TaxTMI 
TaxTMI 
2018 (3) TMI 423
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....e from 24th March, 2008 and was not applicable for A.Y. 2007-08. No nexus between the interest paid on borrowed funds and tax free income was established by the authorities below. At any rate without prejudice the additions as made are excessive. 3. Facts of the case, in brief, are that the assessee company is manufacturing toughened glass, laminated glass and float glass. The assessee has a financial and technical collaboration with Asahi Glass Company Limited Japan (AGC). Asahi India Glass Limited is India's largest manufacturer of world-glass automotive safety glass. It performs all the functions, starting from purchase of raw materials, processing it into final product till the stage of carrying out the marketing functions and after sales service. It filed its return of income on 30.10.2007 declaring loss of Rs. 65,37,51,392/- under the normal provisions and book profit of Rs. 42,25,48,996/- u/s 115JB of the I.T. Act. During the course of assessment proceedings, the Assessing Officer observed that the assessee company has shown dividend income of Rs. 8,27,937/- and long term capital gain at Rs. 60,12,597/- which have been claimed exempt u/s 10(34) and 10(38) respectively. He,....
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....ons, he submitted that no disallowance u/s 14A is called for when the Assessing Officer has not pointed out any expenditure which according to him has been incurred by the assessee. He, however, fairly conceded that under identical facts and circumstances, the Tribunal in assessee's own case for assessment year 2006-07 vide ITA No.4242/Del/2010 order dated 06.04.2016 has restored the issue to the file of the Assessing Officer. 8. Ld. DR on the other hand submitted that since the Tribunal in preceding assessment year has restored the issue to the file of the Assessing Officer, therefore, for this year also, this issue should be restored to the file of the Assessing Officer for adjudication afresh in the light of the decision of the Tribunal in assessee's own case in the preceding year. 9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer made disallowance of Rs. 14,72,158/-u/s 14A and also added the same to the book profit u/s 115JB. We find the ld. CIT(A) restric....
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....r the law in not deleting interest charged u/s 234B and 234C of I.T. Act in respect of disallowance on account of 'provision for bad and doubtful debts' and 'deferred tax liability' made under MAT provision of the I.T. Act which were inserted with retrospective effect after filing the income tax return." 13. Facts of the case, in brief, are that the Assessing Officer in the assessment order has not discussed the issue relating to charging of interest u/s 234B and 234C of the I.T. Act. However, before the ld. CIT(A), the assessee took the ground challenging the charging of interest u/s 234B in respect of disallowance on account of 'provision for bad and doubtful debts' and disallowance on account of 'deferred tax liability' on the ground that such disallowances made under the provisions of the I.T. Act have been inserted after the filing of the income-tax return for the year under consideration from retrospective effect. The ld. CIT(A), however, did not adjudicate the issue raised by the assessee. 14. Ld counsel for the assessee referring to the decision of the Hon'ble Orissa High Court in the case of Siksha "O" Anusandhan v. CIT reported in 336 ITR 112 submitted that the Hon'ble....
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....the Assessing Officer vide assessment order dated 28.01.2011 added Rs. 75,00,000/- on account of bad and doubtful debts to the taxable book profit u/s 115JB and levied interest u/s 234B and 234C thereon. He submitted that since the aforesaid Explanations were introduced or brought in with retrospective effect by the Finance Act, 2008 and 2009 respectively, therefore, the assessee could not be termed as defaulter in payment of advance tax and hence was not liable to pay interest in terms of section 234B and 234C of the I.T. Act. 18. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT v. JSW Energy Ltd., he submitted that the Hon'ble High Court in the said decision has held that where the assessee computed book profit of assessment year 2006-07 as per prevailing law, no interest under section 234B could be levied consequent to inclusion of various items while computing book profit as per Explanation to section 115JB which has been brought on statute by Finance Act, 2008 with retrospective effect from 01.04.2001. 19. Referring to the decision of the Hon'ble Calcutta High Court in the case of CIT v. Emami Ltd. reported in 337 ITR 470, he submitted that the H....
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....34C and 234D. We find the assessee before the ld. CIT(A) has raised the ground challenging the levy of interest u/s 234B in respect of disallowance on account of provision for bad and doubtful debts and disallowance on account of deferred tax liability under MAT provisions which has been reproduced by the ld. CIT(A) at page 2 of the order which reads as under :- "6. That the Ld. AO erred in charging interest under section 234B of the Act. 6.1 That the Ld. AO erred in charging interest under section 234B of the Act in respect of the following disallowances made under the MAT provisions of the Act which have been inserted after filing the tax return for the year under consideration from retrospective effect. * Disallowance on account of "provision for bad and doubtful debts "; and * Disallowance on account of "deferred tax liability ". " 22. We find although a specific ground was raised by the assessee before the ld. CIT(A), however, he has not adjudicated the same. Now, the assessee before the Tribunal has raised a ground challenging the levy of interest u/s 234B in respect of disallowance on account of the various additions made under MAT provisions which has been amen....
