Addition on account of arm’s length price - Comparable selection - HELD THAT:- When we examine the services rendered by the taxpayer to its AE in the light of the fact that the taxpayer is a risk free entity working on cost plus mark up and does not own any intangibles, the taxpayer is a low end BPO.
Accentia Technologies Ltd. (Seg.) - extra ordinary growth, extra ordinary operating cost towards overseas business expenses and substantial market cost towards overseas business expenses, it leads to the irresistible conclusion that growth of 3197% in profitability of Accentia in comparison to its earlier year itself is an eye opener to make it incomparable with the taxpayer. So, we order to exclude Accentia from the final list of comparables.
Eclerx Services Ltd excluded on ground of functional dissimilarity. When business model of the taxpayer had not undergone any change during the year under assessment to adopt consistent approach is also cardinal principle of law. So, in view of the matter, we order to exclude Eclerx from the final set of comparables for benchmarking the international transactions qua ITES.
HCL Comnet Ltd. (Seg.) has been ordered to be excluded by the coordinate Bench of the Tribunal in ICC India Pvt. Ltd. [2016 (6) TMI 1309 - ITAT DELHI] on account of functional dissimilarity by following Rampgreen Solutions (P) Ltd. [2015 (8) TMI 931 - DELHI HIGH COURT] . HCL Comnet is also operating 24x7 in three shifts whereas the taxpayer is operating with single shift only. Moreover, HCL Comnet is a risk bearing company whereas the taxpayer is a captive service provider to its AE. So, there is stark functional dissimilarity. HCL Comnet is having huge asset’s base of ₹ 188.90 crores and ITES revenue of ₹ 260 crores as against the total turnover of ₹ 5 crores of the taxpayer. So, in view of the matter, we order to exclude HCL Comnet from the final set of comparables
Vishal Information Technologies Ltd.- different business model as it outsourced its work to external vendors to save the cost on employees which is apparent form the figure of employee cost visà- vis sales detailed in the preceding paras. So, we order to exclude Vishal from the final set of comparables for benchmarking the international transactions.
Wipro Ltd. (Seg.) - business profile of Wipro vis-à-vis the taxpayer, there are stark dissimilarities as Wipro is a giant company having huge asset base, brand value, goodwill and presence in the global market, spending 8.5% of the total revenue on R&D and it is a full fledged risk bearing service provider. Moreover, marketing expenses of Wipro is 3% of the total turnover. So, we are of the considered view that Wipro is not a suitable comparable for benchmarking the international transactions.
Infosys BPO Ltd.- when we examine business profile of the Infosys BPO vis-à-vis the taxpayer, Infosys BPO is a full fledged risk bearing company having huge asset base, turnover of ₹ 649 crores and total asset base of ₹ 450 crores having employee base of 11226 as against 20 employee of the taxpayer and turnover of ₹ 5 crores only; Infosys BPO is into providing high end services; whereas the taxpayer is a small scale captive service provider to its AE for ITES services and does not own any intangibles or brand value and is working on cost plus basis.
Informed Technologies India Pvt. Ltd. - AR for the taxpayer sought to exclude Informed from the final list of comparables for benchmarking the international transaction on ground of sale/employee cost filter but later on candidly admitted that functionality of Informed is similar to the taxpayer so far as ITES are concerned. However, after arguing for sometimes, the ld. AR for the taxpayer preferred not to press her arguments for exclusion of Informed. So, we decide this issue against the taxpayer and Informed is ordered to be retained as a suitable comparable.
R Systems International - Following the decision rendered by the coordinate Bench of the Tribunal in M/s. Kanexa Technologies Pvt. Ltd. [2014 (11) TMI 1209 - ITAT HYDERABAD] we direct the TPO to consider the provision for doubtful debts as operating expenses and then compute the profit & loss of the comparable company for benchmarking the international transaction.
