TaxTMI 
TaxTMI 
2017 (3) TMI 888
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....nufactures pharmaceutical products, diagnostic kits as well as cosmetics. It filed its return on 25.09.2009 stating nil income. The Assessing Officer framed a regular assessment in question on 23.01.2014 accepting its MAT computation determining book profits of Rs. 1,77,27,48,435/-. 3. It is evident that the above PCIT -1, Ahmedabad thereafter termed the above regular assessment as erroneous causing prejudice to interest of the Revenue so as to propose exercise of Section 263 revision jurisdiction vide show cause notice in question dated 22.07.2015 as under: "(1) From the computation of income, it is noticed that Company has claimed an amount of Rs. 48,00,00,000/- as exempt income u/s.28(v) being the remuneration received from Partnership....
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....s profit and therefore, the Firm itself disallowed the remuneration paid to the assessee company on the ground that the company is not working partner. During the A Y 2009-19, as per IT return, the firm has claimed entire business income as deduction u/s.80IC, after disallowing so called partners' remuneration of Rs. 48.00 crore. The fact is that the remuneration was paid for the providing business marketing auxiliary services to the Firm through its infrastructure and network. iv) The assessee company under pretext of disallowance of partner's remuneration in Firm's income claimed it as exempt income under section 28(v) of the Income Tax Act. In fact, the company received service charges for providing auxiliary marketing serv....
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....on 22.07.2015 strongly contesting the above show cause notice. Learned PCIT however rejects its explanation in the order under challenge reading the following: "6. I have considered the facts of the case and the submissions made by the AR of the assessee. So far as the objection of the assessee against proceedings u/s 263 is concerned on the ground that action u/s 263 is not possible in cases where the A.O. had already examined the issue, this proposal is palpably untenable for the reason that the power u/s 263 is intended to correct the wrong assessment made by the assessing authority. As a matter of fact, it appears that no such inquiries have been conducted by the AO. The AO has simply accepted the claims of the assessee and failed to m....
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....o received share of profit and interest from the firm. As per the Memorandum of Undertaking dated 15-03-2008 between the firm and the assessee, it was decided that the assessee will market the products of the firm and also provide auxiliary marketing services like consignment, sales agent and after sales service for which the assessee would be eligible for remuneration @ 12.5% of the total turnover of the firm. Accordingly, the remuneration of Rs. 48 crores has been paid by the firm to the assessee. In the return of income of the firm, the expenses of remuneration paid to the assessee was added back to income on the ground that the assessee is not a working partner in terms of section 40(b). On the other hand, the assessee has claimed that ....
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....rtnership deed dated 01.03.2007 executed between three parties namely the Assessee, Cadila Healthcare Staff Welfare Trust and German Remedies Ltd. The amount is paid as per a separate agreement in the form of MOU dated 15.03.2008 executed at the fag end of the financial year. An unsigned copy of this MOU is found in the assessment record. The AO has clearly erred in not verifying the typical facts of the case and not conducting the requisite inquiries to ascertain the tax evasion, if any. by misuse of the provisions of section 40(b) and 28(v) of the Act. 8. Considering the above facts and findings, it is evident that the AO has neither examined the issue involved nor conducted necessary inquiries on the same. The AO has thus erred in not ....
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....cover the same u/s.28(v) r.w. proviso thereto envisaging a corresponding adjustment in case the sum in question received as remuneration as in fact of the instant case is disallowed u/s.40A(b) of the Act. Learned PCIT is of the view that the Assessing Officer ought to have conducted all necessary inquiries so as to pierce the corporate veil causing substantial loss to Revenue's interest. Learned Departmental Representative places before us copy of Assessing Officer's assessment order for assessment year 2010-11 disallowing a similar adjustment u/s.28(v) of the Act amounting to Rs. 170crores. He pleads us to follow the very course of action herein as well. 6. We proceed in this backdrop of facts to notice first of all that there is no force....