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Showing 281 to 300 of 1354 Records
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2024 (3) TMI 1074
Estimation of income - Bogus purchases - CIT(A) in restricting the disallowance to 12.5% of the purchases instead of addition made by the ld. AO for the entire purchases - HELD THAT:- We find that AO has made addition on account of entire purchases which is wholly unjustified, because once the source of purchases have been debited in the books of accounts and corresponding quantity of material purchased had been recorded in the books and corresponding quantity of sales has also been accepted then, it cannot be held that purchases are outside books.
At the most, it could be the case of purchases made from hawala dealers for inflating the cost and suppressing GP rate. If parties have not confirmed the transaction then in such a case the principle laid down in the case of PCIT vs. Vishwashakti construction [2023 (5) TMI 278 - BOMBAY HIGH COURT] wherein GP rate of 12.5% has been held to be reasonable in such cases, is applied in the present case also, then CIT (A) is justified. Decided against revenue.
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2024 (3) TMI 1073
Levy of penalty u/s. 271(1)(c) - Defective notice u/s 274 - non striking of irrelevant clauses - Estimation of income on bogus purchases - HELD THAT:- A perusal of the notice reveals that it is in a pre-drafted Performa and mentions both limbs of section 271(1)(c) of the Act as. 'have Concealed the particulars of your income or Furnished inaccurate particulars of such income.'
The Assessing Officer has not struck off irrelevant clauses in the notice. As decided in Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] held that where AO clearly records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, non-striking of irrelevant matter would render the notice defective and such defective notice vitiate the penalty proceedings. In the present case, we find that in assessment order the AOhad initiated penalty proceedings for furnishing inaccurate particulars of income only. Since, both limbs i.e. “concealed particulars of income and furnished inaccurate particulars of income” are recorded in the notice, the notice is defective. The penalty levied u/s. 271(1)(c) is liable to be deleted on the ground of defective notice as well. Decided in favour of assessee.
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2024 (3) TMI 1072
Revision u/s 263 - CIT held AO had fallen in error by accepting the source of cash investment - limited scrutiny concluded against assessee - AR has primarily came up with the plea that the return was filed on the presumptive income and the scrutiny proceedings were for a limited purpose which was duly examined by the ld. AO - HELD THAT:- It comes up that the notice u/s 143(2) of the Act for limited scrutiny was issued on 29.09.2017 where the primary query under consideration was ‘whether the investment and income relating to security transactions are duly disclosed’.
The copy of return of income shows that the assessee had filed presumptive income return. The aforesaid leaves no doubt in the mind of this Bench to conclude that the finding of the ld. PCIT that the AO had not been diligent enough and had not conducted worthwhile inquiries during the scrutiny assessment is erroneous. It appears that the ld. PCIT had questioned the prudence of the assessee for investing the sale proceeds of the business in security investment and transactions.
We are of the considered view that such observations cannot be the foundation to hold that the order is erroneous so far as prejudicial to the interests of the Revenue. Rather, without pointing out anything specific during the revision proceedings, the ld.PCIT has merely substituted his own view to the matter examined by the ld. AO during assessment proceedings. Thus, the grounds raised are sustained in favour of assessee.
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2024 (3) TMI 1071
Reopening of assessment u/s 147 - AO initiated reassessment proceedings based on the information received from Investigation Wing that the Assessee was involved in making cash payment - HELD THAT:- Information on basis of which AO had initiated proceedings u/s 147 of the Act was certain and it could be construed to be sufficient and relevant material on basis of which a reasonable person could have formed a belief that income had escaped assessment. Thus, there was reason to believe that income of the assessee company to the extent of Rs. 6.61 Crores had escaped assessment on account of failure on the part of the assessee to disclose fully and truly all the material facts/particulars of its income necessary for its assessment.
Therefore, the reassessment proceedings initiated by the Assessing Officer were within jurisdiction and valid in the eyes of law in as much as reasons recorded by the Assessing Officer satisfied the requirement of section 147
It is well settled law that, for an assessment to be re-opened what is required that the AO should have reason to believe that the income of assessee had escaped assessment and the said belief should be an honest and reasonable person based on reasonable grounds. The correctness of the materials/reason to believe is not a matter to be looked into at the initial state. Therefore, we find no merit in the ground No.1 of the assessee. Ground No.1 of the assessee is dismissed.
Addition u/s 69 - addition based on the estimation of the cost of acquisition of the property - cash component of Rs. 5.41 Crores was paid over and above the registered value - addition based on statement of witness - HELD THAT:- In the present case, the addition has been made by the AO ignoring the documentary evidence in the form of registered sale deed which being a best evidence for finding the actual sale value and in the absence of any other material to show the transactions involved in cash outside the sale consideration mentioned in the sale deed and in the absence of any corroborative documentary or credible oral evidence, the AO should not have made addition.
The entire addition made by the AO based on the statements of the witnesses which have been retracted thereafter and no opportunity of cross examination was granted by the AO and in the absence of any corroborative material on record, the AO could not have made any addition and the Ld. CIT(A) should have deleted the addition. Thus, in our considered opinion the CIT(A) committed error in upholding the addition made by the AO - Ground No. 2 of the Assessee allowed.
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2024 (3) TMI 1070
Penalty proceedings u/s 271(1)(c) - failure of the assessee to explain the source of cash deposit in the bank account - burden of proof - HELD THAT:- Burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty u/s 271(1)(c) - On facts, we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives.
Assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not, in our view, warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se.
We are inclined to agree with the contention on behalf of the assessee that discretion vested with the AO u/s 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty u/s 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so.
Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased, it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus, a soft instance deserves in the present case. Appeal of the assessee is allowed.
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2024 (3) TMI 1069
Accrual of income in India - Royalty receipts - taxation of revenue from online database of text journal and books as royalty income u/Article 12 of India US DTAA - HELD THAT:- Perusal of the order of the Tribunal shows that identical issue came up for consideration in assessment years 2013-14 and 2014-15 [2022 (3) TMI 1019 - ITAT DELHI] in respect of taxation of revenue from online database of text journal and books as royalty income under Article 12 of India US Double Taxation Avoidance Agreement (DTAA) amounts paid by resident Indian end users/ distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195. Decided against revenue.
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2024 (3) TMI 1068
TP Adjustment - MAM - “other method” used by the assessee for carrying out the arms length analysis for purchase of traded goods rejected - TPO proceeded by applying TNMM as the most appropriate method for bench marking assessee’s international transactions by doing fresh search for comparables - assessee is engaged in trading of edible oils whereas all the comparables mentioned here in above are in manufacturing of edible/ non edible oils.
HELD THAT:- Since the market quotes were available on corresponding dates and when corresponding dates data was not available on the date of contract entered between the assessee and its AE, therefore, in our considered view the “other method” has been rightly applied by the assessee.
As given a thoughtful consideration to the orders of the TPO we are of the considered view that the TPO has failed to analyze the TP documentation prepared by the assessee. We find that the assessee has appropriately compared the prices of third party brokerage houses / associations/ exchanges where ever available during the time of preparation of the TP documentation.
Assessee has considered all the market quotations available while maintaining the transfer pricing report and considering the contemporaneous nature of documentation process as provided under the relevant provision of the Act.
Thus if any third party rate is not considered for a particular date of contract due to non availability of the data would not give right to the TPO to reject the method adopted by the assessee. We find that the assessee has considered the rates based on the average of available third party market quotations of Murgi Meghan, Sunvin Group, Malaysian Palm Oil and Solvent Extractors and not specifically to any single broker rate.
The objective of applying of any transfer pricing method is to determine the arm’s length price for a given transaction and not to justify any transfer price at which the transaction may have been under taken - If there is a difference between arm’s length price determined by a particular method and the transfer price adopted by the assessee, it may warrant the transfer pricing adjustment, in case such variation is not within the permissible tolerance range specified in the Act. However, such variations cannot be the basis of questioning appropriateness of the method.
A perusal of the order of the TPO show that he has mentioned a difference of Rs. 97,36,699/- and rejected the applicability of “other method”. In our humble opinion this difference is miniscule when considered with the total value of international transaction of Rs. 729 crores. - Decided in favour of assessee.
Enhancing the income of the Appellant pertaining to the purchase of traded goods that allegedly do not satisfy the arm's length principle envisaged under the Act - HELD THAT:- Documentation of arm’s length price by the assessee by adopting quotations from various brokerage houses/ associations/ exchanges cannot be faulted with and, therefore, all the decisions relied upon by the DR are distinguishable on facts. Decided in favour of assessee.
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2024 (3) TMI 1067
Deduction of interest expenditure incurred on borrowed funds u/s 57 - Interest incurred on borrowed funds utilized for making investment in shares in company of Singapore - expenditure allowable u/s. 57 or not? - HELD THAT:- As not disputed that the assessee’s investment in M/s. Dolphin Overseas Private Limited, Singapore is for the purpose of earning income in the future periods. Revenue Authorities also did not bring on record that the investment was made by the assessee otherwise than for the purpose of making an income. We observed that section 57(iii) is clear and has to be construed according to its natural meaning. It should not be given a narrowed meaning and the interpretation of section 57(iii) cannot be held to be conditional upon making or earning of the income.
As relying on SRI SAYTASAI PROPERTIES & INVESTMENT PVT. LTD. case [2014 (2) TMI 796 - CALCUTTA HIGH COURT] we are of the considered view that the assessee is eligible to claim deduction of interest expenditure incurred on borrowed funds utilized for making investment in shares of M/s. Dolphin Overseas Private Limited, Singapore as per the provisions of u/s. 57 of the Act. Appeal filed by the assessee is allowed.
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2024 (3) TMI 1066
Taxability of income in India - assessee is a company based out of the Netherlands which provided various services to its group companies based in India - Taxability as royalty/fee for technical services - revenues received from rendering certain services were claimed by the assessee as non-taxable in India - AO held that the services were taxable as royalty/fee for technical services under the income tax act, read with the India-Netherlands tax treaty - HELD THAT:- The payments do not qualify as royalty for several reasons. Firstly, the Department in the subsequent years (Assessment Years 2018-19, 2020-21 and 2021-2022) has itself not tax the aforesaid payments as royalty. Secondly, we observe that the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT]has effectively overturned all the decisions, on which reliance was placed by the tax authorities to hold that the payments qualify as royalty. Tribunal in the case of mirror transaction, while dealing with the issue of non-deduction of tax at source with respect to the aforesaid payments made by the Indian group companies to the assessee, held that since the payments qualify as royalty under the Act, read with the Tax Treaty, and therefore, held that the Indian companies were not liable to deduct tax at source on such payments under Section 195 of the Act
We are of the considered view that payments for providing HR Shell People Support Services do not qualify as Royalty under the Act, read with the Treaty - ground number 1 of the assessee’s appeal is allowed.