Iservices India Pvt. Ltd. - Business profile of Iservice shows that the same is into high end diversifying services vis-à-vis the taxpayer who is into divergent high end services like web hosting, email services, spam filtering, domain names and DNS hosting. web hosting, email services, spam filtering, domain names and DNS hosting is also providing web design services, domain management services and email management services which makes it functionally dissimilar to the taxpayer. The contention of the ld. DR that this argument has not been addressed before the TPO is not sustainable because the TPO in its analysis has to compare functional profile of comparable company with the taxpayer at the very outset before going into further detail. Iservice is also not a suitable comparable for benchmarking the international transaction.
Non granting of risk adjustment - TPO is directed to decide the issue afresh after considering the contentions raised by the taxpayer in the light of the Intellinet Technologies India Pvt. Ltd. [2012 (6) TMI 237 - ITAT BANGALORE] and Motorola Solutions [2014 (10) TMI 358 - ITAT DELHI] .So, the issue of risk adjustment is decided in favour of the taxpayer for statistical purposes.
TDS u/s 195 - payment of commission was made to NRI - addition u/s 40(a)(ia) - lower authorities has sustained the disallowance of payment of sales commission to an NRI without deducting TDS by taking a view that circular has been withdrawn and treating the sales commission as fee for technical services - HELD THAT:- It is pertinent to note that this commission was given for procuring the export orders from outside India. Sourcing orders abroad for which payment had been made directly to the nonresident does not fall in the category of technical services and transactions do not partakes the character of fee for technical services as explained in Section 9(ii)(vii) of the Act. Thus the commission has been paid for the services rendered outside the India. The person to whom the commission paid was not having any business connection in the India and commission so earned by him is not taxable in the India. Therefore, the provisions of Section 195 of the Act are not applicable. See M/S. FARIDA LEATHER COMPANY [2016 (2) TMI 798 - MADRAS HIGH COURT] - Decided in favour of assessee.
Offence under PMLA - Attachment orders - maintainability of the writ petition - HELD THAT:- On an analysis of several provisions of the Act in particular Section 5, Section 8 and Section 26, it becomes clear that the legislative intent underlying the sequential provisions for provisional attachment, confirmation of such attachment and eventual confiscation or for retention of a seized property and also providing remedy of appeal to the appellate authority, is to balance public interest with the individual interest of the person against whom allegations are made and action is initiated.
A mechanism is provided under the Act for redressal of the grievance at different stages that is to say before the Adjudicating Authority at the first instance and latter before the Appellate Tribunal. It is only when a person is aggrieved by the order of the Appellate Tribunal that he may file an appeal to the High Court as per Section 42 of PML Act.
When such is the mechanism provided for the effective redressal of the grievance within the four corners of the provisions of the PML Act, petitioner is not justified in rushing to this Court at the stage of show-cause notice and the provisional order of attachment. Therefore, it is not appropriate for this Court to enter into various contentions urged by petitioner.
This is not a case where extraordinary jurisdiction of High Court under its writ jurisdiction has to be exercised ignoring the efficacious machinery provided under the Act. Hence, without expressing any opinion on the merits of the matter and making it clear that whatever prima facie opinion is expressed shall be confined only for the purpose of deciding the maintainability of the writ petition, by reserving liberty to the petitioner to urge all necessary grounds before the competent authority, this writ petition is dismissed. It is made clear that that period taken in prosecuting this writ petition before this Court shall be excluded for the purpose of time limit prescribed under the Act, both for seeking redressal by the petitioner and also with regard to duration of the provisional attachment order.
TP Adjustment - Comparable selection - functional similarity - HELD THAT:- The assessee is a subsidiary of ADC Telecommunications Inc., USA and is engaged in the provision of software development services and IT Enabled Services to its AEs thus companies functionally dissimilar with that of assessee.
Application of RPT filter at 25% of turnover - Assessee could not controvert the submissions of the Departmental Representative for Revenue that various coordinate benches of this Tribunal have been consistently following application of RPT filter at 25% of turnover - we reject the assessee's claim for exclusion of Aditya Birla Minacs Worldwide Limited, from the list of comparables and consequently uphold inclusion of this company ‘Aditya Birla’ by the authorities below in the final set of comparables.
Penalty on CHA - it is alleged that appellant company's CHA has declared wrong classification - HELD THAT:- From the impugned order, it appears that importer Shri Raj Kumar Wadhwa is the controller of importer firm and on the basis of whatever documents he has sent, Bill of Entry was filed by CHA. Thus, in the instant case, no mala fide intention is on the part of the appellant and he filed Bill of Entry in bona fide manner.
