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Showing 161 to 180 of 1494 Records
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2016 (6) TMI 1337
Disallowance u/s 88E - assessee has Short Term Capital Gains (STCG) which is taxable at the rate of 10% and also the fact that rebate u/s 88E was calculated at the average rate of tax which is inclusive of STCG tax also - Held that:- As considered the provisions of section 88E viz-a-viz the claim of the assessee and find that the AO has rightly reduced the rebate under section 88E of the Act by restricting the amount to ₹ 22,33,556/- as against ₹ 38,80,250/- as claimed by the assessee.
The methodology of calculation of rebate under section 88E has been provided under sub-section (2) of the said section and therefore there is hardly any room for any deviation or departure from the said formula. In our opinion, the AO has correctly applied the formula as per sub-section (2) of section 88E - in agreement with the opinion of the AO and First Appellate Authority that the assessee has claimed excess rebate to the tune of ₹ 16,46,695/- u/s 88E and accordingly uphold the order of CIT(A) - Decided against assessee.
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2016 (6) TMI 1336
Assessment u/s 153C - validity of notice under section 153A - denying exemption under section 11 - Held that:- Initiation of proceedings under section 153A of the Act by the learned Assessing Officer is in accordance with law because from the search proceedings various materials revealed that there is a possibility of the assessee having undisclosed / concealed income due to furnishing of incorrect particulars. Therefore, as pointed out by the learned Departmental Representative and the decisions relied upon by him, we find that issuance of notice under section 153A in the case of the assessee is valid in law for all the three assessment years. Accordingly, this ground raised by the assessee is devoid of merits.
Denial of exemption under section 11 by treating the “donation received” as “capitation fees - proof of charitable activities - Held that:- Based on surmises and conjectures, it cannot be presumed that the donations received by the assessee are capitation fees or forced extortion of money from the students for granting admission. “Corpus donations” received by the assessee cannot be treated as “capitation fees” and the surplus earned cannot be treated as “income from business”.
The employees of the assessee could not have knowledge on the assessee’s affairs.
By earning surplus, it cannot be said that the assessee is carrying on business activity.The assessee is entitled to the benefit of section 11(4A) of the Act. Corpus donation received cannot be treated as capitation fee and therefore assessee cannot be denied benefit under section 11.
Accordingly, we hereby direct the learned Assessing Officer to grant the benefit of section 11 to the assessee and delete the addition made by denying such benefits for all the relevant assessment years 2002-03, 2003-04 & 2004-05. - Decided in favour of the assessee.
Maximum marginal rate of tax as per section 164(2) of the Act, interest under section 234A & 234B and change in method of accounting by Revenue from cash basis to mercantile basis - Held that:- Since we have held that the assessee is entitled to the benefit of section 11 of the Act, the issue with respect to levy of tax at maximum marginal rate under section 164(2) of the Act will not arise in the case of the assessee and accordingly interest under section 234A & 234B of the Act cannot be levied. Further since the assessee is a charitable institution having registration under section 12A of the Act, application of income has to be made on the basis of receipt of income as per section 11 & 12 of the Act and therefore books of accounts have to be necessarily maintained on cash basis. Therefore, we hereby direct the learned Assessing Officer not to change the method of accounting adopted by the assessee which is on cash basis - Decided in favour of the assessee
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2016 (6) TMI 1335
Issues: Interpretation of Section 42(3) of Maharashtra Value Added Tax, 2002
Analysis:
The judgment by the High Court of Bombay pertains to the interpretation of Section 42(3) of the Maharashtra Value Added Tax, 2002. The court deliberated on several substantial questions of law raised in the appeal. The first issue addressed was whether the Sales Tax Tribunal was correct in excluding the amount of Service Tax charged separately in the invoice from the total contract value for determining the composition amount in lieu of tax payable for works contract sales. The court examined the justification of allowing deduction for the separately charged Service Tax while considering the provisions of Section 42(3) of the MVAT Act. Additionally, the court questioned the correlation made by the Tribunal between the definition of 'Sales Price' and 'total contract value,' emphasizing the need for a precise interpretation of these terms within the statutory framework. The judges also scrutinized the Tribunal's reference to the definition of 'Sales Price' while interpreting 'Total Contract Value' under Section 42(3), emphasizing the importance of contextual interpretation within the specific provisions of the Act related to the Composition Scheme. The court highlighted the voluntary nature of the Composition Scheme and the necessity to interpret its provisions in isolation from general tax computation rules. The judgment underscored the need for a meticulous and context-specific interpretation of statutory provisions to ensure consistency and accuracy in tax assessments under the MVAT Act.
The High Court's analysis focused on the intricate legal nuances surrounding the interpretation of Section 42(3) of the MVAT Act. The court's scrutiny of the Tribunal's decisions reflected a commitment to upholding the integrity and coherence of tax laws, particularly concerning the treatment of Service Tax in works contract sales. By dissecting the language and intent of the relevant statutory provisions, the judges aimed to provide clarity on the applicability of the Composition Scheme and the factors to be considered in determining the composition amount for tax purposes. The judgment underscored the significance of aligning interpretations with the statutory framework's specific provisions rather than general tax computation principles. Through a meticulous examination of the legal issues raised in the appeal, the High Court sought to establish a robust foundation for consistent and accurate tax assessments under the MVAT Act. The judgment exemplified the judiciary's role in ensuring the faithful application of tax laws and the preservation of legal coherence in matters of fiscal regulation.
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2016 (6) TMI 1334
TPA - whether the transaction related to payment of technical support charges, should be evaluated on a stand-alone basis or by aggregating this transaction with the other transactions of manufacturing segment of the assessee - Held that:- The assessee has priced the royalty and the technical services provided by the AE separately, and they were all provided under 2 different agreements which constitutes an International Transaction. TPO on one breath does not doubt the existence of services being rendered by the personnel sent by the AE, while on the next breath he has denied that technical support fees paid by the assessee to its AE, on the ground that no independent enterprise would pay such expenses under similar circumstances.