CHR Recruitment Fees, External Information Services (license for online databases) and IT Migration Support Services qualify as fee for technical services u/s 9(1)(vii) of the Act read with Article 12 of Tax Treaty - Scope of “make available” clause - HELD THAT:- Given the wide interpretation to the term “technical” having been taken by the Courts, and looking into the nature of services which have been rendered by the assessee, we are of the considered view that the services involve extensive use of technology, and the same are “technical” in nature.
We also observe that in the instant facts, the India- Netherlands Tax Treaty, contains a specific restriction in the form of “make available” clause, which restricts the definition of fee for technical services under the Treaty Law to only those cases where services have been rendered in a manner that the technology have been “made available” to the recipient of services, meaning thereby, the necessary information/knowledge has been imparted to the recipient of services in such manner, so that in the future, they have been enabled/ empowered to perform the services themselves, without any necessity of recourse to future services being provided by the assessee.
The scope of the term “make available” came up for consideration recently before in the case of Star Rays [2023 (8) TMI 296 - GUJARAT HIGH COURT] where the Assessee, a partnership firm, was engaged in business of cutting and polishing diamonds and export of diamonds. It had made remittances qua diamond testing service for certification of diamonds to GIA USA which set up a laboratory at Hong Kong as GIA Hong Kong and claimed that said sum was not tax deductible at source.
AO held that assessee had made payment to GIA Hong Kong Laboratory and not GIA USA and, therefore, could not claim treaty benefit between India-USA and, that assessee was liable to deduct TDS from said remittance. Invoices for payment of fees were issued by GIA USA and accounts reflected that payment was received in offshore bank account of GIA USA. The High Court held that the assessee's case was protected under India- USA DTAA as mere rendering of services could not be roped into FTS when person utilizing services was unable to make use of technical knowledge etc.
Looking into the nature of services, there is nothing on record to establish that during the course of rendering of services, the technology was “made available” to the recipient of services, in such a manner that the recipient of services were enabled to perform the services in the future, by itself, without any requirement of recourse/further assistance from the assessee company. From the contents of the nature of services, we observe that neither has technology be made available to the recipient of services, nor there is any such intention to render services in a manner that the recipient of services is enabled to perform the services itself without recourse to the assessee. Accordingly, we are of the considered view that the services have not “made available” technology to the recipient of services, so as to fall within the definition of FTS under the India-Netherlands tax treaty.
Levy of interest u/s 234B in respect of non- residents - HELD THAT:- As in light of the aforesaid decision by the Hon’ble Supreme Court in Mitsubishi Corporation [2021 (9) TMI 875 - SUPREME COURT] Ground No. 7 of the assessee’s appeal is allowed. We must also add that recently, in the case of Shell Global Solutions International BV [2023 (10) TMI 1286 - GUJARAT HIGH COURT] held that where during relevant Assessment Year assessee was a non-resident, entire tax was liable to be deducted at source on payment made by payer to the assessee u/s 195 and there was no question of advance tax payment by assessee and thus, no interest under Section 234B could be levied upon assessee.
Payment received from affiliates - license to use the database maintained by EIG and such payment is treated as royalty - HELD THAT:- Grant of right to access the online database would not amount to transfer of right to use the copyright, as alleged by the Assessing Officer - payments for grant of access to software database would not take the case of the assessee within the definition of royalty, as defined under the India-Netherlands tax Treaty. In the instant facts, access to the software has been granted to the Indian entities and there is no transfer of copyright, so as to fall within the definition of royalty under the India- Netherlands Tax Treaty.
Taxability of Real Estate And Corporate Travel Services as fees for technical services under Section 9(1)(vii) of the Act read with article 12 of Tax Treaty - AO was of the view that under the Real Estate and Corporate Travel Services, the assessee provides consultancy and assists the regional team of the affiliates in managing real estate transactions and leveraging of global relationships and contract management with key suppliers and real estate information technology tool - HELD THAT:- In respect of the aforesaid services, the condition of “make available” is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was “made available” to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty.
International Tax Administration - as observed that under the international tax administration services, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of tax administration work performed by the Shell group companies is highly technical in nature - HELD THAT:- We are of the considered view that in respect of the aforesaid services, the condition of “make available” is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was “made available” to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty.
Levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the Treaty provisions.
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2024 (3) TMI 1065
Unexplained opening balance of cash - unaccounted business receipts - Addition based on seized documents - assessee did not submit such details and failed to substantiate it claim with any supporting documents during the assessment proceedings - HELD THAT:- Admittedly, the documents seized are not showing that the opening balance of ₹ 8.28 lakhs belongs to the beginning of the year, the documents seized is for part of the year. Therefore, the opening balance is result of the transaction of the year. Evident from the statement recorded of various persons and the document seized. The opening balance is stated to be a cash balance lying with the office of the 3/10/2020 at Mahape.
