TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1640
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....ent order was framed under section 143(3) on 22.12.2008 by the Addl.CIT, Range-1, Ahmedabad. On receipt of notice, the assessee has filed cross-objection in this appeal bearing no.89/Ahd/2011. ITA No.2447/Ahd/2011 is also directed at the instance of the Revenue, but against order of ld.CIT(A) dated 5.7.2011. Proceeding in this appeal has arisen out of an assessment order passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 dated 30.12.2010. In other words, assessment was reopened and addition made in re-assessment proceedings travelled to the ld.CIT(A), which have been deleted. The Revenue is aggrieved with those deletions. The grounds of appeal of the Revenue in ITA No.692/Ahd/2011 reads as under: "1. The ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 8,65,17,574/- made on account of TPO order under section 92CA(3) of the I.T.Act by rejecting the TNMM selected by the assessee. 2. The ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 18,45,974/- made on account of miscellaneous expenses." 4. Brief facts of the case are that assessee has filed its return of income for Asstt.Year 2005-06 on 31.10.2005 declaring a total income....
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....ndings of the ld.TPO is also available in the order of theld.CIT(A). On the basis of CUP method, the ld.TPO recommended for making upward adjustment in the price of products sold to these AEs. Similarly, he applied same analogy for making upward adjustment in respect of contract research receipts. The ld.TPO made recommendation for adjustment of Rs. 8,65,17,574/- on two items i.e. sale of various products and contract research services. Recommendation made by the ld.TPO have been given effect by the AO in his assessment order dated 22.12.2008. 6. Dissatisfied with the adjustment, assessee carried the matter in appeal before the ld.CIT(A). The assessee has field written submissions contending therein as to why CUP was not an appropriate method for determining ALP of products sold by the assessee. It further contended that the ld.TPO has not recorded any finding as to how TNMM adopted by the assessee was not an appropriate method. Without pointing out fault with the method of assessee, the ld.TPO ought to have not jumped into an alternative method. The assessee has appraised the ld.CIT(A) about essential ingredients of CUP method. It was submitted that this method can only be applie....
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.... the act are very clear, in as much as it is the assessee who has a right to choose the best applicable method for the purpose of calculation of arms lengthprices analysts AO finds serious defects in the said method and he fulfils the preconditions prescribed under section 92C (3) of the act. Under the scheme of the act, the AO is required to find out the arms length price based on any of the five methods prescribed under the act. Under the act no particular preferences given to a particular method compared to other methods. it is also mandatory on the part of the AO to give a clear finding as to how to and why the method adopted by the assessee cannot give a true and correct picture of arms lengthprices. Moreover, the AO has to justify and give reasons as to why the method adopted by him is more scientific inaccurate in determining the arm's length price is compared to the method adopted by the assessee. In the facts of the present case, the assessee has adopted transactional net margin method (TNMM for short). The assessee has justify the said method by stating that having regard to the sales of large number products to its associate enterprise, coupled with the fact that it ....
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....d and the relevant particular line from the judgement reads as under- "as regards income attributable to the P E, we hold that the transactional net margin method was the appropriate method for determining the arm's length price in respect of transactions between Morgan Stanley & Co and MSAS' even the honourable special bench of this tribunal in the case of Aztec software and technology services Ltd has held that the computation of arms length price is effect to exercise. Each case depends on its own facts and circumstances. In many cases where identical or almost similar uncontrolled transaction is areavailable for comparison, determination of arms length price is an easy task. But it is not so in most of the transactions and rarely one is able to locate and identical transaction. In such cases arms length price is determined by taking this survey comparable transaction in comparable circumstances and make suitable adjustment for the differences. Similarly in the present case also the PB IT of the assessee company is exactly similar or nearby with that of the other uncontrolled transactions of unconnected enterprises. The PB IT of the exports is as high as 23.02% as aga....