Neither this can be a ground for rejecting the claim for deduction nor it can be a ground for assuming that the technical service fees paid by the assessee to the AE is not at arm’s-length. The documents/evidence submitted by the assessee wide letter dated 07/10/2011 has not been analysed by the TPO. It cannot by any stretch of imagination be held that the evidences are irrelevant. For example the assessee has produced all the invoices and the proof of payments in respect of the services rendered by the employees of the AE. On one hand commercial expediency is recognised but on the other hand it has been held that the transactions were really not for the The assessee has priced the royalty and the technical services provided by the AE separately, and they were all provided under 2 different agreements which constitutes an International Transaction. Ld. TPO on one breath does not doubt the existence of services being rendered by the personnel sent by the AE, while on the next breath he has denied that technical support fees paid by the assessee to its AE, on the ground that no independent enterprise would pay such expenses under similar circumstances.
Neither this can be a ground for rejecting the claim for deduction nor it can be a ground for assuming that the technical service fees paid by the assessee to the AE is not at arm’s-length. The documents/evidence submitted by the assessee wide letter dated 07/10/2011 has not been analysed by the TPO. It cannot by any stretch of imagination be held that the evidences are irrelevant. For example the assessee has produced all the invoices and the proof of payments in respect of the services rendered by the employees of the AE. On one hand commercial expediency is recognised but on the other hand it has been held that the transactions were really not for the benefit of the assessee. We are therefore inclined to set aside this issue to the TPO for determination the ALP in accordance with the ratio laid down by Hon’ble jurisdictional High Court in the case of EKL Appliances Ltd [2012 (4) TMI 346 - DELHI HIGH COURT]. As we are remanding the matter, we direct the Ld. TPO to consider the evidence submitted by the assessee in the paper book and adjudicate the issue in accordance with law.
Inadvertent mistake as crept in form 3CEB under the head technical support service fee paid to AE, against which the assessee had filed a rectification application - Held that:- Ground is set aside to the Ld. AO/TPO to exclude the payments made by the assessee to unrelated party from the technical support fee paid by the assessee to its AE after verification as directed by the DRP.
DRP had directed the AO to reduce the amount capitalised to fixed assets from the block of assets. The relevant para of the DRP has been extracted in para 4.4 above. It is observed that the Ld. AO has not followed the directions of the DRP. Accordingly this ground is set aside to Ld. TPO/AO to do the working as per the DRP direction.
Addition in respect of undisclosed sales - Held that:- It is observed that the authorities below have not considered the evidence filed by the assessee in the right perspective the calculation of reconciliation submitted by the assessee at page 301 of the paper book very clearly shows the difference in the turnover due to various statutory payments that the assessee has collected from M/s Maruti Udyog Ltd. The statutory payments as submitted by the assessee has been paid to the government account which can be verified by the authorities very easily. We are, therefore, inclined to set aside this issue to the file of the AO for verification of the details filed by the assessee and to allow the claim of the assessee as per law. Accordingly this ground filed by the assessee stands allowed for statistical purposes.
Addition of sundry creditors - transactions of purchase - Held that:- It is observed by the DRP that the AO has added certain purchases from these parties. Further additions have been made on account of confirmed credit balances from the same parties. It is also observed that the details/evidences filed by the assessee has not been verified and considered by the Ld. AO. We are therefore inclined to set aside the issue to the files of the AO for considering the evidences filed by the assessee and to allow the claim as per law after proper verification. Accordingly this ground reached by the assessee stands statistically allowed.
Addition of gardening expenses claimed by the assessee under the head repair and maintenance-building - Held that:- It is observed that the AO has not verified that details/evidences filed by the assessee and also has not verified as to whether there existed any garden within the factory premises of the assessee. We accordingly set aside this issue to the AO for verification of the facts and to consider the claim of the assessee within the parameters of law. Accordingly this ground filed by the assessee stands statistically allowed.
Warranty expenses - AO disallowed the claim on the ground that no supporting documents in this regard were furnished by the assessee - Held that:- It is observed that the assessee has produced warranty analysis and Ledger account for warranty expenses for the year under consideration at page 378 of the paper book volume II. We accordingly set aside the issue to the file of the Ld.AO for verification of the details/evidences filed by the assessee and to allow the claim following the ratio laid down in the case of M/s Rotork Controls India Pvt. Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA). Accordingly this ground of the assessee stands statistically allowed.
Cash discount expenses paid to Maruti Udyog Ltd - Held that:- As observed from the records filed before us that the authorities below has not properly verified the quantum which is available from the details filed by the assessee in the paper book. We thus set aside this issue to the ld.AO for verification of the details/evidences filed by the assessee and to allow the claim within the parameters of law. Accordingly the grounds raised by the assessee stands statistically allowed.
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2016 (6) TMI 1333
TPA - Comparable selection - Held that:- Assessee providing software development service to its group companies. Assessee is a captive service provider assisting SAP AG, Germany in research, design and development of new software products, software enhancement and modifying existing software modules. It operates from various units registered with Software Technology Parks (STP) of India. Assessee had international transactions in the nature of software development services rendered to its AE abroad thus companies functionally dissimilar with that of assessee need to be deselected from final list.
We direct exclusion of Accel Transmatics Ltd (seg), Avani Cimcon Technologies Ltd, Celestial Labs Ltd, E-Zest Solutions Ltd, Flextronics Software Systems Ltd (seg), Helios & Matheson Information Technology Ltd, Infosys Technologies Ltd, Ishir Infotech Ltd, Kals Information Systems Ltd(seg), Lucid Software Ltd, Persistent Systems Ltd, Tata Elxsi Ltd (seg), Thirdware Solutions Ltd and Wipro Ltd (seg) from the list of cmparables considered by the TPO. We also direct that Megasoft Ltd, shall be considered as a comparable only after effecting proper segmentation of its results as mentioned at para 15 above. TPO/AO is directed to rework the ALP of international transactions of the assessee accordingly. Needless to say that working capital adjustment has to be given to the assessee based on the work- out of such working capital, relating to the final set of comparables left in the list.
