Offence punishable Under Section 66D of the Act - Compensation on the bedrock of public law remedy - justifiability of the continuance of the criminal proceedings - HELD THAT:- The officers of the State had played with the liberty of the Petitioners and, in a way, experimented with it. Law does not countenance such kind of experiments as that causes trauma and pain.
In the case at hand, there has been violation of Article 21 and the Petitioners were compelled to face humiliation. They have been treated with an attitude of insensibility. Not only there are violation of guidelines issued in the case of SHRI DK. BASU, ASHOK K. JOHRI VERSUS STATE OF WEST BENGAL, STATE OF UP. [1996 (12) TMI 350 - SUPREME COURT]), there are also flagrant violation of mandate of law enshrined Under Section 41 and Section 41A of Code of Criminal Procedure. The investigating officers in no circumstances can flout the law with brazen proclivity. In such a situation, the public law remedy which has been postulated in NILABATI BEHERA @ LALITA BEHERA VERSUS STATE OF ORISSA [1993 (3) TMI 355 - SUPREME COURT], SUBE SINGH VERSUS STATE OF HARYANA AND ORS. [2006 (2) TMI 699 - SUPREME COURT], comes into play. The constitutional courts taking note of suffering and humiliation are entitled to grant compensation. That has been regarded as a redeeming feature.
In the case at hand, taking into consideration the totality of facts and circumstances, we think it appropriate to grant a sum of ₹ 5,00,000/- (rupees five lakhs only) towards compensation to each of the Petitioners to be paid by the State of M.P. within three months hence. It will be open to the State to proceed against the erring officials, if so advised.
In the present case, it can be stated with certitude that no ingredient of Section 420 Indian Penal Code is remotely attracted. Even if it is a wrong, the complainant has to take recourse to civil action. The case in hand does not fall in the categories where cognizance of the offence can be taken by the court and the accused can be asked to face trial. In our considered opinion, the entire case projects a civil dispute and nothing else.
The proceedings initiated at the instance of the 8th Respondent is quashed - the order negativing the prayer for discharge of the accused persons is set aside - prosecution initiated against the Petitioners stands quashed - petition allowed.
Revision u/s 263 - addition on account of bogus share application and premium investment - Commissioner who was of the opinion that inquiries were not made in respect of 11 share and premium applicants therefore restored the matter back to the AO for carrying out necessary inquiries with respect to identity and creditworthiness of these 11 share applicants and then to decide about genuineness of the share application transactions - HELD THAT:- Tribunal in impugned judgment upon perusal of the record, particularly of the assessment proceedings held that the Assessing Officer had in fact, made inquiries with these 11 applicants also. The Tribunal held that even the Commissioner did not dispute this fact. The Tribunal was therefore of the opinion that this was not a case where it can be said that the Assessing Officer failed to carry out any inquiry at all. The Tribunal also noted that the Assessing Officer had called for the reply of the assessee who had given elaborate explanation. In fact, it was this exercise undertaken by the AO in the reassessment proceedings which led to addition of ₹ 26 lacs in case of the assessee on account of bogus share application and premium investment.
The facts being such, we do not found any error in the Tribunal striking down the order of the Commissioner of Incometax (Appeals) passed under section 263 - No question of law arises
Addition u/s 68 - unexplained cash credit - HELD THAT:- Merely because the investment of ₹ 2.94 crore has come from a KYC compliant NRO account is not enough to prove either the genuineness of the transaction or creditworthiness of Shri Vakil. It is not fair on the part of the first appellate authority to put the entire onus on the Assessing Officer to prove that the transaction is not genuine or Shri Vakil has no creditworthiness.
When the AO in his remand report has clearly stated that the assessee neither submitted the documentary evidence called for nor produced Shri Vakil for examination to ascertain his creditworthiness as well as genuineness of the transaction, the AO could not have accepted the transaction as genuine in the absence of proper evidence.
