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2019 (10) TMI 991 - AT - Income TaxDisallowance of salary paid to whole time Director - HELD THAT - In earlier Assessment Year, the services provided by the whole Time director was not discussed is not correct as the Tribunal has discussed the same in the findings. Besides the factual aspect in the present year has not changed which is established by assessee from the records. In fact, para 6.1 of the TPO s order the role and responsibilities of the Director was submitted by the assessee. The minutes of meetings were also submitted by the assessee. Therefore, the assessee demonstrated the services provided by the Whole Time Director. Thus, issue is identical in the present year as well. Hence, Ground No. 5 is allowed. Disallowance on account of allocation of expenses between exempt and non-exempt units - HELD THAT - In the present assessment year as well the Assessing Officer/TPO/DRP could not bring any material on record or not pointed out any inaccuracy as to the method of allocation adopted by the assessee company. Thus, the issue is identical in the present year as well. Ground No. 6 is allowed. Addition on account of CSR - HELD THAT - Insertion of Explanation 2 to section 37(1) is applicable w.e.f. 1.4.2015 and thus, the said provision will not be applicable in the present case. There is no dispute that the expenses in question are not incurred under the statutory obligation. The Assessing Officer disallowed the claim of CSR expenses without disputing the factual matrix or bringing on record any adverse material which can be seen from the Assessment Order. Thus, this disallowance does not survive Disallowance on account of difference in total receipts and Form 26AS - HELD THAT - From the perusal of the records it is appropriate in the present Assessment Year as well to remand back this issue to the file of the Assessing Officer for proper adjudication. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice
Issues Involved:
1. Legality and jurisdiction of the draft order and final assessment order. 2. Assessment of income at ?49,03,25,520/- instead of the returned income of ?20,64,13,580/-. 3. Jurisdictional error in the reference made by the AO to the TPO. 4. Non-compliance with the detailed procedure for determining the arm’s length price. 5. Disallowance of remuneration paid to Ms. Shallu Jindal. 6. Addition on account of allocation of expenses. 7. Addition on account of purchase of power. 8. Disallowance of expenditure on Corporate Social Responsibility (CSR). 9. Addition on account of alleged difference in income as declared and receipts appearing in Form 26AS. 10. General grounds regarding unjust and excessive additions. 11. Improper consideration of evidence and material. 12. Initiation of penalty under section 271(1)(c) of the Act. Detailed Analysis: 1. Legality and Jurisdiction of the Draft Order and Final Assessment Order: The draft order passed by the AO under section 144C read with section 143(3) of the Income Tax Act, 1961, the order passed by the TPO under section 92CA(3), the directions issued by the DRP, and the final assessment order were challenged by the assessee as illegal, bad in law, without jurisdiction, and void ab initio. However, these grounds were dismissed as general in nature. 2. Assessment of Income: The AO/TPO/DRP assessed the income of the assessee at ?49,03,25,520/- instead of the returned income of ?20,64,13,580/-. The assessee's objections to this assessment were not upheld. 3. Jurisdictional Error in Reference to TPO: The reference made by the AO to the TPO was challenged on the grounds that the AO did not record any reasons in the draft assessment order/assessment order based on which he reached the conclusion that it was ‘necessary or expedient’ to refer the matter to the TPO. This ground was not specifically addressed in the judgment. 4. Non-compliance with Procedure for Determining Arm’s Length Price: The AO/TPO/DRP were accused of not following the detailed procedure laid down in Chapter X of the Act read with the Rules for determining the mechanism for computing the arm’s length price. This ground was not specifically addressed in the judgment. 5. Disallowance of Remuneration to Ms. Shallu Jindal: The disallowance of ?78,24,682/- paid to Ms. Shallu Jindal, Whole Time Director, was contested. The Tribunal referred to its decision in the assessee’s own case for A.Y. 2013-14, where it was held that the remuneration paid was allowable and no part of the same was excessive or unreasonable. The Tribunal found that the role and responsibilities of the Director were submitted and demonstrated by the assessee. Therefore, the issue was decided in favor of the assessee. 6. Addition on Account of Allocation of Expenses: The addition of ?3,31,20,337/- on account of allocation of expenses between exempt and non-exempt units was contested. The Tribunal referred to its decision in the assessee’s own case for A.Y. 2013-14, where it was held that the expenditures were allocated on a scientific and prudent basis, and the AO/TPO/DRP had not brought on record any discrepancy in the method of allocation adopted by the assessee. Therefore, the issue was decided in favor of the assessee. 7. Addition on Account of Purchase of Power: The addition of ?23,53,79,753/- on account of purchase of power was contested. The Tribunal referred to its decision in the assessee’s own case for A.Y. 2013-14, where it was held that the assessee is entitled to transfer price by treating the sale price of power transferred for captive use. The Tribunal found that the facts were identical in the present year, and there was no discrepancy made out by the revenue. Therefore, the issue was decided in favor of the assessee. 8. Disallowance of Expenditure on CSR: The disallowance of ?69,46,170/- on account of CSR expenditure was contested. The Tribunal referred to its decision in the assessee’s own case for A.Y. 2013-14, where it was held that the expenses incurred for CSR were allowable under section 37 of the Act. The Tribunal found that the facts were identical in the present year, and there was no discrepancy made out by the revenue. Therefore, the issue was decided in favor of the assessee. 9. Addition on Account of Difference in Income and Form 26AS: The addition of ?6,40,988/- on account of the alleged difference in the income as declared by the assessee and receipts appearing in Form 26AS was contested. The Tribunal remanded this issue back to the file of the AO for proper adjudication, following the principles of natural justice. 10. General Grounds Regarding Unjust and Excessive Additions: These grounds were dismissed as general in nature. 11. Improper Consideration of Evidence and Material: These grounds were dismissed as general in nature. 12. Initiation of Penalty under Section 271(1)(c) of the Act: This ground was considered consequential and was not adjudicated at this juncture. Conclusion: The appeal of the assessee was partly allowed for statistical purposes, with specific issues being decided in favor of the assessee and others remanded back to the AO for proper adjudication. The judgment emphasized the importance of following established procedures and principles of natural justice in tax assessments.
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