Claim for deduction u/s.80JJAA - additional wages paid during the year consisted of a sum paid to 383 new regular workman employed in Unit-1 - engineers who were newly employed by the assessee were not considered as workers by the lower authorities - Held that:- The deduction is given on profits and gains derived from industrial undertaking engaged in manufacture of production of article or thing. It is only for quantification of the amount that 30% is applied. In our opinion the deduction is very much linked to the profits of the undertaking. We are therefore unable to accept this line of argument taken by the counsel. In the result, we hold that assessee is not eligible for deduction u/s.80JJAA of the Act, in respect of its units 2 , 3 and 4. However, denial of such claim in respect of unit-1, where it was not claiming any deduction, in our opinion is incorrect. We, therefore set aside the orders of authorities below for the limited purpose of quantifying the eligible deduction u/s.80JJA in respect of Unit-1. In the result, ground treated as partly allowed for statistical purpose.
Allocation of interest related to its non 10A to other software units - depressing its claim of exempt income from 10A units and prorata increasing the income of the non-10A unit - Held that:- Just because the loan was taken for rolling over an earlier loan would not mean that interest incurred in relation to such loan cannot be allocated to unit-2 which was also functioning from the very same area and utilising the services given by the head office, which was functioning from the building constructed utilising the loan. In our opinion, AO was justified in making reallocation of the interest in between unit-1 and unit-2. Evidence produced by the assessee, which is in the nature of resolution passed by its board of directors and letter to the concerned bank does not in any way show that the loans were utilised only for construction of campus and the campus never catered to unit-2. In any case, assessee itself had mentioned that a part of the loan was unsed for financing the working capital and business needs. In such a situation, we do not find any reason to interfere with the orders of lower authorities in this regard.
Deduction u/s 10A - deduction of travelling expenditure, support expenses, telecommunication expenditure and other expenditure from export turnover while computing the deduction available to it u/s.10A - Held that:- The definition of the term ‘export turnover’ in Explanation (iv) to Section 10A of the Act, does not give room for such an interpretation as sought by the assessee. However, in so far as its alternate ground that items which are deducted from export turnover have to be reduced from total turnover also while computing deduction u/s.10A of the Act, we are inclined to accept, in view of the judgment in the case of Tata Elxsi Ltd v. CIT [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. Accordingly, we direct the AO to rework the deduction u/s.10A of the Act, after reducing the amounts which are deducted from export turnover from total turnover also.
Disallowance of deduction u/s.10A in respect of its business undertaking located in Chandigarh, registered with STP authorities - slump sale - Held that:- It is not disputed that the Chandigarh unit came to the assessee through a slump sale. M/s. Virsa had given this undertaking to the assessee as a going concern. That such transaction was a slump sale has not been disputed by any of the lower authorities. It is also not disputed that the said M/s. Virsa was eligible for deduction u/s.10A of the Act and was claiming such deduction in the earlier years for such unit.
As decided in M/S. SONATA SOFTWARE LTD. [2012 (4) TMI 99 - BOMBAY HIGH COURT] Slump sale could not be considered as a reconstruction of business. Similar view was also taken by the coordinate bench in the case of LG Soft India P. Ltd [2010 (5) TMI 825 - ITAT BANGALORE]. We are therefore of the opinion that assessee was eligible for claiming deduction u/s.10A for its Chandigarh unit for the balance sheet for the period of availability of deduction u/s.10A. We therefore set aside the orders of lower authorities in this regard and remit the issue back to the AO for consideration afresh in accordance with law for verifying whether the claim for deduction u/s.10A
Foreign tax credit as not granted to it though it was claimed in the return of income - Held that:- Facts before us does not show whether assessee was eligible for the claim of foreign tax credit of ₹ 2,42,205/-. It might be true that it had claimed such credit in the return of income. In all fairness we feel that this matter requires a fresh look by the AO. If the assessee is eligible for foreign tax credit and if the amount claimed by the assessee is correct, AO shall give such credit. Ground. is allowed for statistical purpose.
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2016 (6) TMI 1332
Addition u/s 80IA - yielding abnormal profits - excess profit on the ground that the assessee had not booked any expenses in respect of the technical know-how and goodwill - Held that:- The assessee was not able to show any change in the given facts in the instant year. CIT(Appeals), after discussing the issue in detail was of the opinion that availability of technical know-how, good will and customer base to the assessee free of cost has resulted in yielding abnormal profits to the assessee which stand in glaring contrast to the profits returned by his sister concern M/s Stoneage in the same line of business.
CIT(Appeals) was, therefore, of the opinion that assessee certainly would have been under an obligation to pay suitable price for the technical know-how, good will and customer base, had he followed the arm’s length principles while dealing with M/s Stoneage Industrial. Therefore, ld. CIT(Appeals) correctly followed the decisions of earlier years while deciding the issue against the assessee. The finding of fact recorded by the authorities below in assessment year under appeal as well as in earlier years, have not been rebutted through any evidence or material on record. - decided against assessee.
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2016 (6) TMI 1331
Issues:
1. Interpretation of precedent set by Kerala High Court
2. Compliance with Notification No.10/2003 S.T
3. Application of precedent without discussing facts
Interpretation of Precedent:
The appeal raised the issue of whether the Customs, Excise and Service Tax Appellate Tribunal was correct in following the ratio of a decision by the Kerala High Court in a specific case. The appellant argued that the Kerala High Court's judgment was made based on the facts of that particular case and should not be considered a binding precedent. The Tribunal's decision was challenged on the grounds that it did not discuss the facts and applicability of the Kerala High Court's decision to the present case with distinguishable facts.
Compliance with Notification No.10/2003 S.T:
Another issue raised in the appeal was whether the Tribunal's order was legal and correct, despite the Taxable Information Management Services (TIMS) not fulfilling the conditions of Notification No.10/2003 S.T dated 20/6/2003. It was noted that TIMS collected fees from students in two parts, one sent to the University and another directly collected for conducting classes. The appellant contended that TIMS did not meet the conditions of the notification, raising questions about the legality of the Tribunal's decision.