Penalty set aside - appeal allowed - decided in favor of appellant.
Clandestine removal by a benami firm - traded goods or not - HELD THAT:- The matter is required to be remitted back to the Tribunal for re-consideration - We make it clear that we are not expressing any opinion on merits inasmuch as the Tribunal being last fact finding authority ought to have considered the facts in detail and discussed the order passed by Commissioner (Appeals) and give its independent finding after considering the documents which are on record. The order of the Tribunal is quashed and set aside.
Winding up of respondent company - inability to pay its debts and declared commercially insolvent - main argument of respondent was that meetings of Joint Lender's Forum had taken place in which there were many lenders who were not in favour of winding up, whereas there were many other lenders who were in favour of winding up - HELD THAT:- After the petition was admitted, no new affidavit of reply has been filed opposing the winding up of the company. Today also there is nobody present for respondent company. Petitioner has also filed an affidavit of one Digambar Khadye affirmed on 2nd August, 2017 to which are annexed copies of newspaper cuttings advertising admission of petition and also a copy of the gazette notification advertising admission of petition. At the time of admission, service of petition under Rule 28 of the Companies (Court) Rules, 1959 has been waived.
While admitting the petition in paragraph 56, it is quite obvious that the company is unable to pay its debts, is commercially insolvent and deserves to be wound up. Therefore, the petition is allowed.
Maintainability of petition - Initiation of CIRP - Corporate debtor - Default in making repayment of loan - HELD THAT:- In the present case it appears from the evidence on record that the petition is complete as per requirements of the code. The petitioners has proved that corporate debtor has committed default in making repayment of the loan amount. Therefore, the petition filed by the Financial Creditor, Bank of Maharashtra deserves to be admitted.
The Delhi High Court dismissed the writ petition as withdrawn. The petitioner sought permission to withdraw the petition. The citation for the judgment is 2017 (12) TMI 1723.
Principles of Natural Justice - ex-parte order - Bihar VAT Act - HELD THAT:- The order itself indicates that it is ex parte order, and therefore, in the interest of fair play, the impugned order passed by the Commercial Tax Officer, Buxar under Section 31 & 39 of the Bihar Value Added Tax, is also set aside.
The petitioner will appear before the Assistant Commissioner, Commercial Taxes, Buxar Circle, Buxar with a copy of this order on the 4th of January, 2018. The Assistant Commissioner, thereafter, will fix a date for hearing of the matter in which the petitioner shall render full cooperation and will not try to play games by seeking frivolous adjournment or avoid proper assistance in the adjudication.
Levy of interest under Section 234E - Intimation under Section 200A - Levy for period prior to 01/06/2015 - HELD THAT:- There cannot be levy of late fee u/s. 234E for the period prior to 01/06/2015, we are inclined to delete the levy of late fee u/s. 234E of the Act in all the cases. See Fatheraj Singhvi & Ors. Vs. Union of India [2016 (9) TMI 964 - KARNATAKA HIGH COURT] - Decided in favour of assessee
Cancelling registration granted u/s 12A - holding the activities of the assessee society as not being genuine and not being carried out in accordance with the objects of the trust - assessee is indulging in the activity of giving donations to other institutions - HELD THAT:- The assessee admittedly has given donations to various organizations as reproduced in earlier part of out order. When asked to show during proceedings before the Ld. Commissioner of Income Tax as to how they were actually utilized by the donee societies/institutions, nothing was shown by the assessee. The assessee has, therefore, neither established the user of the donations for charitable purposes, nor demonstrated that the said donee society was a charitable society registered u/s. 12A of the Act. Meaning thereby that the assessee society has not demonstrated the application of its funds for charitable purposes. The assessee, therefore, is not entitled to claim the donations as application of its income.
In view of the above, we agree with the Ld. Commissioner of Income Tax that the assessee is indulging in the activity of giving donations to other institutions which is not in consonance with the approved objects of the assessee society. We, therefore, uphold the action of the Ld. Commissioner of Income Tax in cancelling the registration granted u/s. 12A of the Act by invoking the provisions of section 12AA(3) of the Act. - Decided against assessee.