We are inclined to set aside the impugned order of the Commissioner (Appeals) and restore the matter back to the file of the AO to examine the issue relating to genuineness of the investment made of ₹ 2.94 crore by Shri Vakil, in share application money of the assessee company and decide the issue after providing adequate opportunity of hearing to the assessee. The assessee is at liberty to furnish necessary evidences either documentary or by producing Shri Vakil, to prove the genuineness of the investment made by him and also his creditworthiness.- Ground raised by the Department is partly allowed for statistical purposes.
Rectification of mistake - TP Adjustment - Working capital adjustment - as per assessee lower authorities have erred in not giving working capital adjustment in the final assessment order even though it was given in order passed u/s.92CA. Even otherwise, working capital adjustment is incorrectly computed - HELD THAT:- Tribunal had allowed the ground of the assessee, though second part of the ground was not specifically dealt with. Not dealing with the second part of the ground regarding incorrect computation of working capital is a mistake apparent on record. There can be no dispute that working capital adjustment has to be calculated from the final list of comparables and cannot be restricted. We therefore modify para 43 of the order and direct the AO / TPO to give working capital adjustment based on actual figures computed from the final list of comparables. MP filed by the assessee is allowed.
Transfer Pricing Adjustment - assessee is engaged in the business of providing software services related to back office operations on contract basis to overseas Siemens Group companies - RPT filter at 15% - HELD THAT:- In normal circumstances when there is no difficulty in selecting the comparables, the RPT filter should not exceed 15% of the sale/revenue. In the case on hand, the TPO has selected as many as 27 comparables which shows that there was no difficulty in finding the comparable companies and therefore we are of the considered opinion that the RPT filter shall not exceed 15% of the total sale instead of 25% filter applied by the TPO. Only in the exceptional cases where the comparable companies are not easily available and only few companies are found during the search then the tolerance range of RPT can be relaxed to the maximum limit of 25%. Since the case on hand is not an exceptional case therefore in our view the extreme limit of 25% of RPT filter cannot be applied in this case. In view of the above facts, we admit the additional grounds raised by the assessee regarding the RPT filter at 15%.
Application of employee cost filter at 25% - HELD THAT:- We agree with the contention of the learned Authorised Representative that the employee cost filter should be applied at 25% however even if it is applied to 1 or 2% less or more will not cause any substantial effect or would be prejudicial to the interest of either of the party. We are of the view that the ITES sector is employee intensive and therefore the cost of the employees cannot be ignored for selecting the comparable companies. If in a particular case of company, the employee cost is less than the average cost previaling in the industry then it is necessary to find out the reasons of such a low employee cost which is against the normal business practice in this industry. Accordingly we admit the additional ground raised by the assessee with a rider that the TPO has to apply a proper filter of employee cost and then apply the same on all the comparable companies in the set of comparables.
A low employee cost shows a different business model and it appears that these companies are outsourcing their business however since the TPO has not examined this issue therefore we set aside this issue to the record of the TPO/A.O for limited purpose of verification of the reasons for such a low employee cost and if it is found that low employee cost is due to a different business model then these companies shall be excluded from the list of comparables.
Software development segment cannot be compared with ITES segment and hence this company cannot be compared with the assessee's ITES segment.
Assessing Officer himself has applied the employee cost filter at 25% and this company is having employee cost of 22.69%. However, in the case of the assessee as we have discussed in the foregoing paras neither the assessee nor the TPO has applied any employee cost filter. While deciding the additioal ground we have set aside this issue to the record of the TPO/A.O to apply an appropriate employee cost filter. Accordingly, the comparability of this company has been set aside to the record of the TPO/A.O for reconsideration and adjudication.
Revenue from software products and also enjoy the benefit of huge intangible asset apart from brand value and leader in the market.
Since the employee cost is only 7.16% and further the revenue form ITES is only 8.21% therefore by any yardstick this company cannot be considered as functionally comparable having a different business model of low employee cost and low revenue from the ITES segment. Accordingly, we direct the A.O./TPO to verify the alleged fact and if it is found correct, this company shall be excluded from the list of comparables.