Application of Precedent without Discussing Facts:
The third issue focused on whether the Tribunal erred in applying the ratio of the Kerala High Court's decision without discussing the facts and its relevance to the current case, which presented distinguishable facts. The argument was centered on the lack of detailed analysis by the Tribunal regarding the applicability of the precedent to the specific circumstances of the case at hand.
In the hearing, the appellant's counsel informed the court about the department's decision to withdraw the appeal based on instructions from Circular No.I/10/10/2016 Legal. Consequently, the Civil Miscellaneous Appeal was dismissed as withdrawn, leaving the substantial questions of law raised in the appeal open without imposing any costs.
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2016 (6) TMI 1330
Estimation of income - assessee is a wholesale dealer in liquors - as contended that the assessee is a wholesale dealer in liquors and majority of the sales are to be wholesale consumers wherein profit margin is 2% only and hence, the A.O. is not justified in estimating the income/profit at 5% - Held that:- The assessee has not placed grounds and statement of facts filed before the CIT(A) and even in Form-36 the address to which the notice may be sent to the respondent was also wrongly mentioned as ‘Commissioner of Income Tax’ instead of furnishing correct address of the respondent.
With regard to issue of estimation of income, the Ld. CIT(A) observed that no contrary decisions were placed on record and therefore, the Ld. CIT(A) followed the decision of ITAT in the case of ITO, Warangal vs. Shri P. Ramaiah and others [2013 (12) TMI 1001 - ITAT HYDERABAD]. Though the assessee preferred an appeal before the Tribunal no reported decision was placed before us and no material whatsoever was furnished to contradict the findings of the A.O. as well as CIT(A). Under these circumstances, we do not find any infirmity in the order passed by the CIT(A) and therefore, dismiss the appeal filed by the assessee.
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2016 (6) TMI 1329
Disallowance of the expenditure incurred by the Appellant on homologation based on the possibility that the same could be non-business expenditure/inflated expenditure - Held that:- We find the CIT(A) upheld the action of the AO which has already been reproduced in the preceding paragraphs. It is the submission of the assessee that given an opportunity the assessee is in a position to furnish the full details of Homologation charges before the AO. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore this issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the Homologation charges. Ground raised by the assessee on this issue is accordingly allowed for statistical purposes.
Addition of miscellaneous expenses, staff welfare expenses, advertisement and sales promotion expenses based on the possibility that the same could have been booked for non-business purposes - Held that:- We find the Ld.CIT(A) has already deleted the disallowance out of travelling and telephone expenditure. He has only sustained an amount of ₹ 2,50,000/- out of the miscellaneous expenses and other expenses. No infirmity in the order of the CIT(A). Admittedly, substantial part of petty expenses have been incurred in cash and are not verifiable in nature, therefore, the possibility of booking of expenditure for non business purposes cannot be ruled out. Since the disallowance sustained by the CIT(A) is very nominal considering the huge amount of miscellaneous expenses, staff welfare expenses etc. amounting to ₹ 13.07 crores, therefore, we find no infirmity in the order of the CIT(A) sustaining such disallowance. The submission of the Ld. Counsel for the assessee that no disallowance has been made in earlier year and subsequent year on this issue is not material. It is settled law that every year is separate and distinct and the principle of resjudicata do not apply to income-tax proceedings. In this view of the matter we uphold the order of the CIT(A) and the ground raised by the assessee is dismissed.
Addition of car repair charges as a prior period expenditure - Held that:- Since the assessee in the instant case is following mercantile system of accounting and since the liability has crystallized in the preceding assessment year, therefore, the same cannot be allowed as a deduction in the current year. The various decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. Accordingly, ground of appeal No.3 is dismissed.
Deduction u/s.80IB as allowed by the AO in the rectification order u/s.154 - Held that:- Since in the instant case the assessee is otherwise entitled to deduction u/s.80IB as granted earlier by the AO in the 154 proceedings and since it is also the settled law that proceedings before the appellate Tribunal are continuation of the assessment proceedings, therefore, respectfully following the decision of the Hon’ble Supreme Court cited [1996 (12) TMI 7 - SUPREME COURT] we set aside the order of the CIT(A) and direct the AO to allow the claim of deduction u/s.80IB.
Project Assistant Technical charges as deductible expenditure u/s.37(1) - assessee has not been able to prove the basis of such payment, the nature of service rendered by the expatriates and also when the payment were not made in accordance with the project assistant agreement dated 11-12-1994 - Held that:- DRP in assessment order for A.Y. 2007-08 has directed to allow the project assistance technical fees as deductible business expenditure and the revenue has accepted the same and when in subsequent years the tax authorities have accepted the revised agreement entered into in May 2005 with retrospective effect from 01-01-2002 and since the genuineness of the payments has not been doubted by the AO in the body of the assessment order, therefore, we find no reason as to why part of such project assistance technical fee should be disallowed. In view of the above discussion and in view of the reasoning given by CIT(A) we uphold the order of the CIT(A) on this issue. - decided against revenue
TPA - agreement with DCAG to pay royalty for technical knowhow received from DCAG - selection of MAM - Held that:- The royalty payment has been benchmarked considering combined transaction approach in TNM method. No separate benchmarking was undertaken to determine the ALP of Royalty. In A.Y. 2007-08 till A.Y. 2011-12 the payment of royalty was held to be at ALP. We therefore find merit in the submission of the for the assessee that in view of the rule of consistency the Cit(A) was justified in rejecting the CUP method adopted by the AO and accepting the TNM method followed by the assessee.
Payment of royalty - nature of expenditure - revenue or capital expenditure - Held that:- We find the Hon’ble Bombay High Court in the case of Antifriction Bearings Corporation Ltd. Vs. CIT reported [1977 (11) TMI 37 - BOMBAY HIGH COURT] has held that royalty paid to a Foreign collaborator for provision of technical know-how in a restricted manner for a restricted use during the agreement period, not resulting in absolute transfer of anything or acquisition of any asset of enduring character is a revenue expenditure.