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....13 SCC 697, held that once the materials are available on record, it was for the High Court to have decided the matter on the basis of that materials after appreciation of evidence, and there was no need for directing remand. 25. The apex Court in Gowrammanni & Ors. v.. V.V.Patil (D) by L.Rs. & Ors., [2009] (II) OLR SC 465, held that the appellate court should have itself disposed of the case on merits taking into consideration the evidence adduced before the trial Court as on the question of identity of disputed land the parties have adduced evidence, the Court Commissioner was appointed and submitted a report, and he was examined as a witness and duly cross-examined and thereupon the suit was disposed of by the trial Court. 26. The Allahabad High Court in Mohd. Ayyub and Sons Agency's case (supra), held that the power of the Tribunal to permit any party to the appeal to raise the question of jurisdiction, which goes to the root of the matter and does not involve further investigation into facts, cannot be disputed on the plain reading of rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. Indeed, on such a plea being taken, the Tribunal is under a statutory obligation....
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....ce (No.2) Act, 2009 with retrospective effect from 01.04.2001 whereby provision for bad and doubtful debts was to be added to the book profit of the assessee under the MAT provision and, therefore, the Assessing Officer, who made addition of Rs. 75,00,000/- on account of bad and doubtful debts to the taxable book profit could not have levied interest u/s 234B and 234C thereon. 27. We find the provisions of section 208 as it stood at the relevant time read as under :- "Conditions of liability to pay advance tax. 208. Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is ten thousand rupees or more. 28. Now, the question that arises is as to whether there is any statutory obligation on the part of the assessee to pay advance tax during the said previous year when the Explanation 1(h) to provisions of section 115JB was inserted by the Finance Act, 2008 with retrospective effect from 01.04.2001 whereby the deferred tax liability was added to the book profit under the MAT provision and when the Finance Act, 2008 received assent of ....
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....cember - Not less than seventy-five per cent of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. On or before the 15th March - The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. (b) all the assessees (other than companies), who are liable to pay the same, in three instalments during each financial year and the due date of each instalment and the amount of such instalment shall be as specified in Table II below: TABLE- 2 Due date of instalment Amount payable On or before the 15th September Not less than thirty per cent of such advance tax. On or before the 15th December Not less than sixty per cent of such advance tax, as reduced by the amount, if any, paid in the earlier instalment. On or before the 15th March The whole amount of such advance tax as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments: Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be treated as advance tax paid during the financial year ending on that day fo....
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....,63,65,71 1/-. The Assessing Officer accepted such return of income but imposed interest under Section 234B and 234C of the Act amounting to Rs. 44,00,937/- and Rs. 11,78,960/- respectively. 11. In our opinion, the amended provision of Section 11 5JB having come into force with effect from April 1, 2001, the appellant cannot be held defaulter of payment of advance tax. As pointed out earlier, on the last date of the Financial Year preceding the relevant Assessment Year, as the book profit of the appellant in accordance with the then provision of law was nil, we cannot conceive of any "advance tax" which in essence is payable within the last day of the financial year preceding the relevant Assessment Year as provided in Sections 207 and 208 or within the dates indicated in Section 211 of the Act which inevitably falls within the last date of Financial Year preceding the relevant Assessment Year. Consequently, the assessee cannot be branded as a defaulter in payment of advance tax as mentioned above. 12. At this stage, we may profitably rely upon the observations of the Supreme Court in the case of Star India P. Ltd Vs. Commissioner of Central Excise, reported in (2006) 280 ITR....
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.... and Section 234C of the Act for default in making payment of tax in advance which was physically impossible." 30. We find the Hon'ble Bombay High Court in the case of JSW Energy Ltd. (supra) following the decision of the Hon'ble Calcutta High Court in the case of Emami Ltd.(supra) and various other decisions has upheld the decision of the Tribunal in deleting the levy of interest u/s 234B on account of the addition made by the Assessing Officer while making MAT calculation u/s 115JB on the basis of amendments made to such provisions with retrospective effect from 01.04.2001. The relevant observations of the Hon'ble High Court read as under :- "11. Then, Mr. Tejveer Singh vehemently contended that in relation to question no. 2, the findings require detailed probe by this Court. He submits that the Tribunal was not right in law when it held that no interest under section 234B of the I.T. Act can be levied. Though several items have to be calculated while computing book profit and in terms of explanation to section 115JB of the I.T. Act, that explanation has been brought on the statute book and with retrospective effect from 1st April, 2001, therefore, this calculation of the tri....