Since we have directed the A.O./TPO to exclude certain comparables and also re-examine certain issues therefore the ALP has to be recomputed after exclusion of the companies from the list of comparables as directed by us as well as re-examination of the comparability of certain companies. Needless to say that the benefit of the proviso to Section 92C also be considered if the ALP is within the tolerance range of + or – 5%.
Foreign currency from the export turnover for computation of deduction under Section 10A - HELD THAT:- The Hon’ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others [2011 (8) TMI 782 - KARNATAKA HIGH COURT] had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator - we direct the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10A
Validity of reopening u/s 147 - initiation of reassessment proceedings has been proceeded after internal audit report of the department - whether reopening of assessment and reopening of assessment proceedings beyond four years was validly initiated in the present case ? - assessee did not classify the golf course as per provisions of the Act as to whether it is part of ‘building’ or ‘plant and machinery’ - HELD THAT:- The income of the assessee escaped assessment due to the reason of failure on the part of the assessee in disclosing fully and truly all material facts pertaining to depreciation on golf course and on the issue of income from sale of Labunum Project. Therefore, on these two counts, action of the AO to initiate reassessment proceedings u/s 147 of the Act and issuing notice u/s 148 of the Act against the assessee for A.Y 2001-02 beyond four years cannot be held as invalid assumption of jurisdiction and finally part conclusion of the ld. CIT(A) on legal contention and objection of the assessee are upheld.
Suppressed recognition of revenue from sale value of project - HELD THAT:- From the statement submitted by the assessee during the assessment proceedings we observe that the assessee has recorded total sales value of ₹ 174.99 crores whereas sales value has been recognised @ 98% of ₹ 171.10 crores and proportionate project cost of ₹ 156.15 crores has been debited to Profit and loss account and in our humble understanding, this calculation is not in accordance with percentage of completion method. If assessee has incurred some more cost in the subsequent A.Ys, but the total sales value was received during the year under consideration, then the sales value has to be recognise accordingly. The issue requires examination and verification at the end of the AO according to the percentage of completion method consistently and regularly followed by the assessee and accepted by the department. Therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee.
Alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after deduction of tax at source and same amount was offered to tax by the recipient Gilt Facilities P. Ltd - HELD THAT:- From the copies of the agreement dated 16.8.1995 and correspondence between the assessee and M/s Gilt Facilities P. Ltd, it is clear that the issue of interest was raised and settled during F.Y. 2000-01 and the assessee paid interest to M/s Gilt Facilities P. Ltd as per computation agreed between them. However, from the copy of the chart showing the calculation of total interest amount paid by the assessee to M/s Gilt Facilities P. Ltd reveals that the impugned amount was related to prior period but during the prior period there was no occasion for the assessee to claim the same as expenditure because this liability was accrued and crystallised after long conversation and correspondence with the Gilt Facilities P. Ltd as per agreement dated 16.8.1995 and the assessee paid amount after deduction of tax and the same was offered to tax by the recipient Gilt Facilities P. Ltd during A.Y 2001-01. We are unable to see any apparent mistake or ambiguity in the appellate order on this issue and thus we have no reason to interfere with the same.
Depreciation @ 25% on golf course under the category of plant machinery as against 10% as allowable in the case of building which includes golf course - HELD THAT:- We observe that the ld. CIT(A) noted that golf course is a specialised superstructure on the land with various level undulation, holes, small points etc. as a specialised profession requirement for playing golf on the piece of land. Therefore cost of creating such technical requirement will certainly make the field of golf course as a plant.
It is pertinent to note that for creation of golf course, landscaping is done for in various levels and some holes, ponds and walking path is created but in our humble understanding this kind of piece of land converted into a golf course by creating some specialised facilities for playing golf cannot be put in the category of plant and machinery.
