on 19th August, 2013.
The Tribunal after taking note of the decision in Brahm Datt [supra] took into consideration of the facts of the assessee’s case and found that notice for reopening the assessment issued on 19th August, 2013 in respect of the assessment year under consideration, Assessment year 2005-06 was time barred. The view taken by the learned Tribunal does not call for any interference - Decided against revenue.
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2022 (7) TMI 1394
Profiteering - De-freezing Bank accounts of petitioner - petitioner contends that the debit freeze orders impugned here would not sustain since the details of the bank accounts which were maintained by the petitioner were known to the respondents - HELD THAT:- The Court notes that the bank guarantee which is proffered together with the amount which stands to the credit of the freezed accounts would safeguard the interest of the respondent during the pendency of the writ petition.
Consequently, let the petitioner furnish a bank guarantee to the extent of Rs. 950 crores to the satisfaction of the respondents within seven working days from today. Subject to the submission of that bank guarantee, the petitioner may be permitted to operate the bank accounts which form subject matter of the orders under Section 17(1A) to the extent that a sum of Rs. 251 crores which was standing in credit in those accounts on the date of the passing of the impugned orders shall be maintained at all times. Additionally the petitioner shall also furnish to the Enforcement Directorate all details of remittances that may be made from the concerned bank accounts every 48 hours.
Let this petition be listed on 28.07.2022 for final disposal.
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2022 (7) TMI 1393
MAT - Denial of deduction being lower of the two i.e. book loss or unabsorbed depreciation claimed in terms of clause (iii) of Explanation (1) to Section 115JB - HELD THAT:- We have examined the evidences/records/ITRs of the assessee in respect of earlier years and observed that the claim of the assessee is correct and to that extent the finding of the CIT(A) cannot be sustained.
So far as the issue of allowing lower of book loss or unabsorbed depreciation while computing the book profit under section 115JB, we are of the considered view that the issue is debatable and cannot be subject matter of the proceedings u/s 154.
The case of the assessee is squarely covered by several decisions of the Coordinate Benches in the case of (i) Kanchanganga Estates (P) Limited [1997 (10) TMI 396 - ITAT MUMBAI] (ii) Maccaferri Environmental Solutions (P) Limited [2018 (12) TMI 1974 - ITAT MUMBAI], Cadila Healthcare Limited [2021 (12) TMI 1244 - ITAT AHMEDABAD], Smt. Vandana Manoj Shah [2016 (3) TMI 1452 - ITAT AHMEDABAD] & M/s. Madhav Stock Vision [2018 (4) TMI 1947 - ITAT MUMBAI] - We, therefore direct AO to allow the claim of the assessee while computing the book profit u/s 115JB of the Act. Appeal of the assessee is allowed.
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2022 (7) TMI 1392
Revision u/s 263 by CIT - Addition u/s 69A - Assessee has submitted that the assessee has already opted to avail the Vivad-se-Vishwas Scheme 2020 - HELD THAT:- In the present case, the assessee has opted to avail the Vivad-se-Vishwas Scheme 2020 and filed Form 1 and Form 2 on 10.11.2020 and subsequently Form 3 were issued to the assessee on 23.12.2020 by the Designated Authority and moreover, Form 4 was filed on 04.02.2021 for issuance of Form 5 and Form 5 was also issued and taxes paid accordingly, much before the revision order under section 263 of the Act was passed on 25.02.2021. Since the assessee could produce the above details of availing Vivad-se-Vishwas Scheme 2020 and the Designated Authority has already issued Form 5 during the course of revision proceedings, the ld. PCIT was not aware of the above facts.
Thus we of the considered opinion that the revision order passed u/s 263 by the ld. PCIT cannot survive. Revision order passed under section 263 is quashed. Appeal filed by the assessee is allowed.
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2022 (7) TMI 1391
TP Adjustment - comparable selection - Turnover and Abnormal Profits Filter - exclusion of Celestial Biolabs Ltd. raised - HELD THAT:- We are of the opinion that, this comparable cannot be compared with that of the assessee which is a captive service provider, as observed by this Tribunal vide order dated 06/04/2018.
Also recorded by this Tribunal that, the assessee before us is engaged in the business of providing software development and other related support services to the SAP AG Group companies and conducts its operations from various undertakings registered under STPI scheme. Based on the above analysis, we hold that this comparable is not a fit company to be included in the list of comparables to compute the ALP of the transaction.
Exclusion of comparables as functionally dissimilar with that of assessee as captive service provider.
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2022 (7) TMI 1390
TP Adjustment - comparable selection - As per ITAT Excel Infoways failed the diminishing revenue filter - HELD THAT:- This Court is of the view that the intent of Chapter X of the Act is to compute the income in relation to a controlled transaction between an assessee and its associated enterprise having regard to the arm’s length price in order to nullify the effect of transfer of income to a jurisdiction outside India, if any, in respect of the controlled transaction. The exercise of determining the arm’s length price in respect of international transactions between related enterprises is aimed at determining the price which would have been charged for products and services, as nearly as possible, if such international transactions were not controlled by virtue of their being executed between related parties.
The object of the exercise is to remove the effect of any influence on the prices or costs that may have been exerted on account of the international transactions being entered into between related parties. It is clear that for the exercise of determining the arm’s length price to be reliable, it is necessary that the controlled transactions be compared with uncontrolled transactions which are similar in all material aspects.
Since, in the present case Excel Infoways Pvt. Ltd. fails not only the service revenue from export/ITES filter of 75% insisted upon by the TPO but also the diminishing revenue filter as is apparent from the chart reproduced hereinabove, no interference is called for in the finding recorded by the Tribunal. No question of law arises for consideration.
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