TaxTMI 
TaxTMI 
2013 (11) TMI 1239
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.... 1. On the facts and circumstances of the case of the case and in law the Ld. CIT(A) has erred in allowing the relief with regard to disallowing the interest expenditure made by the Assessing Officer of Rs. 5,64,10,000/- which was incurred by the appellant on its entire borrowings for the purposes of its business. 2. On the facts and circumstances of the case of the case and in law the Ld. CIT(A) has erred in allowing the relief to the enhancement of the returned income due to determination of the arm's length adjustment with regard to the Appellant's international transactions from Associated Enterprises. 3. The appellant craves to add or amend any ground any grounds of appeal before the appeal is heard or disposed off. 4. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the Assessing Officer may be restored. 4. The issue in Ground No. 1 raised by the Revenue is against the disallowance of interest expenditure. 5. The brief facts relating to the issue are that the Assessing Officer during the course of assessment proceedings noted that the assessee had adva....
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....t income on such sick advances was not recognized by the assessee. The learned A.R. for the assessee stressed that the said advances were not interest free loan and assessee was always charging interest on the said loan. During the year under consideration, nothing was advanced to the said parties and thus total loan of the earlier years was brought forward. It was stressed by the learned A.R. for the assessee that no addition is warranted during the year because of the same reasoning as before the Tribunal in assessment years 2003-04 and 2004-05. The learned A.R. for the assessee also clarified that the said company was going for winding up. 9. We have heard the rival contentions and perused the record. The issue arising in the appeal filed by the Revenue is in relation to the interest chargeable on the advances made by the assessee in the earlier years. During the year under consideration a sum of Rs. 59.55 crores was due from M/s Hindustan Max G.B. Ltd., which was joint venture company promoted by the assessee company. The assessee had advanced the said amount to M/s Hindustan Max G.B. Ltd. against supply of raw material, and was carrying interest @ 16.5% per annum. However, be....
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.... advancing of amount was for business purposes. Consequently, the interest paid on borrowings was held to be allowable deduction under section 36(1)(iii) of the Act in view of the ratio laid down by the Hon'ble Apex Court in S.A. Builders v. CIT 288 ITR 1. 11. We find that the issue in the present appeal is identical to the issue before the Tribunal in assessee's own case relating to assessment years 2003-04 and 2004-05. Admittedly, the assessee had paid interest on the borrowings made from its parent company in the earlier years and no fresh borrowings had been made during the year under consideration. The interest expenditure had been allowed in the hands of the assessee from year to year. Further the advances to M/s Hindustan Max G.B. Ltd. were also made in the earlier years and the balance is brought forward from the preceding year on which in the earlier years the assessee was charging interest. However, the interest on the said loan had not been recognized during the year under consideration as M/s Hindustan Max G.B. Ltd. had gone before the BIFR because of financial constraint. In the above said circumstances, we find no merit in the order of the Assessing Officer and uphol....
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.... are that the assessee had shown salaries amounting to Rs. 13,74,846/- as prior period expenses as per Annexure-XI , clause 22(b) of the Profit & Loss Account. The Assessing Officer noted that the said expenses did not pertain to the financial year 2004-05 and pertained to financial year 2003-04. As the assessee had booked the expenses in the succeeding year the same were held to be not allowable expenditure and addition of Rs. 13,74,846/- was made on this account. 17. The CIT (Appeals) upheld the order of the Assessing Officer. 18. The assessee is in appeal against the same. The learned A.R. for the assessee pointed out that the nature of the expenditure was the tax on salary of foreign expatriate wherein the salary was paid up to December, 2003. However, certain information required for computing the final tax liability of the said foreign employee was available to the assessee in April, 2004 only. Hence, the final tax liability of Rs. 13,74,846/- was paid in April, 2004. The learned A.R. for the assessee pointed out that as per Note-7 annexed to the computation of income filed by the assessee for the year under consideration, the break down of prior period expenses was furnish....
