9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (9) TMI 736 - AT - Income TaxTP Adjustment - interest on outstanding receivables - assessee submitted interest on outstanding receivables cannot be treated as a separate international transaction - HELD THAT - This issue is no longer res-integra by virtue of the decision of Instrumentation Corporation Ltd. 2016 (7) TMI 760 - ITAT KOLKATA Therefore this argument by the Ld.AR stands rejected at the outset. Rate that needs to be applied for computing interest in the hands of assessee - As decided in Cotton Naturals (India) Pvt. Ltd. 2015 (3) TMI 1031 - DELHI HIGH COURT it is the currency in which the loan is to be repaid that determines the rate of interest and hence the prime lending rate cannot be considered. The Ld.AR before us has not provided the details of the outstanding debtors and the delay in respect of the same. As the agreement / invoice grants for 30 days credit period which is observed by the DRP, we direct the Ld.AO/TPO to compute interest on such outstanding receivables that exceeded 30 days credit period, by applying LIBOR rate 200 basis points. In the event, the receivables get subsumed while computing the net margin of assessee, the same shall stand excluded - We therefore remand this issue to the Ld.AO to compute the disallowance if any in accordance with law. Disallowance of deduction claimed u/s. 80G - donations made in pursuance of the CSR policy - HELD THAT - As decided in assessee s own case for A.Y. 2016-17 2022 (11) TMI 1320 - ITAT BANGALORE , wherein, this Tribunal followed the decision of First American (India) Pvt. Ltd. 2020 (5) TMI 187 - ITAT BANGALORE authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act. Under such circumstances, we are remitting the issue back to Ld.AO for verifying conditions necessary to claim deduction under section 80G of the Act. Assessee is directed to file all requisite details in order to substantiate its claim before Ld.AO. Ld.AO is then directed to grant deduction to the extent of eligibility. Disallowance of provision for gratuity u/s. 40A(7) - assessee claimed leave encashment and gratuity that was disallowed in earlier years and claimed in the year under consideration on payment basis this year - AO disallowed the claim as the same was not verifiable with respect to Form 3CDB - HELD THAT - Assessee has not provided satisfactory explanation with reference to documentary evidence to substantiate its claim of gratuity having paid during the year under consideration. It is also an admitted position that the contributions made by assessee was towards unapproved gratuity fund and therefore the disclosure of the actual payment of gratuity to the employees would not be reported in coln. 26 of form 3CED. The deduction in respect of gratuity is to be allowed either in the year in which the gratuity is actually paid on retirement / termination or in the year in which the contributions are made to a gratuity fund which may be approved or unapproved. In support, we take strength from the decision of Hon ble Supreme Court in case of Shree Sajjan Mills Ltd. 1985 (10) TMI 2 - SUPREME COURT and the decision of Commonwealth Trust Pvt. Ltd. 2004 (4) TMI 51 - KERALA HIGH COURT We therefore remand this issue to the Ld.AO for necessary verification in respect of the disallowance made by the assessee towards the gratuity in any of the previous year and subsequent payment to the extent it is paid should be allowed.
Issues Involved:
1. Communication of the final assessment order. 2. Transfer Pricing adjustments on overdue receivables. 3. Disallowance under Section 80G for CSR contributions. 4. Disallowance under Section 40A(7) for gratuity payments. 5. Addition to book profits under Section 115JB. Summary: 1. Communication of the Final Assessment Order: The assessee contended that the final assessment order dated 27.01.2022 was not communicated as prescribed under the Income-tax Act, 1961, rendering the proceedings null and void. 2. Transfer Pricing Adjustments: - The assessee challenged the adjustment of Rs. 7,87,77,217/- for overdue receivables, arguing that delayed receipts should not be treated as unsecured loans to Associated Enterprises (AEs) and should not attract interest imputation. - The assessee argued that delayed receivables do not constitute a separate international transaction under Section 92B of the Act and should be benchmarked with the principal transaction of rendering services. - The assessee maintained a policy of not charging interest on receivables from both AEs and non-AEs, and that notional income should not be taxed. - The Tribunal referenced the Hon'ble Special Bench decision in Instrumentation Corporation Ltd. vs. ADIT and the Hon'ble Delhi High Court in CIT vs. Cotton Naturals (India) Pvt. Ltd., directing the AO/TPO to compute interest on outstanding receivables exceeding 30 days using LIBOR rate + 200 basis points. The issue was remanded to the AO for recalculating disallowances. 3. Disallowance under Section 80G for CSR Contributions: - The AO disallowed Rs. 5,50,000/- claimed under Section 80G for CSR contributions. - The Tribunal, referencing its decision in the assessee's own case for A.Y. 2016-17 and the case of First American (India) Pvt. Ltd. vs. ACIT, remanded the issue to the AO to verify the details and allow the deduction to the extent of eligibility. 4. Disallowance under Section 40A(7) for Gratuity Payments: - The AO disallowed Rs. 1,84,63,918/- claimed for leave encashment and gratuity, citing non-verification with Form 3CDB. - The Tribunal noted that contributions were made towards an unapproved gratuity fund and remanded the issue to the AO for verification. The AO was directed to allow deductions for gratuity paid during the year or contributions made in previous years. 5. Addition to Book Profits under Section 115JB: - The Tribunal directed the AO/TPO to recompute the book profit in accordance with the law after giving effect to this order. Conclusion: The appeal filed by the assessee was allowed for statistical purposes, with various issues remanded to the AO for further verification and computation in accordance with the law. The order was pronounced in the open court on 31st May, 2023.
|