No hesitation to hold that the ld. CIT(A) granted relief to the assessee without any basis and without arriving to a conclusion as to whether golf course is a plant and machinery or building. Therefore, conclusion of the ld. CIT(A) is not sustainable as we are unable to see any basis for the factual observations noted by the ld. CIT(A) for putting the golf course in the category of plant. Since the issue has not been adjudicated by the ld. CIT(A) in a proper manner, therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee and without being prejudiced from earlier orders and our observations in this order.
Facts regarding this issue have to be dealt in respect to golf course of 300 acres land and how it became plant and machinery attracting 25% depreciation. AO has to examine these detai ls to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order
Capital gain u/s 45 - HELD THAT:- CIT(A) was right in drawing conclusion that there was neither sale of land nor transfer of possession as per clause (i) to (v) of section 2(47) of the Act pertaining to sale of immovable property and he rightly concluded that these provisions covers a situation where registration of sale deed has been completed. As per clause (v) of section 2(47), any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, but in the present case, the AO could not controvert this fact that the possession of the land in question was not transferred to the assessee and thus applicability of clause (v) of section 2(47) of the Act as part performance of contract cannot be inferred. On the basis of above discussion, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order on this issue and thus we uphold the same. Since facts and circumstances of A.Y 2003- 04 on this issue are similar to A.Y 2001-02, therefore, our conclusion for A.Y 2001-02 would apply mutatis mutandis to A.Y 2003-04 also
Disallowance of deduction u/s 10B - claim allowed for initial assessment year - HELD THAT:- the provision envisaged is for a period of ten consecutive years commencing from the first year during which the undertaking begins to manufacture or produce articles, things or computer software, as the case may be. When the Revenue therefore, did not question the certification by the Director, Software Technology Park of India, in the initial year of the claim made by the assessee as well as in the subsequent years, it would not be open for the Revenue to pick one year out of a total of ten consecutive years for different treatment that too without offering any explanation for the same - Decided against revenue
Disallowance u/s 40A(3) - cash payment exceeding or ₹ 20,000/- - whether payment made to the labourers in the instant case is in violation of provision of Sec.40A(3) ? - HELD THAT:- In the instant case, the genuineness of the payments has not been doubted. Besides the above we also find that from the submission made by AR that none of the case, the payment has exceeded more than ₹20,000/- and where the payment was exceeding more than ₹20,000/- it was paid to the sardars who further paid to individual labourers.
DR has also failed to bring anything contrary to the argument placed by Ld. AR before us. Therefore in our considered view in none of case the payment in the instant case is inconsistent to the provision of section 40A(3) of the Act and taking a consistent view of the Co-ordinate Bench of this Tribunal in the case of Sri Manoranjan Raha [2016 (1) TMI 359 - ITAT KOLKATA] we are inclined to reverse the orders of Authorities Below. This ground of assessee’s appeal is allowed.
Bogus purchases - HELD THAT:- AO disallowed the purchases from Mr Samiran Dutta on the ground that notice for verification was not served u/s. 133(6) of the Act but Ld. AR has produced the same before appellate stage for AY 2010-11. So the identity of the party (Mr. Samairan Dutta) cannot be doubted for instant case and for the year under consideration. The copy of the order of Ld. CIT(A) is placed at page 68 of the paper book. In this view of the matter and after considering assessment order for AY 2010-11, we are of the considered view that the party is not identifiable and so the purchase cannot be held bogus. Therefore we are inclined to reverse the orders of Authorities Below. This ground of assessee’s appeal is allowed.
Remission and/or cessation of several accounts comprised u/s 41(1) - HELD THAT:- Certain old creditors are reflecting in the balance sheet of assessee and none of the sundry creditors was written off in the books of account of assessee. In our considered view the income cannot be brought to tax us/ 41(1) of the Act until and unless the trading liability ceased to exist in the books of account. In the instant case the liability of the sundry creditors is very much appearing. Therefore, the question of treating the same as income u/s 41(1) of the Act does not arise. - Decided in favour of assessee.