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.... consideration. In view of the above said facts and circumstances where the said liability to pay balance tax due on the salary of the foreign national was crystallized and paid in April, 2004, is to be allowed as an expenditure in the year under consideration as the same relates to the captioned assessment year. The liability being crystallized in the year under appeal and having been paid in the year under appeal, is to be allowed as a deduction in the year under consideration. Thus we direct the Assessing Officer to delete the addition of Rs. 13,74,846/-. The Ground No. 2.1 raised by the assessee is thus allowed. 21. The issue in ground No. 2.3 raised by the assessee and ground No. 2 raised by the Revenue are in relation to determination of arms' length price of the international transaction entered into by the assessee. 22. The brief facts of the case relating to the issue are that the DCIT, Circle-I, Chandigarh vide letter dated 10.9.2007 had referred certain international transactions under section 92CA(1) of the Act to the JCIT, Transfer Pricing, Chandigarh. The list of international transactions so referred with the associated enterprises are tabulated under para 2 of the....
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....h the basis for allocation of expenses among different segments. The reply of the assessee is incorporated under para 6.2 at pages 6 to 11 of the Transfer Pricing Report. The TPO thereafter show caused the assessee by way of order-sheet noting dated 7-10-2008, as to why fresh transfer pricing analysis should not be done. A list of comparables was confronted to the assessee by the TPO. The said companies were selected on the basis of usage of Pen-G and the data of financial year 2004-05 was considered. The assessee vide letter dated 13-10-2008 explained why the companies selected by the TPO should not be taken as comparables. The reply of the assessee is incorporated under para 6.4 at pages 12 and 13 of the transfer pricing order. After considering the submissions of the assessee the TPO applied provisions of Rule 10B(4) of the Income-tax Rules, which prescribe that for the purposes of benchmarking international transaction the data of comparables used would be the data for the year in which international transaction took place and more commonly known as contemporaneous date. Further reliance was placed on the decision of the Special Bench of Bangalore Tribunal in the case of Aztec ....
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....e submissions were made by the assessee against the comparables filters by the TPO and also in respect of the comparables rejected by the TPO. The CIT (Appeals) after considering the facts of the case and after analyzing the related parties transactions, rejection of the comparables on insignificant use of Pen-G and also considering the proportion of trading sale in the case of two comparables filters chosen by the TPO, determined the arms' length price on the basis of operating profits over sales ratio at (-)1.64%. The ground of appeal raised by the assessee was thus partly allowed by the CIT (Appeals). 25. Both the assessee and the Revenue are in appeal before us against the said directions of the CIT (Appeals) relating to assessment year 2005-06. 26. The learned A.R. for the assessee pointed out that for doing the analysis of transfer price profit with associated enterprises, the transactional net margin method was used with operating profit over sales ratio as profit level indicator. It was fairly admitted by the learned A.R. for the assessee that the TPO had also applied the said method while determining the arms' length price in respect of international transaction. He furt....
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....termine the arms' length price in the case of the assessee. 27. The learned D.R. for the Revenue in reply fairly admitted that for the TPO one of the criteria in filters was the manufacture of Pen-G. It was further pointed out by the learned D.R. for the Revenue that the data base was used to select the comparables and these are just tools to apply to many companies. However, filters are then to be applied to choose best comparable in order to compute arms' length price for international transaction. The learned D.R. for the Revenue pointed out that the assessee was a manufacturing company. So the first filter was to ignore the trading companies. One filter which was used both by the assessee and the TPO was the use of Pen-G, which was an accepted filter. Our attention was drawn to the report of the TPO at page 95 which talks about the nature of the assessee's business, under which it had been commented that the Pen-G was the critical raw material. The learned D.R. for the Revenue fairly admitted that Pen-G utilization was the filter used by both the assessee and the TPO. However, no threshold limit of utilization of Pen-G was defined. It was further pointed out by the learned D.R....
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....ssee were arms' length. Our attention was drawn to the computation at pages 5 to 9 of the Paper Book. Our attention was also drawn to the guidelines and various case laws which shall be referred by us in the paras hereinabove. 29. The learned D.R. for the Revenue pointed out the assessee had not applied filter of RPT and this year the Assessing Officer applied filter of more than 10% i.e. companies with RPT of more than 10% on sales turnover were to be rejected. However, as per the learned D.R. for the Revenue, the said filter was incorrect and benchmarking of 25% RPT filter should be applied and consequently the results of Aurobindo Pharma Ltd. should be used. The learned D.R. for the Revenue fairly admitted that after Standard Pharmaceuticals Ltd. with low utilization of Pen-G is ignored last year the same should be ignored during this year also. It was further contended by the learned D.R. for the Revenue that Aurobindo Pharma Ltd. was one of the comparables selected by the assessee then the same should be applied. Our attention was also drawn to the written submissions on the working capital adjustment and it was pointed out that the calculation have to be checked in this rega....