Expenses pertaining to the cars allotted to the top executives - allowable busniss expenses - Held that:- No justification for adhoc disallowance on the ground that personal or non business component in the expenses claimed such as sundry expenses, hotel expenses gift articles, employee welfare expenses etc. Similarly, in the case of Bajaj Auto Finance Ltd. [2014 (6) TMI 969 - ITAT PUNE]) has held that in case of a company which is an inanimate person, no adhoc disallowance towards car and telephone expenses for personal use can be made. Similar view has been taken by the Coordinate Benches of the Tribunal in different other cases. We therefore do not find any infirmity in the order of the CIT(A) holding that the expenses pertaining to the cars allotted to top executives of the company are tax deductible since the same were taxed in the hands of the employees.
So far as the amount on account of difference between amount of capitalized cars as per tax audit report and expenses on capitalized cars transferred from profit and loss account to fixed assets in the financial statements is concerned, we find merit in the submission of the assessee that the difference relates to balance sheet items and not profit and loss items such as RTO tax, CBU cars and preowned cars. However, the order of the CIT(A) is silent on this issue. We therefore restore this issue to the file of the AO with a direction to verify the same. In case the same is only due to difference in the balance sheet items, then no disallowance is called for. The AO shall verify the records and decide the issue as per fact and law. Ground of appeal No.5 by the Revenue is accordingly allowed for statistical purposes.
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2016 (6) TMI 1328
Addition in respect of rented property - ALV determination - Assessee has let out these properties to one of the company where assessee has made some investment - Held that:- As perused the order of the Hon’ble Delhi high court – full bench [2011 (3) TMI 497 - DELHI HIGH COURT] dealing with the identical issue with respect to the same properties where issues have been decided by the Hon’ble high court in favour of the assessee. Therefore respectfully following the decision of the Hon’ble high court we decide ground No. 1 in favour of the assessee reversing the order of the lower authorities deleting addition made in respect of rented properties
Deemed dividend addition u/s 2(22)(e) - companies controlled by the assessee through the shareholding of his minor son - advance rent received - Held that:- Merely because the shares are held by the minor son of the assessee and the loan is received by the assessee it cannot be established that assessee is the beneficial shareholder of 10% or more and therefore such loan amount is not chargeable to tax in the hands of the assessee. Furthermore the submission of the assessee before the lower authorities that it is in the nature of advance rent as whenever the rent is payable by the company to the assessee same is deductible from this amount therefore it partakes the character of advance rent. AO has not categorically stated that this amount is not advance rent and not adjusted subsequently against the rent payable by the company to the assessee. According to us if it is an advance rent then it becomes a business transaction and the provisions of deemed dividend cannot apply to such transactions. In view of this we reverse the finding of lower authorities in confirming an addition on account of advance rent received by the assessee from the Suba Microsystems private limited. - Decided in favour of assessee.
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2016 (6) TMI 1327
Disallowing commission payment - expenditure was incurred wholly and exclusively for the purpose of business - Held that:- It is not in dispute that similar payment has been made in earlier year as well. Assessee was also deducting TDS on the payment made to M/s. Delite International. Thus, M/s. Delite International was giving not only services of Commission Agent but composite services to the assessee. Revenue Officers had tried to invoke the provisions of Section 40A(2)(b) of the Act. Comparative cases have to be brought on record to justify the disallowance in question, but in this case, having discussed the provisions of Section 40A(2)(b) of the Act, full amount has been disallowed. Hon’ble Bombay High Court in case of CIT vs. Indo Saudi Services (Travel) P. Ltd. [2008 (8) TMI 208 - BOMBAY HIGH COURT] had held that in case of tax neutrality, disallowance in question are not justified because both payee and recipient are paying tax on highest slab. Assessing Officer has not brought on record to establish colourable device in such payment. There is nothing on record that payment is against public policy. There is also nothing on record that such payment have routed back to assessee in any manner. Lastly, assessee has paid the amount in question after deducting TDS and recipient has paid taxes on same. Taking all facts and circumstances of the case into consideration, we are of the view that payment in question @5.25% looking to the services rendered by said party is justified and same is allowed.
Payment of transport charges made by assessee company - assessee did not discharge the onus to substantiate the claim with supporting evidences - Held that:- Revenue authorities have not disputed the fact that possession of transport vehicles was M/s. Delite International and transportation by assessee. They have not brought anything on record that goods have been transported by other than vehicles of the M/s. Delite International. It is a tax neutrality as held by Hon’ble Bombay High Court in case of CIT vs. Indo Saudi Services (Travel) P. Ltd. [2008 (8) TMI 208 - BOMBAY HIGH COURT] as both the parties are paying tax on highest rate. No colourable device has been suggested by AO with regards to these transports’ payments. similar type payments have been made in assessment order for earlier year has not been disturbed in any manner. We are of the view that assessee is supposed to maintain its affair in its own way and Revenue authorities had brought nothing on record to suggest that such payments were not for business purpose. So, taking all facts and circumstances of the case into consideration, Assessing Officer is directed to allow these expenses in question.
Disallowance paid for foreign tour - stand of assessee has been that assessee has incurred expenses as mentioned on foreign travel wholly for the business purposes only - Held that:- t is business decision of assessee which should not be disturbed by Revenue authorities without bringing out anything otherwise on the record. Revenue authorities failed to bring any material on record to establish that it was a pleasure trip as same were undertaken by the said persons individually. Assessee is not supposed to disclose all strategic decision to the Revenue authorities including final conclusion of purchasing certain machinery and running the business in more efficient technical and administrative manner. As stated above, Revenue authorities have not brought anything on record to suggest that it is a devise to avoid the tax. AO is directed to allow the travel expenses in question.