Disallowance u/s 40(a)(ia) - amounts otherwise be allowable as a business expenditure - revenue’s submission is that since assessee did not make the entry in the P&L A/c in the year in which the liability actually accrued, therefore, the assessee’s claim is to be denied - HELD THAT:- We are not inclined to accept this proposition advanced by revenue for the simple reason that the real income of an assessee is to be determined as per the provisions of the Income-tax Act and not on the basis of entries made in the books of account. As per the proviso of section 40(a)(ia), admittedly, the deduction is allowable in regard to an expenditure only in the year in which the TDS amount has been deposited. There is no dispute on this count. Further, even if an assessee had not debited these expenses in the P&L A/c of earlier year that cannot be the basis for denying deduction which is otherwise admissible to assessee. We further find that section 40(a)(ia) does not mandate for any disallowance in earlier year for proviso to section 40(a)(ia) to come into operation.
We find that the assessee’s claim is fully covered in the case of SMC Construction [2010 (1) TMI 10 - HIGH COURT OF DELHI] as held the amounts which may otherwise be allowable as a business expenditure as per the provisions of sections 30 to 38 and which is 'chargeable to tax in the hands of the recipient would not be allowed as a deduction unless requisite amount of tax has been deducted on the' said amount. Thus, mere passing a debit entry in the books of account, of these expenses would not be sufficient for claiming the deduction in the present account in the concerned year then also deduction would not be admissible unless tax has been paid on such amount. The proviso to section 40(a)(i) makes it clear that if tax has been deducted in the subsequent year and paid then deduction would be allowed in that year. Therefore, we are of the opinion that the learned first appellate authority has rightly deleted the disallowance. - Decided against revenue
TP Adjustment - international transaction of payment of interest on external commercial borrowings of ₹ 3,32,11,250/- - interest had been paid to BT plc. @ 9.72% - HELD THAT:- Admittedly the external commercial borrowings, made by assessee, are denominated in the Indian currency. Therefore, for bench marking the interest rate paid by assessee @ 9.72%, the prevailing PLR in India, was to be applied and not the 6 months GPB LIBOR in view of the decision of Cotton Naturals (I) (P) Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] . Since, the interest paid by assessee is much less than as per PLR, therefore, no adjustment is called for. In the result, this ground is allowed.
Adjustment made u/s 92CA - HELD THAT:- As regards adjustment made u/s 92CA of the Act, we are of the considered opinion that in the immediately preceding assessment year i.e. 2010-11, DRP deleted the addition on account of interest payment to AE in identical circumstances. We do not find any reason to take a different view in the current assessment year. Accordingly, we direct the TPO to follow the directions given by the DRP in the assessment year 2010-11 for this year also.
Disallowance of the claim u/s 80JJAA - AO has disallowed the claim by holding that the assessee company had not employed new employees more than 100 during the previous year relevant to assessment year under consideration - HELD THAT:- On a perusal of the provisions of section 80JJA of the Act, which is extracted below, we do not find that any such condition is imposed in the said provision. As requires to be satisfied that all other conditions mentioned in provisions of section 80JJA are fulfilled before allowing deduction u/s 80JJA of the Act. Therefore, this ground of appeal is also rest
Jewellery declared under VDIS Scheme after converting it to bullion - HELD THAT:- All the items which were appearing in bill issued by M/s. Balaji Refinery were also mentioned in the valuation report filed in support of the VDIS declarations. Gross weight also tallies. Purchase invoice issued by the concern which purchased the gold and diamonds also shows the same weight of bullion as mentioned in the bill of M/s. Balaji Refinery and same caretage of diamonds mentioned in the valuation report. Case of the Revenue is that M/s. Balaji Refinery, which melted the ornaments and the concern to which the gold / bullion were sold were not found in Keshavpur, Hubli.