The non-production of the documents for the full year cannot disentitle the assessee of the result of the transactions during the year. It is not the claim of the AO opening balance shown by the assessee on 3/10/2020 is higher than the amount of disclosure made or such balance as on 3/10/2020 is not available with the assessee from accounted source as well as from disclosure taken together.Assessee has already offered ₹ 27.74 crores, which is not denied. Therefore, assessee cannot be denied capitalization of such disclosure already made. Naturally, income will have the acquisition of the asset in the form of advances, cash on hand, and other assets.
Statement recorded u/s 132 (4) of the staff, the director of the company and investigation/examination of the details during assessment proceedings categorically shown that the above sum is standing as opening balance in the seized documents as on 3/10/2020.
On the issue of telescoping, honourable Supreme Court in S. NELLIAPPAN [1967 (5) TMI 6 - SUPREME COURT] has categorically held that telescoping is a question of fact. Therefore, it is for the revenue to prove that the fund flow statement shown by the assessee is factually incorrect. It is for revenue to show that the telescoping is not available because amount of income earned by the assessee have already been invested in other assets. Such fact is not demonstrated before us.No infirmity in the order of the learned CIT – A in granting the benefit of telescoping.
Thus, taking into consideration all the factors of disclosure made by the assessee for which telescoping has been granted, fund flow statement of additional income offered consistent statement of director, staff, and submissions before the investigation Wing and the assessing officer, clearly establishes that the addition is correctly deleted. Decided in favour of assesee.
Internal transfer of cash - Addition on account of internal transfers - HELD THAT:- It is not shown that there is a change in the facts and circumstances of the case or any of the entries shown as internal transfer has not been recorded in one branch and other connected branch. Over and above the assessee has produced row wise and column wise transfer and receipt of fund between various entities that remains undisputed by the AO, it cannot be said that there is any income contained in the above transfer entries. In view of this, it is apparent that at least to the extent of Rs. 73,84,000/- with respect to the internal movement of funds pertaining to financial year 2020 – 21 relevant to impugned assessment year 2020 – 22, does not contain any income element. This fact has been categorically verified by the learned CIT – A at least for this year Addition to be deleted.
Addition on the ground that it pertains to the transaction of other concerns of the assessee group - HELD THAT:- We find that only the disallowance of expenses was made and there is no separate addition further of any income. M/s. Ganadhish GNP is also assessed by The Deputy Commissioner of Income Tax, Central Circle – 6 (1), Mumbai i.e., the same assessing officer who is assessing the assessee. Further, the above sum is offered by the group concerns as 'on money' received. That sister concern has in fact offered ₹ 13.65 crore 'on money' income from construction activity. Further, the claim of the assessee that sum of ₹ 3,50,000 has also been similarly assessed in the hands of M/s Roshani Enterprises, another group concern. In view of these facts, we do not find any infirmity in the order of the learned CIT – A in deleting the addition of the income contained in the WhatsApp message which is already offered by the other group concern as per income, subject to verification by the ld. AO, therefore same cannot be added once again in the hands of the assessee. Accordingly, ground number 4 of the appeal is dismissed.
Addition of opening cash balance - AO submits that assessee has failed to substantiate its claim with any documentary evidence that the opening balance and the receipts were out of the unaccounted income disclosed by the assessee - HELD THAT:- It is fact that in search no such cash statements for other days of the year were found. Therefore, it is not an unusual presumption that those statement did not exist on the date of search. It is apparent that only the cash statement of 26/8/2020 was found. It may be possible that assessee must be maintaining all these statements for eachday, and which would be reported to the director of the company. However, that cannot go against the assessee that why cash statements of other days are not found. It is also the fact that for assessment year 2018 – 19 in assessment order dated 31/3/2023, AO has accepted that there are internal transfers of cash from one branch of the assessee to the other branch of the group. It is also the claim of the AO that no cash was seized of that magnitude during search.
We find that search took place on 23/9/2021 and this Statement was found for the day 26/8/2020. Time of more than 11 months elapsed between the date of cash statement and the date of search. Naturally, such a magnitude of cash, which was recorded on 26/8/2020, could not have been found on the date of search on 23/9/2021. The reasons given by the learned CIT – A in paragraph number 12 of his order is also sustainable. In view of this, we confirm the order of the learned CIT – A in deleting the addition made by the learned assessing officer based on the cash statement pertaining to 26/8/2020. Accordingly, ground number 5 of the appeal stands dismissed.
Addition u/s 69C - AO has made addition of the opening balance as well as the receipt as undisclosed income of the assessee and in the same document there are references of the expenditure, he further added such expenditure u/s 69C - HELD THAT:- When there is an addition under section 69C of the act such unexplained expenditure, which is deemed the income of the assessee, should not be allowed as a deduction under any head of income. In the present case, assessee has incurred certain expenditure, which is found during search in the seized documents, the seized documents also show the amount of undisclosed income and the amount of expenditure incurred for earning such income. In those circumstances, the disclosure of undisclosed income shows the source of such expenditure. Therefore, naturally net income in the seized document can be assessed as income. If the approach of the ld. AO is accepted then in such case, Income and its application both are taxable as income. This is not correct. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the addition.