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....r to attract the provisions contained in section 234B and 234C of the Act, it must be established that the assessee had the liability to pay advance tax as provided under sections 207 and 208 of the I.T. Act within the time prescribed under section 211 of that Act. Noting the rival contentions, the Calcutta High Court proceeded to hold that the last date of relevant financial year was 31st March, 2001 and on that date, admittedly, the appellant before it had no liability to pay any amount of advance tax in accordance with the then law prevailing in the country. Consequently, the appellant paid no advance tax and submitted its regular returns on 31st October 2001, within the time fixed by law wherein it declared its total income and the book profit both as Nil. The amendment to section 115JB by virtue of Finance Act, 2002 and which was referred to in the Calcutta High Court judgment has retrospective effect from 1st April, 2001. 17. In the present case, what the assessee has pointed out is that some of the amounts included in the book profits as per Explanation (h) to section 115JB were brought in by the Finance Act, 2008 with retrospective effect from 1st April, 2001. The assess....
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.... courts and Tribunals or other authorities, which required to be neutralised by the validation clause. We can only assume that the judgments, decree or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the valuation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. 8. The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect." 20. The Supreme Court held that the liability to pay interest would only arise on default and is really in the nature of a quasi punishment. The liability to tax although credited retrospectively could not entail the punishment of payment of interest with retrospective effect. It is this principle which has been laid down which is followed by the Calcutta High Court. It is that principle relied upon by the Calcutta High Court which has been applied....
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.... assessee is allowed. ITA No.2183/Del/2014 (By Revenue) : 33. The ground no.1 by the Revenue reads as under :- "1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in deleting the addition of Rs. 4,09,00,000/- made on account of adjustment following TPO's order on ALP and holding that the action of the TPO in determining the ALP of Royalty paid for the Taloja Plant of the assessee at NIL was incorrect and unsustainable." 34. Facts of the case, in brief, are that the assessee during the year under consideration has entered into the following international transactions with its AE in both its automotive and float glass divisions :- International Transactions Automotive Float Method Purchase of raw material 24.65 TNMM Import of stores & machinery spares 5.77 0.2 TNMM Import of clear float and reflective glass 6.38 TNMM Purchase of capital goods 8.57 124.82 TNMM Import of Tin bath blocks & machinery spares - 1 .08 TNMM Fee for Technical consultancy services 0.44 16.50 TNMM Royalty for use of technical know-how 3.30 1.83 CUP TOTAL 58.97 44.87 10.3.84 35. The Assessing Officer referred the....
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....On the basis of the above, the TPO determined the arm's length price for the payment of royalty as NIL under CUP and, accordingly, proceeded with an upward adjustment of Rs. 4.09 crores to the income of the assessee on account of the international transactions in the Float Glass division. The Assessing Officer, thereafter, in the assessment order made addition of Rs. 4.09 crores to the total income of the assessee. 40. Before the ld. CIT(A), the assessee submitted that it has paid on amount of Rs. 3.62 crores as royalty for technical know-how in the Automotive Glass division and Rs. 4.09 crores in the Float Glass division. Thus, the total royalty of Rs. 7.71 crores paid by the assessee to its AEs amounted to 0.98% of its net sales. It was submitted that the royalty paid by Sona Steering Systems Limited was considered as an appropriate CUP for benchmarking the royalty payments of the assessee since in either case, the technology was ultimately used to cater to OEMs. Accordingly, the Sona Steering agreement was submitted before the TPO during the course of assessment proceedings. It was submitted that as per agreement, Sona Steering paid royalty to its foreign collaborator at 3% of ....
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....l evidences filed before the ld. CIT(A) and justified its earlier action. The ld. CIT(A) confronted to the assessee to the remand report made by the Assessing Officer. After considering the contents of the remand report and the rejoinder of the assessee to such remand report, the ld. CIT(A) directed the TPO to delete the addition of Rs. 4.09 crores on account of TP adjustment in respect of royalty by observing as under :- "10.4 I have carefully considered the submissions of the appellant and also the remand report dated 01/01/2013. In the TP study the royalty paid by Sona Steering Systems Limited was considered by the appellant as an appropriate Comparable Uncontrolled Price ('CUP') for benchmarking the royalty payments of the appellant. During the appellate proceedings the appellant had undertaken a search of independent agreements over global royalty database namely, RoyaltyStat database, to identify comparable uncontrolled agreements to compare royalty rates paid by appellant to its AEs with the rates charged between independent third parties for use of similar intangibles. As per the search, the arithmetic mean of the royalty rates on sales/ revenue of 5 agreements between in....