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....,05,367/-. The assessee had reflected the book value of revenue at Rs. 1,11,86,62,019/-. The Assessing Officer was thus directed to enhance the total income of the assessee by Rs.6,07,43,348/- against which the assessee would not be entitled to the deduction under section 10A, 10AA, 10B or under Chapter-VI-A of the Act. The assessee filed the objection under section 144C of the Act before the Dispute Resolution Panel-I, New Delhi, which upheld the order of the TPO. The Assessing Officer in the order passed under section 144C(13) r.w.s. 143(3) of the Act made the aforesaid addition against which the assessee has filed direct appeal before the Tribunal. 32. Admittedly the issue raised in the assessment years 2005-06 and 2006-07 against determination of arms' length price of international transaction is identical, so we proceed to decide the said issue by this consolidated finding after referring to the facts of both the captioned assessment years. 33. We have heard the rival contentions and perused the record. The assessee is a wholly owned subsidiary of GB International BV, The Netherlands. During the year under consideration the assessee was engaged in manufacturing/processing of....
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.... with arms' length price. The TPO conducted fresh search during the assessment year 2005-06 and following filters were applied for rejecting non-comparables: * Only companies using Penicillin-G as raw material were selected. * Companies having no data for the financial year 2004-05 were rejected. * Companies predominantly engaged in trading activity were rejected. * Companies having negative net worth were rejected. 35. In assessment year 2006-07 the TPO also conducted fresh search applying the following filters: * Only companies using Penicillin-G as raw material selected * Companies having no data for the financial year 2005-06 rejected * Companies engaged in trading activity rejected * Companies having negative net worth rejected * Companies with sales turnover exceeding Rs. 1 Crores selected * Companies with related party transactions ('RPT) > 10% of sales turnover rejected. 36. As a result of the search conducted, the T....
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....ated party transaction of approximately 23.19%. 42. The TPO in assessment year 2006-07 ultimately selected the following comparables for benchmarking assessee's international transactions: Company OP/ Sales 1 Aurobindo Pharma Ltd. 9.46% 2 KDL Biotech Ltd. -6,08% 3 Standard Pharmaceuticals Ltd. 5-75% Mean 3-04% 43. The TPO while making the final selection rejected Nector Life Sciences Ltd. due to related party transaction being greater than 10% of sales. 44. The CIT (Appeals) against the order passed by the Assessing Officer adopting the report of the TPO in assessment year 2005-06 rejected the company Standard Pharmaceuticals Ltd. which was using Pen-G as only 4.23% of the total raw material. The second comparable Aurobindo Pharma Ltd. was also rejected as the assessee had significant related party transaction with the said concern. The CIT (Appeals) applied one comparables to compute arms' length price. The assessee is aggrieved by application of only one comparable to determine arms' length price in relation to international transaction entered upon by the assessee. 45. The second contention of the assessee before the CIT (Appeals) was that Standa....
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....arables and their data which can come into public domain subsequent to the search conducted by the tax payers. However, the data available at the time of comparability analysis should be used subject to the condition that it pertains to the current year under consideration. The provision of Rule 10B(4) of Income-tax Rules itself provide a rider that where such datas are not available then in such circumstances the data most appropriate of the preceding year should be used. We find that similar issue of user of current year data in view of the provisions of Rule 10B(4) of the Income-tax Rules arose before the Delhi Bench of the Tribunal in Actis Advisers (P.) Ltd. v. Dy. CIT [IT Appeal Nos. 5277 (Delhi) of 2011 & 958 (Delhi) of 2012, dated 12-10-2012] and it was held as under: "+ a bare perusal of this rule [10B(4)] would reveal that expression "shall" has been employed in this rule which make it abundantly clear that current year data of an uncontrolled transaction is to be used for the purpose of comparability, while examining the international transactions with associate enterprises. The proviso appended to the section carves out an exception that the da....