Disallowance of interest expenses - allowable busniss expenses - Held that:- Interest paid to M/s. Technical Works Industrial Link Ltd. was a reimbursement the interest incurred by M/s. Technical Works Industrial Link Ltd. on overdraft facility in bank, which was availed against fixed deposits of M/s. Technical Works Industrial Link Ltd. for the purposes of business of assessee. As stated above, CIT(A) found nothing on record to show that this payment was partly or wholly for purposes other than the business purpose. The submissions of assessee were sent to AO. AO has not brought any fact to the knowledge of CIT(A) to suggest that interest payment made to M/s. Delite International of ₹ 46,07,791/- or to M/s. Technical Works Industrial Link Ltd. of ₹ 21,04,071/- was partly or wholly attributable to purposes other than business of assessee. In these facts and circumstances, CIT(A) was justified to held that these expenses have been incurred for business purposes of assessee and this reasoned finding of CIT(A) needs not interference from our side. - Decided in favour of assessee.
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2016 (6) TMI 1326
Disallowance u/s 40(a)(ia) even if the amount has been paid by the assessee - Whether can be applied when payments in respect of which tax is deductible at source has already been made by the assessee to the payee at the time of computing the income chargeable under the head "profits and gains of business or profession" i.e. at the close of the year? - Held that:- We not inclined to interfere with the orders of the authorities below. Hon'ble Punjab & Haryana High Court in the case of M/s PMS Diesels (2015 (5) TMI 617 - PUNJAB & HARYANA HIGH COURT) held that” Provisions of Section 40(a) (ia) of the Ac t would cover amount payable at any time during the accounting year” . The issue is, therefore, covered against the assessee.
Addition on account of personal expenses - addition on account of personal expenses, details of the same are noted in the appellate order which were about 25% of the total expenses claimed - Held that:- CIT(Appeals), considering the details of the expenses and submissions of the assessee, restricted the disallowance to 10% on account of telephone, vehicle and running, repair and maintenance, car loan interest and depreciation etc. No arguments have been made before me as to how the disallowance is excessive or not reasonable. Therefore, this ground has no merit, same is accordingly, dismissed. - decided against assessee.
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2016 (6) TMI 1325
Deduction u /s 10A denied on interest income - interest income is in the nature of Business Income and is derived from the industrial undertaking and not allowing deduction u/s 10A - Held that:- Similar issue arose in assessee’s own case in earlier year i.e. A.Y. 2009- 10 [2016 (3) TMI 1285 - ITAT MUMBAI] as held interest income earned by the assessee has a direct nexus and was derived from the assessee's business and was, therefore, entitled to be considered for deduction u/s.10A of the Act. - decided in favour of assessee
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2016 (6) TMI 1324
Restoration of registration under TNVAT Act - petitioner's registration certificate has been cancelled on the alleged ground 'stopped Business Dealer'.
Held that:- It appears that the petitioner has independently challenged the notice dated 13.5.2016. However, since the representation dated 12.2.2015 is pending with the respondent, there shall be a direction to the respondent to consider the said representation dated 12.2.2015 and pass appropriate orders on merits and in accordance with law. If the order of cancellation has not been already served on the petitioner, then the authenticated copy of the said order shall be served on the petitioner - petition disposed off.
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2016 (6) TMI 1323
TDS u/s 195 - disallowance made u/s. 40(a)(i) paid to foreign parties towards sales promotion services rendered outside India - retrospective amendment in Explanation 2 to section 9 of the Act with regard to retrospective TDS obligation - whether no tax withholding was called for from such remittance - scope of amendment of law - Held that:- We hold that the assessee cannot be expected to foresee an amendment in the statute with regard to TDS obligations and any retrospective amendment in the law could only disturb the computation mechanism of determination of income. Accordingly, we hold that by virtue of a retrospective amendment, the income of an assessee could be disturbed on a higher side or lower side. But the TDS obligations that are cast on the assessee are only procedural in nature and assessee could maximum be expected to follow the law as it stood at the time of making payment or crediting the account of payee whichever is earlier. Hence we hold that the assessee cannot be faulted with for violation of TDS obligations due to retrospective amendment in procedural law - retrospective amendment in statute does change the tax liability in respect of an income, with retrospective effect, but it cannot change the tax withholding liability with retrospective effect. Accordingly the raised by the assessee is allowed.
Disallowance of Professional and Consultancy Fees - Held that:- CIT-A after taking into account the remand report and rejoinder filed by the assessee and on perusal of the entire details had deleted the addition. We also find that the Learned CIT-A had given categorical finding in respect of each and every payment by referring to relevant provisions of the Act and with specific reference to treaties of various countries. None of these findings were controverted by the revenue before us. Hence we find no infirmity in the order passed by the Learned CIT-A on this issue. Accordingly, the Ground No. 1 raised by the revenue in respect of Professional and Consultancy fees is dismissed.
Disallowance on account of Commission charges - Held that:- CIT-A after taking into account the remand report and rejoinder filed by the assessee and on perusal of the entire details had deleted the addition. We also find that the Learned CIT-A had given categorical finding in respect of this issue which is stated hereinabove and we find that none of these findings were controverted by the revenue before us. Hence we find no infirmity in the order passed by the Learned CITA on this issue. Accordingly, the Ground raised by the revenue in respect of Commission expenditure is dismissed.
Disallowance of commission paid on account towards reservation charges - TDS liability - Held that:- We find that the Learned CITA had given a categorical finding with regard to payments made to Oberoi Contact Centre being inter unit payments for which TDS provisions could not be made applicable. The Learned DR could not controvert this finding of Learned CITA before us. Accordingly, we find no infirmity in the order of the Learned CITA with regard to deletion of disallowance.
Disallowance on account of provision for overriding commission - Held that:- On perusal of the details of subsequent payments it is observed that out of the aggregate amount of ₹ 3,700,563/ - disallowed in the assessment order, ₹ 27,21,258/- was paid subsequently. The remaining amount of ₹ 9,19,303/ - was written back in the books of account in March 2008. During the appellate proceedings, the appellant submitted that the written back amount was offered to tax in the relevant assessment year. Under the circumstances, we do not find any reason as to why the amount should not be allowed as deduction in the hands of the appellant in the-assessment year under appeal. In my opinion the amount represents a crystalised liability and thus the appellant should be eligible to deduction of the said amount.