Reference u/s 92CA to TPO - Cognizance taken by the AO under section 92B(i) and reference made to TPO u/s 92CA - expenditures in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A - Whether on account of omission of clause (i) from the statute, the proceedings already initiated or action taken under clause (i) becomes redundant or otiose ? - HELD THAT:- Once the clause is omitted by subsequent amendment, it would be deemed that clause (i) was never been on the statute. While omitting the clause (i) of section 928A, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 92B(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law.
Where this clause (i) is omitted from the statute since its inception, the AO ought have required to frame the assessment in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not have been done on account of provisions of section 92BA Clause (i) of the Act.
Now when this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter to the AO with the direction to readjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly, since we have restored the matter to the AO, we find no justification to deal with the other issues on merit. Accordingly, appeal of the assessee stand allowed for statistical purposes.
Revision of pay-scale - request for same pay- scale as is available to a Member of the Trade Tax Tribunal, appointed from amongst the Additional Commissioners and Deputy Commissioners of Trade Tax Department - HELD THAT:- We are conscious of the fact that a differential scale on the basis of educational qualifications and the nature of duties is permissible. However, it is equally clear to us that if two categories of employees are treated as equal initially, they should continue to be so treated unless a different treatment is justified by some cogent reasons. In a case where the nature of duties is drastically altered, a differential scale of pay may be justified. Similarly, if a higher qualification is prescribed for a particular post, a higher scale of pay may be granted. However, if the basic qualifications and the job requirements continued to be identical as they were initially laid down, then the Court shall be reluctant to accept the action of the authority in according a differential treatment unless some good reasons are disclosed.
The denial of same pay scale to the petitioner on the ground that his appointment on the post of Member, Trade Tax Tribunal was made from amongst the Advocates quota is wholly unjust and unreasonable. There is no dispute to the fact that at the time of appointment of the petitioner as a Member, Trade Tax Tribunal, the pay scale of Member was ₹ 4500-5700 which was ultimately revised to ₹ 5900-6700. Once the pay scale given to the petitioner at the initial stage has been extended to all other members from different two quotas, then the denial of the same benefit to the petitioner is wholly unwarranted. Members of same cadre have right to get same scale of pay and the respondents have failed to established that the classification was based on some intelligible differentia having reasonable nexus with job requirement.
There is a invidious discrimination - the impugned order dated 12.7.2001 rejecting the claim of the petitioner for grant of same scale of pay which was admissible to the other members of the Trade Tax Tribunal, who were appointed from amongst the Addl. Commissioners and Deputy Commissioners of the Trade Tax Department is hereby quashed - Petition allowed.
Stay proceedings - Reopening of assessment - HELD THAT:- Issue notice. Learned counsel for the respondents takes notice. He may file counter affidavit within four weeks.
List after four weeks.
Further proceedings in furtherance of Sections 147 and 148 of the Income Tax Act shall remain stayed.
Denial of liability to pay service tax under "Mandap Keeper's Services" or under the 'Club or Association Services" by assessee, i.e.Club - The petitioner is giving service to its members but the club is formed on the principle of mutuality - HELD THAT:- The issue involved in these cases has been referred to the Larger Bench in the case of STATE OF WEST BENGAL AND OTHERS VERSUS CALCUTTA CLUB LIMITED [ 2016 (6) TMI 476 - SUPREME COURT ].
Let these appeals be also listed before the larger Bench along with the aforesaid matter after taking orders from Hon’ble the Chief Justice of India.
Penalty u/s. 271(1)(c) - defective notice issued u/s. 274 - HELD THAT:- We find that the notice dt. 05-12-2007 issued u/s. 274 r.w.s 271 does not specify the charge of offence committed by the assessee viz whether had concealed the particulars of income or had furnished inaccurate particulars of income. Hence the said notice is to be held as defective. - Decided in favour of assessee.