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....Mar-05 Mar-06 Mar-07 Mar-08 Asahi India Glass Ltd. 67,606 68,283 87,830 111,382 Y.o.Y growth in sales 1% 29% 27% 10.6 The appellant has further submitted that approximately 80% of the sales revenue of the appellant represents sales made to global customers of the Asahi Group and these sales would not have been possible in absence of the technical and brand affiliation with the Asahi Group. The appellant has also argued that the majority of the benefit derived by the appellant includes retention of its customer base who may be lured by competitors unless the appellant constantly evolves its product portfolio. The royalty payments were made by the appellant for availing patented technology. The appellant has highlighted that the Asahi brand and associated technology is quintessential for its continued existence and sustenance in the float glass industry. 10.7 Since float glass constitute the base raw material for manufacture of auto-glass, the float glass technology would be crucial for the performance of its automotive division as well. Generally, the Float Glass division provides about 30% of the total raw material requirement of the automotive....
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....f sales. Therefore, the same deserves to be allowed because due to the licensed technology made available by the AEs, the assessee company was able to cater to the changing needs of its customers, maintain quality and was also able to increase its sales over the years and smooth functioning of its business. He submitted that since the assessee company does not undertake any research and development activity on its own and totally depends upon its AEs for technology, therefore, without such technology the assessee would not have achieved such higher turnover. He submitted that no independent third party will let any other entity to use its licensed technology without charging a fee/royalty. Since the float glass constitutes about 30% of raw material for manufacture of auto glass, the float glass technology becomes crucial for the performance of its automotive division as well. He further submitted that since the assessee is a public limited company which is listed on BSE and NSE in which Asahi Glass Co. Ltd., Japan (AE) holds only 22.21% shareholding while Indian promoters held 33.03% and the remaining 44.76% shareholding was held by the public, therefore, the AEs were not in a posi....
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....at Glass Tube Ltd. and Triveni Glass Ltd. as comparables. Therefore, Bharat Glass Tube Ltd. and Triveni Glass Ltd. ought to be considered as comparables for the year under consideration for working out the average/mean operating margin of Float Glass Division. He submitted that Gujarat Guardian Ltd. and Sejal Architectural Glass Ltd. could not be considered as comparable because Gujarat Guardian Ltd. was engaged in the manufacture of float glass and mirror glass and Sejal Architectural Glass Ltd. was engaged in the manufacture of toughened glass and laminated glass. Before the TPO the said companies were given as comparables because the assessee company is engaged in the manufacture of both toughened glass and float glass for which royalty had been paid. However, the TPO accepted the royalty payment towards technical fee of toughened glass and determined the arm's length price of royalty at Nil as against royalty of Rs. 4.09 crores paid towards float glass. Therefore, Gujarat Guardian Ltd. and Sejal Architectural Glass Ltd. could not be considered as comparables for working out the average/mean operating margin of Float Glass Division. He submitted that the average/mean operating m....
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....ompany had not derived any benefit from payment of royalty and determined the arm's length price of royalty at Nil under CUP. We find ld. CIT(A) deleted the addition which has been already been reproduced in the preceding paragraph. We do not find any infirmity in the order of the ld. CIT(A) on this issue. We find the assessee company has paid royalty of 4.09 crores on net sales of float glass of Rs. 238.61 crores to its AEs which works out to only 1.71% of the sales. We find merit in the argument of the ld. counsel for the assessee that due to the licensed technology made available by the AEs, the assessee company was able to maintain quality and increase its sales. For the year ending March, 2005 the turnover was Rs. 67,606/- lakhs which has gone up to Rs. 68,283/- lakhs for the year ending March, 2006 and Rs. 87,830/- lakhs for the year ending March, 2007 and Rs. 111,382/- for the ending March, 2008. This indicates that there is huge jump in the turnover between the year 2006 to 2008 as compared to financial years 2004-05 and 2005-06. Further, the royalty paid by the assessee to AE for float glass technology has been accepted by the Department in the earlier years. We also find ....
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....d in view of the detailed reasoning giving by the ld. CIT(A) while deleting the disallowance made by the Assessing Officer. We find no infirmity in the same. Accordingly, the order of the ld. CIT(A) is upheld and the ground raised by the Revenue is dismissed. 49. Ground no.2 by the Revenue reads as under :- "2. In deleting the addition amounting to Rs. 40,36,786/- made on account of provision for gratuity to book profit as per provision of section 115JB of the Income Tax Act 1961." 50. Facts of the case, in brief, are that the Assessing Officer during the assessment proceedings observed that the assessee has debited an amount of Rs. 40,36,786/- on account of provision for gratuity which has been added to the taxable income of the assessee while computing the income under the normal provisions of the Act. Since the same has not been added to the net profit for the purpose of computing book profit, he asked the assessee explain as to why the same should not be added back to the book profit. It was explained by the assessee that the provision for gratuity is ascertained liability calculated by approved valuer and no addition should be made to the book profit. However, the Assessi....