TaxTMI 
TaxTMI 
2010 (7) TMI 643
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....rds payments made to clubs. The assessee claimed that the expenditure on the clubs is merely for the promotion of the business. As per tax audit report, the assessee company paid Rs. 15 lacs towards corporate membership fee to Willington Sports Club. The A.O. made the disallowance of the entire expenditure of Rs.18,14,762/- as not admissible u/s 37(1) of the Act. On appeal, the ld CIT(A) allowed the claim of the assessee. 3 We have heard the parties and also perused the reasons given by the A.O. a well as the ld CIT(A). The ld counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble Delhi High Court in the case of CIT vs Samtel Color Ltd (180 Taxman 82(Del). 3.1 In the present case, there is no dispute about the facts that the assessee company has taken corporate membership in Willington Club, at Mumbai which is one of the prestigious clubs in Mumbai. 3.2 In the case of Samtel Color Ltd (supra), the Hon'ble High Court has held that for qualifying of the deduction u/s 37 is that expenditure incurred should not be on capital account and it should be incurred for the purpose of the bu....
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....xpenditure. The A.O. allocated R&D expenditure to the said units by observing that R&D have nexus with Units in respect of which deduction is claimed under sec. 80IB. The ld CIT(A) deleted the addition by relying on decision of the assesse's own case for the AY 2001-02. The operative part of the findings given the ld CIT(A) in Paras 8.2 & 8.3 in his order which are as under: "8.2 I have gone through the facts brought on record by the A.O. and the contentions of the appellant company, as also the order of the ITAT in the case of the appellant for AY 2001-02. The ITAT, referring to decision of the Madras ITAT in the case of Ponds India Ltd (ITA No.2047/Mad/88 dated 28.5.2002 and the decision of Pune Bench in the case of Vanaz Engineers Ltd, held that no allocation of expenditure on account of R&D expenditure was called for. As in respect of AY 2002-03, during the course of present appeal hearings, the appellant company was required to file the details of product formulations at 80IB qualifying units as well as the details of bulk drugs on which the R&D Centre was working on, to ascertain whether or not the expenditure on R&D had any nexus with t....
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.... 9 Next issue relates to computation of deduction u/s 80HHC without reducing the deduction claimed u/s 80IB. 9.1 It was noticed by the A.O. that the assessee has claimed deduction u/s 80HHC of Rs.14,35,06,609/- and the same was computed without reducing the profit on which he has claimed deduction u/s 80IB. 9.2 The assessee contended that the deduction u/s 80IB was claimed in respect of Daman units and the business of those undertakings is nothing to do with the export as the entire business was in the domestic market. The assessee, therefore, contended that there is no question of claiming double deduction on the same profit. The assessee also relied on the decision of the Jaipur Bench of the ITAT in the case of Toshica Creation vs ITO (96 TTJ 651). The A.O. was not impressed with the explanations of the assessee. The A.O. also noted that the assessee has not filed any evidence to show that in fact the undertakings/units on which the deduction u/s 80IB is claimed have not made any export. He, therefore, reduced the profit of the business for the purpose of deduction u/s 80HHC after reducing the quantum of the deduction cl....
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....is case the TPO has only considered the companies with the favorable margin to the revenue. The ld counsel further argued that the TPO did not grant benefit of 5% difference as contemplated in proviso to sec. 92C(2) of the Act. 11 The ld CIT(A) has observed that comparable considered by the TPO in the case of Gilcon and M/s TCE Consulting Engineer Ltd are cases of profit and even if the comparable of Kitco is not considered, which is due to loss, the ALP worked out to 22.88%, which after 5% deduction is 16.74% as against the margin returned by the assessee company at 16.78% . It is well settled principle in law that if proviso has made certain exception which give relief to the assessee from adverse application of law; on fulfilling of certain conditions then the same should be strictly interpreted. The Proviso to ses.92(C)(2) provides that where more than one price is determined by application of MAM, the ALP shall be taken to be the arithmetic means (AM) of such price or, at the option of the tax payer, with the price which derives from AM by an amount not exceeding 5% of such AM may be to be the ALP. 12 We have heard the rival contentions&....
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....gins of enterprises. For arriving at this conclusion, we drew strength from the decision of Mumbai 'L' Bench of the Tribunal in the case of UCB India P. Ltd. vs. ACIT 121 ITD 131 (Mum.) where it is held that section 92C read with Rule 10B(1)(e) deals with Transactions Net Margin Method (TNMM) and it refers to only net profit margin realised by an enterprise from an international transaction or a class of such transaction, but not operational margins of enterprises as a whole. 12.3. Respectfully following the same, we set aside the issue to the file of the A.O for the reasons that the AO has not followed properly and correctly any of the method prescribed for the purpose of determining the ALP under the Act. Even the transaction at net margin method has not been properly and correctly applied in this case. We, therefore, set aside the issue to the file of the A.O to decide the issue afresh. 13. Next issue relates to provisions of doubtful debts of Rs. 1.49 crores which the A.O. did not allow to reduce while computing book profit u/s 115JB of the Act. 13.1 The A.O. computed the book profit u/s 115JB and added back the profit for doubtful debts of Rs. ....
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....overed against the assessee by the decision of the jurisdictional High Court in the case of CIT vs Ajantha Pharmaceuticals Ltd (318 ITR 252). In the said decision, the Hon'ble High Court has revered the decision of the Special Bench of the Tribunal in the case of Dy CIT vs Silicon Formulations India Ltd (106 ITD 193) (Mum)(SB). We, therefore, reverse the order of the ld CIT(A) and restore the order of the A.O. on this issue. Accordingly, ground no.7 of the revenue is also allowed. 18. Next issue relates to direction given to the A.O. to ignore the phasing out provision for deduction u/s 80HHC for the purpose of computing book profit u/s 115JB of the Act. 19. The ld counsel for the assessee fairly submitted that this issue stands covered against the assessee by the decision of the Tribunal (supra). Accordingly, the order of the ld CIT(A) is reversed and that of the A.O. is restored on this issue. Accordingly, ground no.8 is allowed. 20. Ground no.9 is in respect of adjustment on account of debenture redemtion reserve for the purpose of computing book profit u/s 115JB of the Act. 21. We have heard the parties. Identical issue has been conside....