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.... fairly conceded during the course of hearing that there were no objections against the fresh study conducted by the TPO. However, the contention of the learned A.R. for the assessee was that the said filters should be uniformly applied for both the years under consideration in order to benchmark the international transaction. We find merit in the said stand of the assessee that in case where facts are identical from year to year, similar filters should be used for benchmarking international transactions. 49. In the facts of the present case we find that the TPO in assessment year 2005-06 had applied the following filters for rejecting non-comparables: * Only companies using Penicillin-G as raw material were selected. * Companies having no data for the financial year 2004-05 were rejected. * Companies predominantly engaged in trading activity were rejected. * Companies having negative net worth were rejected. 50. The basic filter applied by the TPO was only the companies using Pen-G as raw material were to be selected. The second filter applied by the TPO that the companies hav....
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....f the total raw material. We find merit in the contention of the assessee in this regard that where the companies are using Pen-G as raw material and are engaged in the manufacture of drugs fall within the ambit of the filter selected as part of transfer pricing search. The said companies are to use as filters irrespective of percentage of use of Pen-G to the total raw material, since the companies selected should be functionally comparable and not identical. In the above facts and circumstances, we are of the view that the results of Torrent Gujarat Biotech Limited and Standard Pharmaceuticals Limited both using Pen-G as raw material should be selected as comparables in order to benchmark the international transaction undertaken by the assessee. The learned A.R. for the assessee brought to our knowledge that DRP in the succeeding year i.e. 2006-07 have adopted Standard Pharmaceuticals Limited as one of the filters for benchmarking the international transaction of the assessee. In view of our observation in the paras hereinabove and also because of the facts that the Standard Pharmaceuticals Limited was utilizing Pen-G as raw material and the data of said company has been used as a....
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....see also pointed out that on same ground of significant related party transaction, the CIT (Appeals) had rejected the said company as comparable in the assessment year 2005-06. The learned A.R. for the assessee thus submitted that in case Aurobindo Pharma Ltd. is considered as non-comparable then assessee's international transactions with its AEs would be consistent with the arm's length standard based on the proviso to section 92C(2) of the Act as referred below: Name of the company Particulars Margin KDL Biotech Ltd -6.08% Standard Pharmaceuticals Ltd 5.75% Arm's Length margin (Arithmetic Mean) (A) -0.17% Appellant's margin (B) -2.39% 56. The learned D.R. for the Revenue had also filed written submissions. The first objection raised by the assessee was against the plea of the assessee in rejecting the comparable having RPT transaction exceeding 15% of sales relying on the ratio laid down in Sony India (P.) Ltd. (supra). The learned D.R. for the Revenue pointed out that the assessee in its transfer pricing study had not used filter of RPT. However, the Revenue was applying RPT filter of 25% consistently in the later y....
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....issue of exclusion of related party transaction and the extent of the said transaction arose before the Delhi Bench of the Tribunal in Actis Advisers (P.) Ltd. (supra). The Tribunal vide paras 27 to 29 held as under: 27. In the next fold of submissions, learned counsel for the assessee submitted that the assessee did not consider the companies which have more than 15% of the transactions with related parties. Learned TPO has observed that the companies who have related parties transaction in excess of 25% of operating revenue will only be excluded. The learned counsel for the assessee submitted that the following parties have transactions to sell more than 15% with related parties: S. No. Name of the companies RPT percentage to sales-F.Y.2006-07 1. Asit Mehta Financial 2006-07 1. Asit C. Mehta Financial Services Ltd. 2. Informed Technologies India 15.83% 3. Apex Knowledge Solutions Ltd. 100% 4. HCL Comnet System & Services Ltd. 21.52% (Based on RPT% computed by the Learned TPO using data sourced by him u/s 133(6) of the Act) - Refer pg 124 of the Merit Appeal PB 28. The learned counsel for the assessee submitted tha....
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....usion. However, if we look to the scheme of Income-tax Act, then it would be revealed that expression "associate enterprises" which is somewhat similar to that of "related party", has been defined in section 91A(2)(a) of the Act. According to this definition, if an enterprises holds 26% share in the other enterprises then it can be considered as an associate enterprises. Similarly, under sec. 40A(2)(b) of the Act, interested persons have been explained, if a person is having not less than 20% of voting power in a company then such person would be considered as substantial interest in the company. This section relates to examination of the cases where some undue benefit is being extended by a company. These two provisions give an indicator that whenever any issue regarding an interest created in any company is being examined which has influence over the results of the company then these aspects can be taken as guidance. On the basis of the scheme, one can safely say that an entity can be taken as uncontrolled, if its related party transaction do not exceed 25% of the total revenue. Thus, we do not find any fault in the conclusion of the learned TPO for applying this filter to the ex....