Assessees were repeatedly questioned about this during the course of second round of proceedings. Inspector’s report relied on by the AO was based on an enquiry done more than 15 years after the event. There was no way assessees could ensure that M/s. Balaji Refinery continued to do its business all through. Much reliance has been placed by the AO on a letter issued by Gold and Silver Refinery Welfare Association, Hubli, wherein it was mentioned that no refinery called M/s. Balaji Refinery, did any refinery work in Hubli since 15 years.
It is not necessary that every refinery should be a member of an association. A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by the concerns show that they were having KST and CST registration numbers. In the case of M/s. Hunney Exports even their PA Number was there.
These evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold and diamond sold by them were the same gold and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in the VDIS. We are of the opinion that assessee had discharged their onus to show that the gold and diamond sold by them were the same which were declared by them in the VDIS declarations. Reasoning given by the AO that antique jewellery would not have been sold by the assessee is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. Lower authorities fell in error in disbelieving the source for credits shown by the assessee concerned. No hesitation in deleting the additions made in the hands of the assessee. - Appeals of all the assessee stand allowed.
Dismissal of appeal in limine by CIT(Appeals) - assessee could not appear on account of his illness and the CIT(Appeals) dismissed the appeal in limine, without dealing with the issues on merit - HELD THAT:- We find that undisputedly the CIT(Appeals) has dismissed the appeal in limine without dealing with the issues on merit, whereas he is not empowered to do so. Under the Income-tax Act, he is required to adjudicate the appeal on merits, even if none appears on behalf of the assessee. In light of these facts, we set aside the order of the CIT(Appeals) and restore the matter to him with a direction to readjudicate the appeal on merits, after affording opportunity of being heard to the assessee.
Assessee's appeal is allowed for statistical purposes.
Declaration under VDIS - Introduction of cash in the books of accounts of the assessee on sale of sliver and diamonds which were declared under Voluntary Disclosure of Income Scheme, 1997 (VDIS) - HELD THAT:- Same quantity of silver and diamonds which were declared under VDIS was sold. Though the assessee has declared the silverware in different form under VDIS, but in sale bill the assessee has sold silver bullion and diamonds separately. The assessee has filed evidence with respect to conversion of silverware into silver bullion and diamonds.
Since the same quantity which was disclosed under VDIS was sold, I find no justification in making the addition on introduction of sale proceeds in the books of account. Once the Revenue has accepted the declaration under VDIS and accepted the tax deposited by the assessee, it should not have made a further addition on account of introduction of sale proceeds of the said jewellery in the books of account. I therefore find no merit in the addition made by the revenue authorities. Accordingly, I set aside the order of the CIT(Appeals) and delete the addition.
Fees for technical services received - computation of period of stay - whether taxable by reason of article 12(2) of the DTAA with Japan? - HELD THAT:- The essential question is whether Article 12(2) or 12(5) of the Agreement which is applicable in these cases.
In the facts of these cases, we are not inclined to go into this aspect. The special leave petitions are, accordingly, dismissed
TDS u/s 194J or u/s 194C - short deduction in respect of payments made towards “Outsourcing expenses” - nature of services received by the assessee requires certain parameters of technical/managerial skill of highly qualified specialized competency - default u/s.201 - HELD THAT:- In assessee’s own case for A.Y. 2008-09, 2009-10 and 2010-11 CIT(A) examined the contract with Writer Information Management Services and found that very basic services were contracted and rendered by the said party involving no special technical skill or professional qualification.
On the basis of the rival arguments and perusal of the various records as placed before us we find that the work assigned to the service provider was not a technical or professional work which required special skills but simple, basic and repetitive nature of work and we are inclined to opine that the order of CIT(A) is correct and deserved to be upheld. - Decided in favour of assessee
Addition on CENVAT credit and VAT credit u/s 145A - HELD THAT:- The assessee has demonstrated in the statement prepared by him that there is no impact on the net profit, if taxes are accounted either under exclusive or under inclusive method
Tax authorities have not examined the statement furnished by the assessee though learned CIT(A) has made certain computations and granted partial relief to the assessee. We have noticed that he has not found fault with the statement furnished by the assessee.