Disallowance on account of aircraft running and maintenance expenditure - Held that:- As decided in assessee's own case ot of force in the arguments of the Learned AR that if at all there is any personal element involved in the aforesaid expenditure, the same have to be taxed as perquisite in the hands of the directors and it is only for the TDS officer to look into the violations, if any, on the same and hence on that ground also, no disallowance of expenditure could be appreciated. We find that the Learned AO had made the entire addition based on surmises and conjectures and made on adhoc basis . It is well founded proposition that what is apparent is real and the allegation to prove the contrary is on the person making such allegation.
Disallowance on account of notional interest on interest free advances given to associate companies - Held that:- It is not in dispute that the assessee had sufficient own funds to make these advances. The assessee had earned a profit of ₹ 260,74,50,176/- during the year and had reserves and surplus of ₹ 992,56,27,750/-. Hence it could be safely concluded that the assessee was flooded with own funds and borrowed funds were not utilized for making these interest free business advances. None of the findings given in the aforesaid order in assessee’s own case were controverted by the revenue before us.
Disallowance u/s 14A - Held that:- It is not in dispute that the assessee had derived taxable income as well as tax free income and incurred expenditure for deriving both the incomes and hence disallowance is definitely warranted in terms of section 14A which is brought in the statute book with retrospective effect from 1.4.1962. The disallowance had to be made only on an estimated basis with regard to the expenditure incurred for the purpose of earning tax free income.We find that the Learned CITA had also directed the Learned AO to restrict the disallowance u/s 14A of the Act at 1% of dividend income. Hence we find no infirmity in the order passed by the Learned CITA in this regard.
Disallowance on account of Commission paid to Airport Authority of India for non-deduction of tax at source - Held that:- We find in the facts and circumstances, the assessee be given one more opportunity to furnish before the Learned AO TDS certificates or any other evidences in support of its compliance to TDS obligations with regard to commission payments made to Airports Authority of India. We direct the Learned AO accordingly - Ground raised by the assessee is allowed for statistical purposes.
Disallowance on account of advance written off - Held that:- We find lot of force in the argument of the Learned AR that the assessee would get only royalty from various hotels for using its trademark, logo and name for which purpose it had made investments in joint venture equity participation. Due to the fact that the project could not take off and got abandoned for various reasons beyond the control of the assessee, the assessee had to claim the same as a regular business loss. We find that the reliance placed by the Learned AR on the decision of the Hon’ble Calcutta High Court in the case of Binani Cement Ltd vs CIT [2015 (3) TMI 849 - CALCUTTA HIGH COURT]is well founded.
Disallowance on account of provision for leave encashment - Held that:- As assessee stated that the deduction on account of provision of leave encashment was made on the basis of the judgment of Hon'ble jurisdictional High Court in the case of Exide Industries Ltd. Vs. Union of India[2007 (6) TMI 175 - CALCUTTA HIGH COURT] but he fairly conceded that subsequently Hon'ble Supreme Court has stayed this judgment of Hon'ble jurisdictional High Court. Accordingly, we set aside this issue to the file of the AO to await the decision of Hon'ble Supreme Court and decide the issue accordingly. This issue of assessee’s appeal is remitted back to the file of AO
Disallowance of General Expenses on estimated basis - Held that:- We find that the addition has been made by the Learned AO merely on surmise and conjecture. The Learned CIT-A had rightly deleted the addition after going through the comments made by the Learned AO in the remand report in respect of this addition. Hence we find no infirmity in the order of the Learned CIT-A in this regard.
Disallowance on account of Provision for Bonus - double deduction - Held that:- CIT-A correctly observed that the Tax Auditor of the assessee had duly certified that a bonus amount of ₹ 29,65,542/- remain unpaid and accordingly the same was disallowed voluntarily by the assessee in the return of income. He observed that the sum of ₹ 7,12,000/- is included in the disallowance made in the sum of ₹ 29,65,542/- and accordingly deleted the double disallowance.
Addition towards unclaimed salaries and wages u/s 41(1) - Held that:- -We find that no specific arguments were advanced by the Learned DR in respect of this addition. We agree with the contentions of the assessee that the employees who had left the organization had not filed any declaration that they had waived their dues from the assessee and the liabilities towards unclaimed salaries and wages continue to be reflected in the books of the assessee. No benefit was derived by the assessee in this regard. We hold that the liability to pay the agreed dues exists on the part of the assessee and merely in the absence of a valid claim from the resigned employees, it cannot be concluded that the liability had ceased to exist. Hence the provisions of section 41(1) of the Act cannot be invoked.
Disallowance of depreciation on certain items of Plant and Machinery - Held that:- CIT-A was correct by allowing the assessee’s claim of depreciation on Plant & Machinery items on the basis of the date on which it was received in stores and not on the basis of the date of its put to use
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2016 (6) TMI 1322
TPA - ALP determination - rejection of Most Appropriate Method (‘MAM’) adopted by the assessee as CPM/CUP by the TPO and adopting Transactional Net Margin Method (‘TNMM’) - comparable selection - Held that:- The assessee provides off shore software development services to its parent company (Associated Enterprise – AE) and also execute project to support engineering system or to develop software for internal use or for development of new product for AE. The assessee is compensated by its AE at cost plus mark up of 10% for the services rendered by the assessee.
Following the earlier order of this Tribunal in assessee's own case this issue is decided against the assessee and confirmed the order of the TPO in adopting TNMM as MAM.
Rejecting the multiyear data and adopting the current year data by the TPO -There is no dispute that as per the Rule 10B(4) as well as Rule 10D (4) so far as possible the current year and contemporaneous data has to be considered for determining comparable price. Only in the case of exceptional circumstances where current year data cannot be relied upon and does not give the true and correct state of affairs of the functional comparability then multiyear data up to 2 earlier years can be used. The assessee has failed to demonstrate that the current year data of the comparables are not reliable. Accordingly, we do not find any substance or merit in this ground of the assessee’s appeal and the same is rejected.