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....ome merit in the plea of the learned A.R. for the assessee but the same proposition cannot be applied as a universal law specially in view of the provisions of Rule 10B(4) of the Income Tax Rules, which mandates that the data of current year shall be applied in order to benchmark the international transaction. In a case where the data of one of the comparables applied in one of the year is at variance in the succeeding year because of non-fulfilment any of the filters selected for rejecting the non-comparable, then the data of the said year cannot be so applied as a filter to disregard the non-comparables in the succeeding year. However, we have already held in the paras hereinabove that Standard Pharmaceuticals Ltd. is to be used as a comparable for determining arms' length margin to be applied to the margin declared by the assessee in order to compute whether the international transaction entered upon by the assessee are at arms' length. In view thereof, we allow this contention of the assessee to apply the data of Standard Pharmaceuticals Ltd. in both the assessment years 2005-06 and 2006-07. In the abovesaid circumstances, the following companies are held to be comparables in a....
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....ns in accordance with our guidelines in the paras hereinabove. The ground No. 2 raised by the Revenue, ground No. 2.3 raised by the assessee in assessment year 2005-06 and ground No. 6 raised by the assessee in assessment year 2006-07 are thus partly allowed. ITA No.1455/Chd/2010 :: Assessee's Appeal :: Asst. Year 2006-07 66. The assessee has raised following grounds of appeal: "1. That on the facts and in the circumstances of the case & in law, the Hon'ble DRP erred in confirming the draft assessment order of the Ld. AO on the following issues and directing the Ld. AO to assess income at Rs. Nil as against the returned loss of Rs. 143,509,455: - Disallowance of Rs. 9,458,449 being the DEPB claims rejected and written off during the year. - Disallowance of Rs. 82,530,000 being the interest paid & financial expenses incurred during the year. - Disallowance of Rs. 9,615,144 being the commission expenses incurred during the year. - Disal....
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....nbsp; 3.1 That the Ld. AO erred on facts & in law in holding that the interest on loan funds borrowed by the appellant company cannot be allowed as a business expenditure either under section 36(1)(iii) or section 37 of the Act without appreciating that the interest expense incurred by the appellant during the year under consideration is on loan funds borrowed and utilized for working capital purposes and for new expansion and there is no nexus or diversion of funds to HMGB during the year. 3.2 The Ld. AO erred on facts and in law, in not following the favourable Tribunal decision in the appellant's own case for the assessment year 2003-04 & 2004-05 on the identical issue. 4. That the Ld. AO erred on facts & in law, in making a disallowance of Rs. 9,615,144 on commission expenses charged to the profit & loss account for the year under consideration. 4.1.1 That the Ld. AO erred on facts & in law, in making a disallowance of Rs. 5,337,931(out of Rs. 9,615,144) on the alleged ground that the export sale....
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....omputing the arm's length price for the Appellant's international transactions with AEs. 6.3 considering a company having significant related party transactions in he final comparable set despite himself having applied a quantitative filter rejecting companies having RPT more than 10 per cent. 6.4 disregarding multiple year/prior year's data as used by the appellant in the TP documentation and holding that current year (i.e. FY 2005-06) data for comparable companies should be used despite of the fact that the same was not necessarily available at the time of the appellant at the time of preparing its TP documentation. 6.5 disregarding judicial pronouncements in undertaking the TP adjustment. 7. That the Ld. AO erred on facts and in law in charging interest under sections 234A, 234B, 234C and 234D of the Act." 67. The ground No. 1 raised by the assessee is general in nature and hence the same is dismissed. 68. The ground No. 2 raised by the assessee is against ....