Addition based on seized document - During search WhatsApp image was found from the mobile phone which is an excel sheet where the name of various brokers, the rate of the land, number of cases handled by each of the broker and amount receivable for the transaction and total amount received until date along with the outstanding balance is mentioned - HELD THAT:- The explanation of the assessee before the AO was same, such statement was also confirmed by the broker, the land transferred to the various parties did not belong to the assessee therefore naturally the sale consideration of that land could not be the income of the assessee. As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee
As the land does not belong to the assessee the rates mentioned in the column number 2 of the seized documents is irrelevant for the taxation in the hands of the assessee. The assessee has shown that this is the amount payable by these unit acquired to the MIDC, and sample cheques details is provided. Therefore, as the land is transferred by MIDC to the respective unit holders through all these brokers for which the assessee has received consultancy fees of ₹ 100,000/- for each unit, the whole of the sale transaction of the land cannot be taxed in the hands of the assessee. Merely because the assessee failed to provide the documentary evidence of payment of cheque by the unit acquired to the MIDC, the whole income cannot be taxed in the hands of the assessee when assessee is not shown to be the owner of such land. In the hands of the assessee, a sum of Rs. 2.81 crores have already been taxed on basis of this document. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the total addition in the hands of the assessee.
Allowance of expenses @ 30% out of unaccounted business receipts offered - HELD THAT:- CIT – A has categorically noted that assessee has incurred expenditure in its regular business at the rate of 28% to 62% and average net profit for all the years' amounts to 53% of the gross receipts. Further in the seized documents, unaccounted receipts were found of ₹ 23.67 crores and unaccounted expenditure was found at ₹ 7.19 crores which is almost 30.03% of the unaccounted receipts and therefore the claim of the assessee is reasonable and can be accepted that the gross receipts 30% of deduction should be allowed for the expenditure incurred by the assessee. Accordingly, we do not find any infirmity in the order of the learned CIT – A which is based on the financial statements of the assessee for past year as well as based on evidence found during search in the seized material. Accordingly, ground number 10 of the appeal of the AO is dismissed.
Addition on transaction not materialized - HELD THAT:- Whether the transaction has materialized or not would be evident if Mr. Umang Jain has paid cheque of ₹ 5 lakhs and ₹ 135,000/- for the above land purchase. If such cheques were paid, it would be known for what land the above transaction has happened, and the addition in the hands of the assessee to the extent of ₹ 380,000 would be justified. However, such taxation would only happen if the transaction has materialized. Therefore, this issue needs an examination. In view of this, we restore this addition back to the file of the learned assessing officer with a direction to the assessee to substantiate its stand that the transaction has not materialized.
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2024 (3) TMI 1064
TP adjustment - ALP of Contract Software Development (CSD Segment) - Comparable selection - HELD THAT:- Infobeans Technologies Ltd had declared that it was engaged in providing custom development services to offshore and was engaged in software engineering services in different fields. No segmentals were available. In such facts and circumstances, we find no merit in inclusion of the said concern in the final list of comparables. We direct its exclusion.
Exilant Technologies Pvt. Ltd derived substantial revenue from software development services. Thus, in our view, the company is functionally similar to the assessee. The impact of amalgamation on profitability needs to be examined. Since, both the sides have not brought any material on record to establish the impact or otherwise of amalgamation on profitability, we restore the issue to the AO for examining this aspect and thereafter decide whether it can be treated as a comparable.
Cybage Software Pvt. Ltd. design and overall guidance relating to the specific software is provided by the AEs. The assessee only has to do the coding and testing as per the design provided by the AE. Thus, not only the assessee doesn’t bear any risk but the work executed is limited in its scope. Whereas, from the annual report of the comparable, it is observed that it has incurred sales promotion and marketing expenses and also owns plant, equipment and other intangible assets which presupposes that it is a full risk bearing entity unlike the assessee which is more or less a no risk-entity. Therefore, in our considered opinion, the company cannot be selected as a comparable.
Rheal Software Pvt. Ltd. excluded as it is a persistent loss making company - The company has made profit in financial year 2015-16. Thus, in our view, applying the filter of persistent loss making company of the TPO, the company cannot be rejected. Accordingly, we direct the Assessing Officer to include this company.
DCIS Dot Com Solutions India Pvt. Ltd - As per the annual report of the company, it has only one segment of software development and the revenue earned during the year is from software development charges. Therefore, in our view, the company being functionally similar to the assessee has to be treated as comparable.
Adjustment of notional interest on overdue receivables from AEs - HELD THAT:- From the facts discussed by the TPO, it is observed that the assessee has entered into international transaction only with its AE. It is further observed, invoice-wise delay worked out by the TPO varies from 27 days to 365 days. Thus, by allowing AEs to retain the money beyond credit period of 30 days and in some instances for a year, certainly amounts to extending benefit to the AE in utilizing the money without paying interest to the assessee. The question one needs to ask is whether the assessee would have extended such benefit to an unrelated party? In our view, the answer would be in negative.
Prima facie, it appears that there was delay in receivables in the immediately preceding assessment year as well. However, TPO needs to examine the statistics of at least three-four assessment years to discern a pattern which would indicate that the assessee has benefited the AEs through the receivables. We may also observe that in some of the decisions cited by learned Departmental Representative, the co-ordinate Benches have held that the invoices raised within the financial year and payment made within the financial year but with delay may not have an impact on the opening and closing balance of outstanding receivables. Therefore, it could not have been factored by the assessee in working capital adjustment.
