TaxTMI 
TaxTMI 
2011 (2) TMI 568
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....e is engaged in the business of manufacturing of refrigeration, washing machine, and spare parts, trading of refrigeration, washing machine and other goods like ACs, microwaves, deep freezer etc. and providing after sale services. Assessing Officer in this case made a disallowance of Rs. 49,35,59,040by placing reliance of provisions of section 2(22)(e) of the Act. 4. Upon assessee's appeal Ld. Commissioner of Income-tax (Appeals) noted that assessee company was not a share holder of M/s. Husqvarna AB, from whom external commercial borrowing had been made. But the same was subsidiary of AB Electrolux which had 51 per cent share of the share holding in the assessee company. Thus the assessee which had obtained external commercial borrowing was not share holder of M/s. Husqvarna AB. In this regard, Ld. Commissioner of Income-tax (Appeals) placed reliance of the Special Bench decision of the ITAT in the case of Asstt. CIT v. Bhaumik Colours (P.) Ltd. [2009] 27 SOT 270 (Mum.). Both the counsel fairly agreed that the present issue is covered by the said Special Bench decision in favour of the assessee. In this case the Special Bench has held as under:- uDeemed dividend can be assessed ....
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....on bills verified by the Assessing Officer, as per his remand report amounted to Rs. 39166616 and good part of the balance amount where Ld. Commissioner of Income-tax (Appeals) has provided relief, were not before the Assessing Officer. In our considered opinion, this resulted in the violation of Rule 46A. Hence, we direct that the total details be furnished before the Assessing Officer who shall verify the same and allow accordingly. 10. The next issue raised is that ld. Commissioner of Income-tax (Appeals) has erred in deleting the addition being provision for doubtful debts - Rs. 12,33,24,025, provision for gratuity - Rs. 1,24,53,119 and provision for expenses - Rs. 9,56,62,981 from the book of profit computed under section 115JB. 11. At the outset, in this regard ld. Departmental Representative submitted that pursuant to the amendment of the Income-tax Act, Ld. Commissioner of Income-tax (Appeals) has passed an order under section 154 confirming the above said disallowance. Hence, he submitted that this ground has thus become infructuous. Accordingly, we dismiss this ground as infructuous. 12. The last issue raised is that ld. Commissioner of Income-tax (Appeals) has erred i....
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....loyees cost, increase in finance charges, increase in administrative expenses, increase in depreciation cost and increase in installed capacity. Ld. Commissioner of Income-tax (Appeals) obtained the details regarding the above from the assessee. he noted that assessee was deriving gross profit from the operations. However, it was incurring losses due to other expenses and factor. The assessee was already incurring huge losses at the time of entering the agreement. Such losses were incurred by the assessee at the operating level due to several internal and external factors. He found that assessee has witnessed reduction in losses immediately following the technical upgradation. Hence, he found it would not be inappropriate to state that the assessee had started deriving significant monetary benefits due to technical upgradation received under its collaboration with its AE. 14.2 In this regard, Ld. Commissioner of Income-tax (Appeals) further mentioned that it is an acknowledged fact that transfer pricing has more to do with economic principles and business conditions that prevail in an uncontrolled situation. He further referred to certain OECD guidelines issued in this regard. He ....
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....enditure fell into the capital field. Accordingly, he disallowed the same and added to the income of the assessee. 23. Upon assessee's appeal Ld. Commissioner of Income-tax (Appeals) elaborately considered the submissions. He noted that in the present case as per the terms of the agreement, there is no question of assessee having secured by the payment of the royalty, any exclusive privilege of either the manufacture or the sale of the products. The terms and conditions of the agreement provide that the right to use the technology and technical information provided to the assessee was for a prescribed period. Hence, it was not perpetual. Further the royalty was based upon the certain percentage of the production/sales every year. In these circumstances, Ld. Commissioner of Income-tax (Appeals) held that it is observed from the details provided that the terms and conditions of the agreement in the present case are similar to those in the case of CIT v. I.A.E.C. (Pumps) Ltd. [1998] 232 ITR 316 (SC). In the said case, Supreme Court held that the salient features of the agreement examined by the court would go to show that the assessee therein obtained a licence and what was paid by t....
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.... debts incurred in the course of the business of the appellant company. 2.All the said payments made were made by account payee cheques. The copies of cheques, bank entries in respect of Rs. 66,68,000 being payments towards advances for purchase of packing materials have been submitted. 3.The books of account of the appellant company are audited by Statutory Auditors both under the Income-tax Act and the Companies Act. 4.Company follows conservative method of accounting and has made all the provisions and write off for debtors and advances which were not recoverable. The same is duly approved by the Board of Directors of the company. 5.Had there been any excess written off the same would have been written back and taxed under section 41(1) of the Income-tax Act. I have considered the submission made by the appellant and also perused the assessment order. The assessee has given details such as name of the party and the purpose for which it is given in respect of advance written off amounting to Rs. 66,68,000. The purpose of advance has also been explained vide aforesaid letters. Further, it is submitted that the assessee company was a subsidiary of a foreign company and it cann....
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....f Research and Development expenses. Accordingly, he made the disallowance of Rs. 1,41,89,000. 33. Upon assessee's appeal assessee submitted that expenditure was incurred for development and improvement of the existing products as well as the new products in the appellant's existing line of business. It was further submitted that expenditure was incurred with a view to run its existing business in the more profitable manner. Ld. Commissioner of Income-tax (Appeals) further noted that the assessee accounting policy in this regard and by referring the several case laws, he held that the Assessing Officer has erred in disallowing the research and development expenditure by treating it as capital expenditure. 34. Against this order the revenue is in appeal before us. 35. We have heard both the counsel and perused the records. Admittedly, in this case the details regarding research and development expenditure were not produced before the Assessing Officer Ld. Commissioner of Income-tax (Appeals)'s order in this regard is also silent regarding details. Under these circumstances, both the counsel fairly agreed that the issue may be remitted to the files of the Assessing Officer to exam....
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....ty for payment of royalty till the company actually showed profit after benefiting from such Brand fees. On account of the above reasons the TPO determined the arm's length price of the brand fees/royalty transactions at NIL and thereby made an adjustment of Rs. 3,42,97,940." 39.2 From the above Assessing Officer's order it is noted that TPO objection regarding the arms length price pertain to royalty transaction. According to the TPO the same should have been NIL and hence he made adjustment of Rs. 3,42,97,940. Both the counsel fairly agreed that issue is identical to the issue raised in para 12 in ITA No. 4878. The said issue we have elaborately examined the Ld. Commissioner of Income-tax (Appeals)'s order and decided that there is no infirmity in the order of the Ld. Commissioner of Income-tax (Appeals). Accordingly, on the same reasoning as mentioned in para 14 to 18, we uphold the order of the Ld. Commissioner of Income-tax (Appeals) and decide the issue in favour of the assessee. 40. The next issue raised is that Ld. Commissioner of Income-tax (Appeals) in deleting the addition of Rs. 365701 on account of late payment towards ESI and PF. 41. At the outset ld. counsel of t....