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TMI Blog2013 (9) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the assessee’s business is given and it helps the assessee’s customers in dealing with it - A website constantly needs updating, otherwise it may become obsolete - It helps in the smooth and efficient running of the day-to-day business - The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies who were engaged to develop the websites, when they became irrecoverable, can be written off and claimed as loss incidental to the business. The loss is thus allowable as business loss in terms of section 28 of the Act - Following decision of Deputy Commissioner of Income Tax Versus M/s Edelweiss Capital Ltd., Mumbai [2011 (2) TMI 284 - ITAT MUMBAI] - Decided in favour of assessee. Disallowance u/s 14A - Held that:- AO has applied Rule 8D by invoking the provisions of section 14A of the Act. It is now well settled that Rule 8D is applicable from AY 2008-09 as is held in the case of DCIT vs. Godrej and Boyce Manufacturing Co. Ltd., [2010 (8) TMI 77 - BOMBAY HIGH COURT]. The CIT(A) has given a very categorical finding that the dividend warrants were credited electronically. However, the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of royalty made to Ciba basel by adopting a Comparable Uncontrolled Price (CUP) method as the Most Appropriate Method (MAM) to determine the Arm's Length Price of the royalty payments made to Ciba Basel. The TPO disregarded Most Appropriate Method (MAM) selected by CIL in respect of royalty transaction i.e. CUP and adopted Transactional Net Margin Method (TNMM) as the most appropriate method for the PAA segment. The assessee was asked to submit comparables to bench mark the transaction using TNMM. The assessee without prejudice to his CUP method submitted the details. The TPO went on to make adjustment to the tune of ₹ 78,28,908/-. 5. When the matter was carried before the CIT(A), the CIT(A) rejected assessee's contention of applicability of CUP as the most appropriate method for the current year. 6. Aggrieved by this finding, the assessee is before us. 7. The Counsel for the assessee drew our attention to the agreement entered between the assessee and the Ciba basel exhibited on page 1 to 9 of the Paper book. The Counsel also drew our attention to the RBI's amended approval for the payment of royalty as exhibited on page 10 of the Paper book. The Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any required should be made on that basis . 10. As no distinguishing facts have been brought on record, we do not find any reason why the directions issued by the DRP for AY 2006- 07 should not be followed for the year under consideration when the facts and the circumstances for payment of royalty are the same. We, accordingly, direct the AO to examine the CUP offered by the assessee in its TP report and adjustment, if any, required should be made on that basis. 11. Grounds no. 4, 5 6 are accordingly allowed. 12. Ground no. 1 relates to the disallowance of employees housing loan written off to the extent of ₹ 4,67,633/- and advances written off at ₹ 1,55,904/-. 13. This issue has been considered by the AO at para 4 of his order. While scrutinizing the statement of accounts during the course of the assessment proceedings, the AO observed that the assessee has debited to the profit loss account an amount of ₹ 11,39,950/- by way of Employee Housing Loan write-off and an amount of ₹ 1,55,904/- by way of advances written off represented by the miscellaneous balances outstanding in the name of various parties. The assessee was asked to explain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces have been given in the ordinary course of business. Respectfully following the findings of the Tribunal in ITA 3971 (supra) we direct the AO to allow the claim of deduction as a business loss. Ground no. 1 is accordingly allowed. 18. Ground no. 2 relates to the exclusion of the 90% of the following receipts while working profits of the business for the purpose of calculation of deduction u/s 80HHC of the Act:- Sr.No. Particulars Amount (Rs) (1) (2) (3) 1 Reimbursement of Goregaon canteen/ other expenses received from Novartis 17,79,029 2 Customers balances written back during the year 2,41,523 2 Income recovered from employees for canteen expenses 1,57,730 3 Sales Tax refund received during the year 5,82,395 4 Insurance claim received during the year against damage/loss of company s goods 6,16,674 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout considering the nature of each item of income vis-a-viz business of the assessee. The CIT(A) has also confirmed the assessment without considering the nature of each receipts, therefore, in the interest of justice, we restore this issue back to the files of the AO. The AO is directed to verify each item before coming to any conclusion and after giving a reasonable opportunity of being heard to the assessee. 