Though, we are conscious of the fact that in assessment year 2017-18, the co-ordinate Bench has decided the issue in favour of the assessee, however, we are of the view that in the impugned assessment year, the issue has not been examined in the context of principles laid down in case of Kusum Healthcare Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT]. However, in all fairness, it must be said that there is delay in trade payable to AEs. Therefore, some benefit on account of delayed payables must have percolated to the assessee. Thus, it needs to be examined whether and to what extent the benefit received by the assessee on account of trade payables can be set off against the purported benefit given to the AEs on account of trade receivables.
We are inclined to restore the issue to the Assessing Officer for de novo adjudication keeping in view the observations made by us (supra) and applying the ratio laid down by the Hon'ble jurisdictional High Court in case of Kusum Healthcare Pvt. Ltd. The assessee must be provided reasonable opportunity of being heard before deciding the issue. Ground is allowed for statistical purposes.
Difference in the income as per the books and as reflected in Form 26AS - HELD THAT:- We are of the view that the issue needs re-examination at the end of the AO as facts brought on record by the assessee have not been properly examined. It goes without saying, if a particular item of income has already been offered to tax, either in the preceding assessment years or in subsequent assessment years, the same income cannot be added in the impugned assessment year again as it amounts to double addition of the same income. If the assessee has not been given credit of TDS corresponding to such income due to the fact that income was recognized in a different assessment year but TDS was in the impugned assessment year, the credit for such TDS has to be given. With the aforesaid observations, issue is restored back to the AO for fresh adjudication after providing due and reasonable opportunity of being heard to the assessee.
Short credit of tax collected at source - Assessee has submitted before us that an application for rectification filed u/s 154 of the Act before the Assessing Officer on the issue has been dismissed - HELD THAT:- Considering the fact that assessee has already availed a remedy by way of section 154 proceedings, it cannot be permitted to continue parallel proceedings on the same issue. The ground is dismissed.
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2024 (3) TMI 1063
TDS u/s 195 - liability u/s 201 and 201(1A) - non deduction of TDS payment in the nature of FTS to the NDS Ltd. UK - royalty receipts or not? - CIT(A) quashing the order of the AO relying on case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] HELD THAT:- We are of the opinion that similar issue came for consideration in assessee’s own case [2023 (12) TMI 1300 - ITAT BANGALORE] held that a copyright is an exclusive right that restricts others from doing certain acts. Computer programs are categorised as literary work under the Copyright Act. Section 14 of the Copyright Act states that a copyright is an exclusive right to do or authorise the doing of certain acts in respect of a work, including literary work.
Term ‘copyright’ has to be understood in the context of the Copyright Act. The court said that by virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for "the use of, or the right to use, any copyright "of a literary work includes a computer program or software. As held that the regarding the expression "use of or the right to use", the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty.
The terms of the licence in the present case does not grant any proprietory interest on the licencee and there is no parting of any copy right in favour of the licencee. It is non-exclusive non-tranferrable licence merely enabling the use of the copy righted product and does not create any interest in copy right and therefore the payment for such licence would not be in the nature of royalty as defined in DTAA. We therefore hold that the sum in question cannot be brought to tax as royalty - Decided against revenue.
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2024 (3) TMI 1062
Income deemed to accrue or arise in India - payment made for providing interconnect services - consideration paid towards IUC charges treated under the ambit of “royalty” - benefit under DTAA - requirement of direct control or physical possession over a right or property or information - whether the IUC charges received by the assessee is in the nature of royalty under the Act and India-Sri Lanka DTAA? - assessee’s contention that the interconnect service does not permit the use of or transfer of right to use any of assessee’s patent, model, design, secret formula or process or trade mark, etc. which are exclusively in possession or control of the assessee, also there is also no use of equipment of the assessee by VSL and does not involve any ancillary services pertaining to the use or transfer of right to use of a process/equipment
HELD THAT:- It is pertinent to note that the Hon’ble Karantaka High Court in the case of Vodafone South Ltd. [2016 (8) TMI 422 - KARNATAKA HIGH COURT] to whom the assessee has received the IUC charges has held that the assessee is entitled to take benefit under DTAA and that the amendment to provision of section 9(1)(vi) inserting the Explanation cannot be read into the provisions of DTAA by relying on the decision of the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT].
It is also pertinent to point out that the lower authorities have relied on the decision of the Tribunal in the case of Vodafone South Ltd [2015 (1) TMI 1018 - ITAT BANGALORE] which has now been reversed by the Hon'ble High Court [2016 (8) TMI 422 - KARNATAKA HIGH COURT] thereby holding that the order of the lower authorities to be perversed.
We would also place reliance on the decision relied upon by the assessee in the case of New Skies Satellite BV [2016 (2) TMI 415 - DELHI HIGH COURT] whereas held that the provision of the DTAA cannot be altered unless by way of amendment through bilateral renegotiation after duly considering the decision of Hon’ble Madras High Court in the case of Verizon Communications Singapore Pte. Ltd. [2013 (11) TMI 1058 - MADRAS HIGH COURT] relied upon by the Revenue. It has also held that the amendment or change in a domestic law cannot result in change in the provision of DTAA unless specific amendment is brought about in DTAA.
Apart from the grounds of applicability of amendment to section 9(1)(via) and the DTAA between India-Sri Lanka It is observed that the Delhi Tribunal in the case of Bharti Airtel Ltd [2016 (3) TMI 680 - ITAT DELHI] and Bharat Sanchar Nigam Ltd [2017 (10) TMI 1093 - ITAT DELHI] has held that the payment made towards interconnect usage charges to foreign telecom operators does not accrue or arise in India and in the absence of any permanent establishment in India could not be brought to tax in India under Article 7 of DTAA. - Decided in favour of assessee.