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.... and claimed as deduction. The learned A.R. for the assessee pointed out that the assessee had made a claim before the Grievance Cell, Ministry of Commerce by way of an appeal to consider the DEPB claim of bulk drugs supplied to SEZ Units at Kandla and copy of the said annexure is placed at pages 60 and 61 of the Act the Paper Book. The learned A.R. for the assessee further referred to the meeting of Grievance Redressal Committee on 15.5.2006 under which the assessee was also asked to attend, copy of which is placed at page 62 of the Paper Book-I. Further reference was made to the communication of the Ministry of Commerce placed at page 73 of the Paper Book. The learned A.R. for the assessee stated that the amount has been received by the assessee in assessment year 2008-09 and has been offered to tax. In respect of sum of Rs. 18,43,753/- the learned A.R. for the assessee pointed out that the same represented short claim received on DEPB. The assessee on accrual basis had accounted for the same in the DEPB account in earlier years but the same has been received in short and as the receipt was for the year under consideration the amount was booked as expenditure during the year unde....
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.... the assessee was that the said amount was offered for tax in the earlier years and the same have not been received by the assessee and hence, the said write off. In respect of sum of Rs. 76,14,696/- relating to IPCA, DEPB., the said claim of the assessee in respect of the DEPB was rejected by DGFT as the same was not applied in time. The claim relates to exports made in the earlier year and the export incentive accrued to the assessee as income in financial year 2003-04. However, the applications for DEPB credit were made in the financial year 2004-05. The ld. AR for the assessee referred the letter dated 10.11.2004 in relation to the claim of DEPB IPCA for Rs. 22,84,475/- placed at pages 47-48 of the Paper Book. The said claim was rejected vide letter dated 07.01.2005. The second claim was made vide letter dated 27.12.2004 amounting to Rs. 45,68,777/- copy of which is placed at pages 51 & 52 of the Paper Book and the third claim was made in respect of DEPB IPCA of Rs. 779,604/- which is made vide letter dated 04.01.2005. The total dues in the application for DEPB credit made before Kandla Special Economic Zone were Rs. 76,32,857/-. The assessee has placed on record the copy of re....
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....were prior to implementation of Chapter X-A of the Customs Act i.e. prior to 11.05.2004, which were not eligible for DEPB benefit. The assessee filed an appeal before the Director General of Foreign Trade Grievance Cell, Ministry of Commerce, New Delhi, to consider the DEPB claim in the bulk drugs supplied to SEZ unit at Kandla. The said representation was made on 22.02.2006 and the claim of the assessee was that the claim of DEPB benefits of the assessee was rejected by the DC Office on the basis of CBEC Circular No. 11/2004 which in turn stated that supplies made by the DTA Units to SEZ units prior to implementation of Chapter X-A of Customs Act were not eligible for DEPB benefits. It was further pointed out by the assessee in the said appeal that the said circular was subsequently superseded by CBEC Circular No. 21/2005 dated 06.04.2005, which overruled the above condition. The relevant clauses of the appeal dated 22.02.2006 made to the Ministry of Commerce read as under : "We had submitted our applications with DC office KASEZ as per the provisions laid down under foreign trade policy to claim DEPB benefits at different dates i.e. between 14.12.2004 an....
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....financial year 2005-06 i.e. even before the meeting of the Grievance Redressal Committee of Ministry of Commerce. We are of the view that such write off of the export incentive by the assessee during the year under consideration is premature in the abovesaid facts and circumstances of the case and is not an expense relatable to financial year 2005-06. Further, admittedly the assessee has received the said export incentives in the financial year 2007-08 itself establishes the case of the revenue. Accordingly, we are in conformity with the order of the DRP and the Assessing Officer in this regard and we uphold the addition of Rs. 76,14,696/-. 76. The second aspect of the write off of export incentives is amounting to Rs. 18,43,753/-. The assessee has moved an application for admission of additional evidence under Rule 18 of Income Tax (Appellate) Tribunal Rules, under which it has placed on record the copies of applications made before the Kandla SEZ for credit of Rs. 35,92,066/- and Rs. 85,762/- alongwith copies of DEPB licences received from Kandla SEZ restricting the claim to Rs. 28,58,140/- and Rs. 52,451/-. The plea of the assessee in this regard was that the claim of the asses....