24. Ground no. 2 is accordingly allowed for statistical purposes. 25. Ground no. 3 relates to exclusion of the following items of income which are set off against the expenses apportioned to industrial undertaking, from the eligible profits of the industrial undertaking on which deduction u/s 80IB is claimed on the following items: Sr.No. Particulars Amount (Rs) 1 Indent Commission 1,93,186 2 Interest Income 14,35,550 3 Foreign Exchange Gain 6,45,691 4 Reimbursement of Goregaon canteen/ other expenses received from Nov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation of the assessee in a summary manner without examining the nexus of the income vis-a-viz expenses claimed by the assessee. The CIT(A) has also erred in rejecting the claim of the assessee in a summary manner except for three items on which the CIT(A) has given relief to the assessee. In the interest of justice and fair play, we restore this issue back to the files of the AO, the AO is directed to decide this issue afresh in the light of the decision of the Hon'ble jurisdictional High Court in the case of Associated Capsules Pvt. Ltd., 332 ITR 43 after giving a reasonable opportunity of being heard to the assessee. 31. Ground no. 3 is allowed for statistical purposes. 32. The assessee has also raised one additional ground by which it is pleaded that 90% of net amount should be excluded while computing the profits of the business for the purpose of deduction u/s 80HHC of the Act. 33. Following our findings for ground no. 2, hereinabove, we restore this issue back to the files of the AO to allow netting of interest before excluding 90% of net amount, if required. 34. Additional ground is also allowed for statistical purposes. 35. In the result, appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is allowed . As no distinguishing facts have been brought on record, respectfully following the findings of the Tribunal in assessee's own case for AY 2001-02 (supra) we do not find any reason to interfere with the order of the CIT(A). Ground no. 1 is accordingly dismissed. 48. Ground no. 2 relates to the charging of interest u/s 234D. 49. The issue identical to revenue's appeal in ITA 7528/Mum/2010 wherein, we have followed the decision of the Hon'ble jurisdictional High Court in 25 taxmann.com284, the AO is directed to follow the same. Ground no. 2 is allowed. 50. In the result, appeal of the revenue is partly allowed. CO 174/Mum/2012 by the Assessee for AY 2003-04: 51. Ground no. 1 relates to the back wages. 52. This issue has already been decided in favour of the assessee vide ground no. 1 in ITA 7529, therefore, this grievance becomes otiose. 53. Ground no. 2 relates to charging of interest u/s 234D. 54. This issue has been decided in favour of the revenue, vide ground 2 of ITA 7529/Mum/2010. The CO is accordingly dismissed. 55. In the result, assessee's C.O. stands dismissed. ITA 792/Mum/2011, Assessee's appeal, AY 2005-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted electronically. However, the CIT(A) has restricted the disallowance to ₹ 2 lakhs, which, in our considerate view and on the facts of the case appear to be very reasonable. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Ground no. 1 is accordingly dismissed. 65. Ground no. 2 relates to the deletion of the disallowance of ₹ 6,78,500/- on account of account of back wages. 66. This issue is identical to Ground no. 1 of ITA 7529, wherein, we have deleted the addition, following order of the Tribunal in assessee's own case. This ground is accordingly decided on similar lines because of similar facts. Ground 2 is accordingly dismissed. 67. In the result, revenue's appeal stands dismissed. CO 151/Mum/2013 by the Assessee for AY 2005-06: 68. The only issue raised by the assessee in this CO relates to the payment of back wages of ₹ 6,78,500/-. 69. As we have deleted this addition in revenue's appeal in ITA 1034, this CO becomes otiose. 70. In the result, assessee's C.O. stands dismissed. 71. To sum up the results: Assessee's appeal in ITA 7779 is partly allowed Revenue's appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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