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2024 (3) TMI 1061
TDS u/s 195 - payment received for interconnect usage charges - transaction with non-treaty country - whether it is liable to be taxed as “royalty” u/s 9(1)(vi) of the Act? - AO/DRP had brought the amount to tax in the hands of the assessee company solely relying on the orders passed u/s 201 and 201A - HELD THAT:- The order of the co-ordinate Bench of the Tribunal in the case of PCCW Global Ltd [2023 (11) TMI 1239 - ITAT BANGALORE] is directly applicable to the facts of the assessee since the said case also relates to Hong Kong – non-treaty country. In light of the aforesaid judicial pronouncements, we hold that the amount received by assessee company from the Indian telecom operator for interconnect usage is not chargeable to tax as “royalty”. Assessee ground of appeal allowed.
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2024 (3) TMI 1060
Benami transaction - petitioner has called in show cause notice issued u/s 24(1) of the Prohibition of Benami Property Transactions Act, 1988 and Provisional Attachment Order issued u/s 24(3) of Act of 1988 - petitioners submits that the show cause notice and provisional attachment order are called in question mainly on the ground that the alleged benami transaction has taken place prior to 01/11/2016, the date when Act of 1988 stood amended - HELD THAT:- The ‘provisional assessment order’ as name suggests, is ‘provisional’ in nature . The ‘adjudicating authority’ is best suited to decide the question of Benami nature of the property. We find substance in the argument of learned ASG that show cause notice is a detailed notice running in several pages containing several factual basis and it is within the province of ‘adjudicating authority’ to decide whether property is ‘Benami’ in nature and whether petitioners are liable for any action under the Act of 1988.
The Division Bench declined interference against show cause notice and PAO and permitted the petitioner to raise all relevant aspects before adjudicating authority under Section 26 of the Act of 1988. We deem it proper to follow the same course. The petitioners can avail the remedies under the Act of 1988 and take all possible factual and legal grounds before the ‘adjudicating authority’.
Needless to mention that judgment of Advance Infra Developers (P) Ltd [2023 (12) TMI 620 - MADRAS HIGH COURT] and other judgments can be relied upon by the petitioners before the ‘adjudicating and appellate authority’ (if required) to impress upon it to take a different view than the view taken by Appellate Authority in M/s. Prism Scan [2024 (1) TMI 203 - APPELLATE TRIBUNAL FOR SAFEMA AT NEW DELHI] We have no doubt that if relevant grounds are taken and judgments are cited, the said authorities will consider and decide the matter on its own merits in accordance with law.
We find no reason to entertain these petitions despite availability of statutory alternative remedies. The petitioners may avail the said remedy.
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2024 (3) TMI 1059
Direction to respondent to decide the stay application which was moved along with Appeal preferred under Section 137 of Maharashtra Prohibition Act, 1949 - cancellation of FL-III licence in exercise of powers under Section 54(1)(e) of the Act - it was held by CESTAT that The licence, if obtained by fraud or misrepresentation and that too by use of a doctored document, frustrates the very claim for grant of equitable relief as the fraud vitiates the proceedings.
HELD THAT:- There are no reason to interfere with the impugned order passed by the High Court - SLP dismissed.
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2024 (3) TMI 1058
Maintainability of appeal - monetary limit involved in the appeal - Smuggling - Gold Bars - HELD THAT:- While the confiscated gold was valued at more than Rs. 1 crore at the same time that was apportioned amongst three assessees namely Ms. Disha Tulsiani, Sri Nirmal Tulsiani and Sri Ashok Kumar Talhani.
Thus individual dispute in each of the appeals is far below the monetary limit of 1 crore. On the earlier dates, we allowed learned counsel for the revenue to file supplementary affidavit to bring on record the revenue effect involved in each of the appeals. While an affidavit has been filed by the revenue on 18.11.2023, it does not bring on record the revenue effect involved in each of the appeals.
Clearly despite time granted, no disclosure has been made by the revenue to establish that the revenue implication in each or any of the appeals exceeds the monetary limit of 1 crore - Since the order passed by the Tribunal is clearly in favour of the assessee and there is no cross appeal filed by revenue, no justification or occasion survives for this Court to allow the revenue the luxury of maintaining the present litigation against its own stated litigation policy.
The present appeal and the connected appeals are dismissed being below monetary limit.
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2024 (3) TMI 1057
Revocation of courier registration of appellant - forfeiture of security deposit - imposition of penalty under Regulation 14 of Courier Import Export Regulation (CIER), 2010 - mis-declaration of goods by the appellants as courier agents - violation of Regulation 12 (1) (i) (iii) (iv) (vii) and (x) and CIER, 2010 - HELD THAT:- There is sufficient evidence on record to prove the under valuation as being committed by the appellant with respect to the impugned import consignments.
The Courier company not only processes the clearance of the goods through the customs but actually receives the goods from the overseas exporter, transports them to India, clears them through the customs and further delivers them to the consignee in India at his address. The Regulations regulating this process provide for licensing of couriers who only can handle this work. In such imports, after the goods are brought into the country the courier has to obtain Know Your Customer (KYC) documents from the consignees and their authorization and thereafter has to file courier bills of entry (CBEs) in respect of each of the consignments. After the goods are assessed by customs, the courier pays the customs duty and clears the goods and takes them to the premises of the importer and delivers them and collects the customs duty which was paid by the courier while clearing the goods.