Non prosecution of appeal - HELD THAT:- The appeal of the assessee was posted for hearing on 05.12.2017 by service of notice [RPAD on record]. None appeared on behalf of the assessee nor any adjournment petition has been filed. Further, the assessee has not rectified the defects notified in the Defect Memo that “Appeal fees to be paid under sub-head “Others”. Hence, it is inferred that the assessee is not interested in prosecuting the appeal.
Therefore, having regard to Rule 19(2) of ITAT Rules and following the decision of the Delhi Bench of the Tribunal in the case of Multiplan (India) Ltd. [1991 (5) TMI 120 - ITAT DELHI-D] and case of late Tukojirao Holkar [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] the appeal of the assessee is dismissed for want of prosecution.
Unaccounted Investment - AO has made the addition only on the basis of unsigned document found in search - non reference to the DVO report - HELD THAT:- As unsigned agreement to sell was found as a result of search but it is also a matter of fact, as submitted by the assessee and not denied by the DR, that no question was asked by the search team on this document during the course of search. The contention of the learned DR that the document seized is sufficient to make addition of unaccounted investment is contrary to the provisions of law as the document found during the course of search is not required to be proved or disproved by both, assessee as well as the department as only presumption can be made u/s 132(4A) of the Act with regard to a seized document.
This presumption is a rebuttable presumption. However, the first onus to disprove such document is on the assessee. In the present case we note that the AO in order to verify the veracity of the document, referred the valuation of the property in question to the DVO with specific remarks that a document showing consideration of ₹ 21.96 crore has been found during the course of search. The DVO after having the knowledge of the seized document showing value of ₹ 21.96 Crore valued the property at ₹ 7.11 Crore with supporting evidence. Strangely, the AO after carrying out this exercise of valuation during the assessment proceedings did not refer the same in assessment order while making the addition of ₹ 698 lakhs.
Also gone through the document like DVO report, sale deed of adjacent property, HSIIDC rate of allotment document and other documents and find that the land prices of the property, excluding construction were in the vicinity of the amount paid by the appellant to Bluebird Software Private Limited and its shareholders. It is also a matter of fact and record the sale price on the basis of signed documents is accepted by the department in the hands of sellers of the property or shareholders of Blue Bird Software Private Limited. Those assessment orders are also passed after search in their cases by the central circle.
The assessee has also placed on record the assessment order of Blue Bird Software Pvt Ltd who has purchased this property for 6.80 cr just few months before the date of unsigned document. This value is also accepted by the Income tax authorities.
The assessee has been able to produce enough evidence on record to rebut the presumption. In the case of M.M. Financers (P) Ltd vs DCIT [2006 (12) TMI 189 - ITAT MADRAS-B] it is held that the expression used in section 132(4A) is ‘may be presumed’ and it does not mean that other factors are not to be taken into consideration. The mandate does not mean that it has to be presumed irrespective of all other factors. The decision of Delhi High Court in the case of CIT vs Ved Prakash Choudhary [2008 (2) TMI 14 - DELHI HIGH COURT] also support the case of the assessee.
Thus addition made by the AO is contrary to the DVO report obtained by him and the CIT(A) has ignored the vital and material documents and evidences on record before upholding the order of the AO. Consequently, the addition upheld by the CIT(A) is deleted - decided in favour of assessee.
Penalty levied u/s. 271(1) (c) - omission to make a suo-motu disallowance u/s.43B(e) - AO put the assessee on notice as to how it could claim interest on loans taken from HDFC when such amount was not actually paid - HELD THAT:- Assessee had offered the sum as income in the subsequent assessment year considering it as a cessation of liability. Interest to the extent of ₹ 1,55,00,000/- debited in Profit and Loss found specific mention in the Audit Report and Annual Accounts also. Thus, the omission to make a suo-motu disallowance u/s 43B(e) was in our opinion inadvertent and not with an intention of understating the income. That apart, assessee having mentioned the amount in its Audit Report and Annual Accounts, we cannot say that the particulars furnished by it were inaccurate.
In our opinion, CIT (Appeals) was justified in relying the case of Price Waterhouse Coopers [2012 (9) TMI 775 - SUPREME COURT] for deleting the penalty levied on the assessee. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). - Decided in favour of assessee.
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