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....2,690,915.80 December, 2003 Received Rs. 1,614,400.00 Shortfall Rs. 1,076,515.80 DEPB No. 3710000461 14.03.2006 Applied for Rs. 3,592,065.94 January, 2004 Received Rs. 2,858,140.00 Shortfall Rs. 733,925.94 DEPB No. 3710000462 dated 14.03.2006 Applied for Rs. 85,762.73 Received Rs. 52,451.00 February, 2004 Shortfall Rs. 33,311.73 Total DEPB written off during the year: Rs. 9,458,449.47" 79. The assessee by way of application for admission of additional evidence has placed on record the copies of the application made before the Kandla SEZ alongwith the copies of DEPB licence received by the assessee reflecting the claim at pages 695 to 711 of the Paper Book. The said documents are admitted as additional evidence in view of no objection raised by the ld. DR for the revenue. In the facts and circumstances of the case, we find merit in the claim of the assessee that the write off of such export incentives which were received short by the assessee by way of communication of the deduc....
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.... respect of the said payments by the Assessing Officer. The assessee furnished details of commission agents and the amount of sales effected through them including the rate of commission. The Assessing Officer, from the details noted that the rate of commission paid to the most of the parties was approximately 2.9% on export sales and on domestic sales, it varied between 1% to 4%. The Assessing Officer also noted that in respect of two of the commission agents, the total commission was paid on 31.3.2000 i.e. at the close of the year. The assessee failed to file any confirmation from the commission agents before the Assessing Officer and also no written agreements regarding the payment of commission was filed during the assessment proceedings. The Assessing Officer afforded various opportunities to the assessee which were not complied with. The Assessing Officer further noted that some of the parties to whom sales had been made, had also been paid commission. However, no such commission was paid to many of the parties to whom exports have been made or to whom domestic sales have been made. The Assessing Officer, thus held that there was no merit in the commission paid to the parties....
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....ersons who were acting as commission agents. In respect of the domestic sales and the commission thereon, it was pointed out by the ld. AR for the assessee that the Assessing Officer had disallowed the commission being higher than 3%. The plea of the assessee was that the commission had been paid to unrelated parties and during the assessment proceedings, no queries were made by the Assessing Officer in this regard. 85. The ld. DR for the revenue pointed out that the assessee had failed to file the confirmation during the assessment proceedings and the confirmation claimed to be filed is filed very late. Further, in the absence of any written agreement, it cannot be presumed that the assessee was paying commission. Further, the assessee has failed to furnish any details of the business services conducted by the said commission agent and as the assessee has failed to justify the rendering of services by the said commission agent, the said expenditure is not allowable in the hands of the assessee. Reliance was placed on Assam Pesticides & Agro Chemicals v. CIT 227 ITR 846. 86. We have heard the rival contentions and perused the record. The issue raised vide ground No. 4 is against ....
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.... merit in the case of the assessee. However, the necessary details in this regard are not available, in particular the plea of the Assessing Officer that the assessee had made sales to the said parties on which commission had been paid. We, therefore, remit this issue to the file of Assessing Officer to verify the claim of the assessee that the commission paid to the said concern had no connection with the sales made to the said concerns and if the contention of the assessee is found to be correct, the Assessing Officer is directed to allow the claim of expenditure booked on account of commission paid on export sales. Reasonable opportunity of hearing shall be afforded to the assessee to put forward its contentions. In view thereof, this issue is set aside to the file of Assessing Officer with our directions. 87. The second aspect of the claim of expenditure under the head 'commission' relates to the commission paid on domestic sales. The Assessing Officer noted that the assessee had paid commission at varying rates starting from about 1% to 5%. The assessee has filed on record the details of the abovesaid commission totalling Rs. 155,27,136/-The assessee has tabulated the names o....
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....ted out that at the time of investment, the dividend income was taxable and in any case, the investment was made to do business of purchase of raw materials from the said concern. Another contention of the ld. AR was that the said investment was made out of own funds and hence, no merit in the disallowance made by the Assessing Officer. 89. The brief facts relating to the issue are that the Assessing Officer from the balance sheet noted the investment of Rs. 5 crore in shares of M/s Hindustan Max-GB Ltd. The said investment was made in the earlier years on which the assessee was earning interest. While deciding ground No.3 of the present appeal, we have deliberated upon the issue of disallowance of interest relatable to such advances made by the assessee on which as per the Assessing Officer, no interest was charged as against the interest expenditure incurred by the assessee. It is an admitted position that the assessee was receiving interest on the said advances. The said investment was made for business purposes i.e. for the purchase of raw material from the said concern. However, as the said concern was in financial constraint, the application was made before the BIFR by the s....