Rejection of companies functionally dissimilar with that of assessee who provides off shore software development services to its parent company (Associated Enterprise – AE) and also execute project to support engineering system or to develop software for internal use or for development of new product for AE
Comparable selection - filter applied by the DRP in respect of the Related Party Transaction (‘RPT’) at 0% - Held that:- RPT filter of 15% is proper in the case of the assessee. Consequently, the impugned order of the CIT (Appeals) whereby applied filter of 0% RPT is set aside. Hence we direct the Assessing Officer/TPO to apply the RPT filter of 15% and then select the comparables.
Benefit of working capital adjustment - TPO has worked out the working capital as per Annexure C to the order passed under Section 92CA however the TPO has restricted the working capital adjustment and not granted the actual computation in the case of each comparable - Held that:- As following the order of the co-ordinate bench of this Tribunal in the case of Bearing Point Business Consulting Pvt. Ltd. (2014 (4) TMI 997 - ITAT BANGALORE), we direct the A.O/TPO to reconsider the issue and allow the appropriate actual working capital adjustment as per the working in case of each comparable.
Benefit of proviso to Section 92C of the Act - Held that:- If the comparable price is within the range of + or – 5% of the assessee's price then the benefit of proviso to section 92C shall be granted to the assessee. Accordingly, we direct the A.O/TPO to consider the same at the time of passing the order to give effect this order of the Tribunal.
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2016 (6) TMI 1321
Addition on account of Arm’s Length Price adjustment - comparable selection criteria - Held that:- As gone through the material available on the record. In the present case, it is an admitted fact that complete data relating to the comparable selected by the assessee was not available at the time of making the transfer price study. However, the same are now available at the public domain. We, therefore, think it appropriate to restore this issue back to the file of the TPO/AO to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
MAM selection - TPO applied the residuary profit split method as most appropriate method instead of TNMM method choosen by the assessee as most appropriate method - Held that:- As noticed that the TPO for the assessment year 2010-11 had considered the TNMM method as most appropriate method by keeping in view the Circular No. 6/2013 dated 29.06.2013 but it is an admitted fact that the said Circular was not in existence when the TPO passed the impugned orders for the respective assessment years i.e. assessment years 2007-08 to 2009-10, under consideration. However, he admitted while passing the orders u/s 92CA of the Act for the assessment year 2010-11 that TNMM is most appropriate method for determining the Arm’s Length Price. We, therefore, deem it appropriate to set aside this issue relating to the assessment years 2007-08 to 2009-10 to the file of the TPO/AO to decide as to what is the most appropriate method by considering the facts and the guidelines available in the form of circular.
As regards to the issue relating to the comparables for which the information u/s 133(6) of the Act were obtained by the TPO and which were not confronted to the assessee, we are of the view that this issue also deserves to be set aside to the file of the TPO/AO for fresh adjudication in accordance with law.
Additional ground relating to deduction u/s 10A of the Act was not before the TPO/AO. The said grounds are purely legal grounds and raised first time before the Tribunal, so this issue raised in the additional grounds is remanded to the file of the TPO/AO to be decided along with another assessment years under consideration.
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2016 (6) TMI 1320
Determining income under section 44BB - Receipts on account of service tax were includible in the gross receipts for the purpose of determining income under section 44BB - Receipts on account of VAT were includible in the gross receipts for the purpose of determining income under section 44BB - Held that:- As decided in DIT vs. Mitchell Drilling International Pvt [2015 (10) TMI 259 - DELHI HIGH COURT] for the purpose of computing the presumptive income for the purpose of section 44BB of the Act, the Service Tax collected by the assessee on the amount paid to it for rendering services is not to be included in the gross receipt in terms of sub section 44BB(2) and 44BB(1) and concluded that Service Tax is not an amount paid or payable or received or deemed to be received by the assessee for the services rendered by it and the assessee is only collecting the service tax for passing it to be Government, the Hon’ble Delhi High Court also considered the Circular No. 4/2008 dated 28.04.2008 of the CBDT which clarifies that the service tax paid by the tenant does not pertake a nature of the income of the landlord and that landlord only collecting tax for government for collecting income tax.
In Oceaneering International GMBH (2015 (11) TMI 1546 - ITAT MUMBAI), the Co-ordinate Bench of this Tribunal while considering the issue, whether service tax collected by the assessee-company does not have any element of income and cannot be form part of the gross receipt for the purpose of computing the presumptive income of the assessee u/s. 44BB of the Act and after considering the almost identical fact answered the issue in favour of the assessee,
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2016 (6) TMI 1319
Penalty under section 271AAA - assessee has not brought on record any documentary evidences to substantiate the manner of deriving undisclosed income - question regarding manner of earning income - Held that:- CIT(Appeals) specifically noted in his finding that revenue has not asked the assessee to disclose the manner in which such income was earned. Therefore, issue was found covered by judgement of Gujrat High Court in the case of CIT Vs Mahendra C. Shah[2008 (2) TMI 32 - GUJARAT HIGH COURT]. Since no question is asked during the statement recorded under section 132(2) of the Act, then the assessee cannot be expected to further substantiate the manner of earning undisclosed income. The ld. CIT(Appeals), therefore, correctly found that when revenue never asked any question regarding manner of earning the income, therefore, no penalty should be levied against the assessee. - decided in favour of assessee
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2016 (6) TMI 1318
Penalty u/s 78(5) of Rajasthan Sales Tax Act, 1994 - Compliance with requirement of 78(2)(A) of the Rajasthan Sales Tax Act, 1994 - submission of 18-A form on receipt of notice - Held that:- The Hon'ble Supreme Court of India in the case of D.P. Metals [2001 (10) TMI 881 - SUPREME COURT OF INDIA] has categorically held that on show cause notice with regard to alleged contravention/ deficiency found in respect of goods in transit, if the deficiency/ contravention is removed, with the filing of the requisite document by the assessee with the reply to the show cause notice, imposition of penalty ought to be eschewed.
Both the first appellate authority and the Tax Board have not committed any illegality in passing the impugned orders setting aside the Assessing Officer's order of penalty u/s 78(5) of the 1994 Act - petition dismissed - decided against petitioner-Revenue.
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