This issue requires fresh examination at the end of the Assessing Officer by duly considering reconciliation statement furnished by the assessee. Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to examine the reconciliation statement furnished by the assessee and take appropriate decision in accordance with law after affording necessary opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes
The Bombay High Court found that the appeal raised substantial questions of law regarding the decision of the CESTAT. The court admitted the appeal on the questions related to the cancellation of CDEC and compliance with Customs Notification 64/88-Cus. The respondent waived service.
TP Adjutment - software development services provided to the Associated Enterprises (AE) - selection of TNMM as MAM by TPO - comparable election - HELD THAT:- Infosys Ltd. should not be considered as part of comparables as it is a giant in the area of development of software and it assumes all risks, leading to higher profit and cannot be compared with the company which is a captive unit of its parent company assuming only limited currency risk. See AGNITY INDIA TECHNOLOGIES (FORMERLY GENBAND PVT. LTD.) VERSUS INCOME-TAX OFFICER, [2010 (11) TMI 852 - ITAT DELHI]
Bodhtree Consulting Ltd there is no doubt that margin of this company has been fluctuating from (-) 50.4% to (+) 79.13%. Further perusal of the above chart shows that turnover of the company remain in the range of 10 crore to 22 crores but margin of the said company has been fluctuating between (-) 50.4% to (+) 79.13%. Such a huge variation in the margins despite the fact that scale of operation did not change that much, shows that the business circumstances of the assessee company were not normal and said company indeed passed through unusual or abnormal business circumstances. Under these circumstances, we do not find this company as a safe and reliable to be used as a comparable company.
Sonata Software Ltd. related party transactions to sales ratio is more than 40% during the A.Y. 2009-10, but keeping in view request of Ld. CIT-DR and to meet ends of justice, we find it appropriate to send it back to the file of the AO/TPO to compute the same properly and exclude it from the list of comparables if ratio of RPT to Sales is found to be more than 25%. The assessee shall be free to raise any legal or factual issue with respect to this comparable. The AO/TPO shall give adequate opportunity of hearing to the assessee to submit requisite details and evidences and case laws in support of its claim, which shall be taken into consideration on objective basis before deciding this issue afresh.
Working Capital Adjustment - MERCER CONSULTING (INDIA) PVT. LTD. VERSUS DCIT, CIRCLE-2, GURGAON [2014 (7) TMI 715 - ITAT DELHI] held that the issue of working capital would be relevant only when there is a situation of inventory remaining tied up or receivables being held up. The assessee contests the non-granting of the working capital adjustment - This issue could not have been brushed aside by the lower authorities in the manner as has been done in this case. Ample details have already been filed by the assessee before lower authorities, therefore, in all fairness and justice we send this issue to the file of the AO/TPO who shall consider this decision and shall give an adequate opportunity of hearing to the assessee to file further details and evidences as may be required and considered appropriate by the assessee and shall decide this issue afresh on objective basis after considering the details and evidences as may be placed on record by the assessee.
Addition on account of notional interest on the alleged overdue receivables from AEs of the assessee company - HELD THAT:- Tribunal for the earlier year and find that identical issue has been decided by the Tribunal in A.Y. 2007- 08 [2016 (1) TMI 1415 - ITAT MUMBAI] we find that no independent source was searched or relied upon by the him. It is a fact that the agreements with the third parties did not contain any clause for charging interest for delayed payment. Thus, the matter has its own peculiarities. The assessee has entered in to agreement with the AE.s. and value of the transaction will have to be decided. The arguments of factoring of delayed payment in the value of service cannot be brushed aside especially when it is found that the OPTC margin earned by the assessee was 29.41 % and it was quite higher than the parties compared with i.e.app.15% - in the interest of justice interest rate should be fixed at LIBOR+200 points for the delayed payments received by the assessee from its AE.s. for the period as mentioned in the agreements.AO is directed to recalculate the interest amount accordingly - we send this issue back to the file of the AO/TPO with the directions to follow the order of the Tribunal for A.Y. 2007-08 and to compute upward adjustment to be made accordingly on account of interest.