The appellant’s main contention is the inquiry report dated 13.01.2021 is in favour of appellant. It has been held that the appellant has abided by all the provisions of the act and CIER Regulations. Alleged violation of Regulation 12 CIER has been ruled out. However the said report and the said order-in-original has been ignored by the order under challenge. It is observed that order dated 05.02.2021 has been discussed in the order under challenge. It has been observed therein that despite an investigation was under process with SIIB and status thereof was demand but was not produced till the time of said inquiry report dated 13.01.2021 and the said order-in-original dated 05.02.2021.
Thus moot question of authenticity of authorizations and invoices especially the manipulation of dates was not before the adjudicating authority at the time of order dated 05.02.2021. the order of setting aside alleged violation of CIER by appellant was thus passed due to lack of evidence at that time. Hence, in the light of subsequent evidence against appellant, there are no reason to different from the findings in the impugned order under challenge (order-in-original dated 18.08.2023).
Thus, the appellant has violated Regulation 12 and the respective sub-regulations of CIER 2010 - the findings arrived at in the order under challenge w.r.t. each sub-clause of Regulation 12 of CIER affirmed - appeal dismissed.
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2024 (3) TMI 1056
Conversion of shipping bills - conversion from Draw Back Scheme to Advance License Scheme - limitation period of three months for seeking conversion of shipping bills from one scheme to another - HELD THAT:- It is seen from the findings of the learned Commissioner that he has given detailed findings while refusing conversion from Draw Back Scheme to Advance License Scheme at such belated stage even after same was availed by the appellants sometime after the exports was done. The order clearly discusses the scheme and legal provisions related thereto and how freely done conversion from one scheme to another after availing benefit can jeopardize revenue interest as both have their own procedural encompass and how conversion from less rigorous to more rigorous examination scheme was not permitted by the Circular No. 36/2010. This court also finds that Hon’ble High Court in THE PRINCIPAL COMMISSIONER OF CUSTOMS, MUNDRA VERSUS M/S LYKIS LIMITED [2021 (2) TMI 261 - GUJARAT HIGH COURT] after having a look at Circular No. 36/2010 dated 23.09.2010 struck down only the para 3(a) which had prescribed of three months limitation from the date of export order.
This court finds validity of condition 3(e) of Circular No. 36/2010 dated 23.09.2010 survives and therefore holds that once a benefit under which shipping bill was filed has been availed, the conversion to any other scheme cannot be allowed. It is thus clear that the same has a bigger objective of atleast giving finality to some extent to decisions earlier taken while exporting, as is the case of the appellants in this matter. This court therefore, finds that once draw back benefit was availed then there was no scope for seeking conversion to any other scheme “And” in relation to mis-declaration clause in 3(e) above being disjunctive as in case later proposition of mis-declaration, manipulation etc., coming into play, the exporter even if has been precluded from availment can still be denied conversion.
This court finds that matter falls within the ambit of para 3(e) of the above Circular and the conversion request after having enjoyed the benefit of draw back scheme, and after availing the same, cannot be allowed.
Appeal dismissed.
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2024 (3) TMI 1055
Rejection of refund claim - amount deposited after pre-notice consultation - interpretation of section 28 of the Customs Act, 1962 - Non issuance of Show Cause Notice - HELD THAT:- A close look at section 28 indicates that a pre-notice consultation is necessary before issuing notice i.e. Show Cause Notice. The purpose of the same as understood, is obviously to indicate the ‘recovery of duties not levied or not-paid or short-levied or short-paid’. Here in the case on hand, a pre-notice consultation dated 9.10.2017 was issued in terms of proviso to section 28(1)(a) ibid to the ‘person chargeable with duty or interest’ and apparently, the appellant responded positively without any demur by paying the duty and interest as indicated. What was indicated / proposed to be demanded was a differential duty and hence nothing more needs to be said about the ‘characteristic’ of the demand since when proposed to be demanded, the payment was made religiously.
Much emphasis has been laid on the non-issuance of letter / communication in writing as specified under sec. 28(2) and it is the case of the appellant that it having not issued any such communication in writing, the payment made by it loses the characteristic of duty - it is found that a positive act followed the pre-notice consultation and hence, nothing can be looked beyond for anything. If the pleas urged is to be considered, then there should have been a communication to the least, indicating as to why payment as proposed / demanded was made, but no such things appear in the file. The appellant having acquiesced, no further action was felt necessary.
It appears that the differential duty arose on account of mis-match with regard to the classification of the product imported. It is the case of the appellant that the correct classification was 8480.60. But there was no request made for rectification / re-assessment, since it is the settled position of law that since acceptance of Bill of Entry is considered as self-assessment per se, the importer if aggrieved by the same, has to seek for modification / rectification / re-assessment as held by the Hon'ble Supreme Court in the case of ITC Ltd. Vs. CCE, Kolkata [2019 (9) TMI 802 - SUPREME COURT].
Rather, the appellant chose to seek only the refund which has rightly been rejected by the original authority.
There are no merit in the case of the appellant - appeal dismissed.
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