Denial of deduction u/s 10A in respect of Bangalore unit acquired on slump sale - HELD THAT:- The position of law is very clear the benefit of deduction shall not be denied to the assessee merely because the undertaking was acquired by the slump sale. The deduction is attached to the undertaking and therefore should be allowed to the assessee provided other prescribed conditions are fulfilled. But there has been some confusion with regard to appreciation of factual evidences. It has been shown to us that complete evidences including agreement and other various evidences were available. But AO has mentioned in the assessment order that the agreement filed with the AO was not eligible and it was not properly stamped. No proper discussion has been made by the DRP also in its order. Under these circumstances, we find it appropriate to send this issue back to the file of the AO to enable him to make proper verification of facts and evidences to analyze the other prescribed conditions. The deduction cannot be denied merely on the ground that the unit was acquired under slump sale. The AO shall give adequate opportunity of hearing to the assessee before deciding this issue afresh. Thus, with these directions this issue is sent back to the file of the AO with the directions given above.
Reducing foreign currency expenses only from export turnover and not from total turnover while calculating the amount of deduction u/s 10A in respect of the other units - HELD THAT:- Respectfully following the decision of the Tribunal in assessee’s own case for the earlier years [2016 (1) TMI 1415 - ITAT MUMBAI] , we decide this issue in favour of the assessee and direct the AO to follow the orders of the earlier years. The AO should reduce the amount of impugned expenses incurred on foreign currency from export turnover as well as total turnover for computing the amount of deduction allowable u/s 10A. Thus, this ground is allowed.
Short credit of TDS, advance tax and as assessment tax - HELD THAT:- No serious objection was raised by the Ld. DR, in this regard. The AO is directed to give opportunity to the assessee to submit requisite details and evidences with regard to correct amount of TDS, Advance Tax and Self Assessment Tax paid by the assessee and after considering the same the AO shall give credit for the correct amount as per law and facts. This ground is treated as allowed for statistical purposes.
CENVAT Credit - duty paying documents - credit disallowed on the ground that certain debit notes were issued by the appellant - HELD THAT:- There is no material on record to show that through the modus operandi of issuance of the debit note, the appellant had enabled the supplier to take refund of the duty element if any. The appellant when explains that the debit notes do not relate to duty element and the Cenvat credit was availed on input and input service used in the manufacture, in absence of evidence to the contrary, the adjudication fails - Credit allowed - appeal allowed - decided in favor of appellant.
Assessment of trust - assessee has paid the money to an approved institution engaged itself in charitable activity, the same is eligible for deduction while computing the taxable income - HELD THAT:- When the AO received a letter from the recipient-society claiming that they have no bank account in Axis Bank and the only one bank account is maintained with State Bank of India, this Tribunal is of the considered opinion that the AO ought to have given an opportunity to the assessee to respond to the above claim of recipient-society.
Since such an opportunity was not given to the assessee, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the AO after furnishing a copy of the letter dated 24.03.2014 to the assessee. The orders of the lower authorities are set aside and the Assessing Officer is directed to furnish a copy of the letter dated 24.03.2014 said to be received from the Society For Welfare Of The Handicapped Persons, Durgapur, Kolkata and thereafter decide the issue after giving reasonable opportunity to the assessee. It is made clear that this Tribunal is not commenting upon the merit of the addition made by the AO and it is for the AO to decide the same in accordance with law without being influenced by any of the observation made by the CIT(Appeals) and made by this Tribunal in this order. - Appeal of the assessee is allowed for statistical purposes.
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