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....to Non-AEs prove that the transactions are entered into at ALP and therefore no adjustments are called for. It is also submitted by the appellant that it has entered into arrangement whereby it has carried out contract based research activity. As per the terms and conditions for contract research mentioned by the appellant, the entire risk of outcome of the said research was to be taken by the principals' i.eDishmanFZE and Dishman USA. As per submission, the appellant was to carry out only the research activity, irrespective of the outcome of such research and for that activity, the appellant was to be compensated in terms of men month hours' basis. In other words, the principals are getting the entire contract research work done by the appellant and takes the risk and as a corollary, the rewards too. The bills issued for contract research work for AEs and non-AEs are identical in which man months was the basis of billing. In the absence of formal contracts, the TPO considered these transactions as normal sale ignoring the nature of transactions. Transactions can be entered even without elaborate formal agreement but that will not change the nature of transactions. These....
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....priate method for determining ALP of assessee's transactions with its AE. In the present assessment year, the assessee has compiled the details in tabular form submitting as to why CUP is not appropriate method. Such details have been reproduced by the ld.CIT(A) and they read as under: Sr. No. Product ALP Adjustment in Rs. Reasons why comparison is not proper 1 Ammonium Tributyle Ammonium Chloride 10,70,529/- The appellant has sold 9,800 Kgs at average rate of Rs. 144.51 to Dishman USA AE. The ld. TPO has compiled the identical products sold to various customers in respective countries and has adopted their average rate of Rs. 253.47. Details of which given on page no. - of Paper Book. Reasons for non-comparable are as under : Function Performed, Risk Assumed and Assets Employed i.e FAR factors are not taken into consideration while comparing prices charged to AE with non-AE. Quantity Factor : The instances taken by the ld. TPO so far as quantity is concerned are at all not comparable, except one, as the Appellant has sold use quantity of 9800 Kgs, whereas comparable quantity is ranging from 22 kgs to 1950 kgs. The only comparable instance could be impugned product s....
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....e issue : Country Qty. Avg. Rate Argentina 600 535.67 Australia 11558 272.49 Belgium 81000 242.42 Iran 16000 228.63 Japan 1600 303.52 Taiwan 24 459.30 UK 5 694.35 Total 110787 246.10 AE - USA 8280 233.08 In the given case, the appellant has charged average price Rs. 233.08 to AE whereas average price to Non-AE work out to be to Rs. 246.10 which is certainly within limit of 5% and therefore as per 2nd Proviso S. 92C(2)of the Act no transfer pricing adjustment is required to be made. Without prejudice to above, the appellant submits that in any case the instances are not comparable at all due to quantity and geographical factors 6 Sodium Picosumlphat 78,713/- No comments for the smallness of amount. 7 Tetrabutyl Ammonium Bromide 31,81,642/- FAR Analysis : As Above. Quantity factor : The instances is taken by the ld. TPO is summarised as under : Country Qty. Avg. Rate Isreal 28800 215.82 Japan 4300 280.63 Korea 3500 433.95 Netherland 1000 810.60 USA 10200 240.67 Total 47800 255.36 AE- Europe 49054 190.50 ....
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.... summarised as under : Country Qty. Avg. Rate Germany 500 663.84 Japan 600 630.00 Netherland 1000 762.65 USA 100 962.50 Total 2,200 713.10 AE- Europe 17306 440.43 All three instances are not comparable as there is huge difference in quantity of the product sold to AE and Non-AEs. Geographical factors : As Above (1). Regularity of transaction : As above (1). 12 Tetra Butyle Ammonium Hydrogen Sulphate 24,931 For the smallness of amount it is not considered. 13 Tetra Ammonium Bromide Ethyle 1,35,57,000/- FAR Analysis : As Above. Quantity Factor : The instances taken by the ld. TPO has summarised as under : Country Qty. Avg. Rate Brazil 63 608.86 Japan 100 650.70 Malaysia 25 437.80 USA 3000 252.02 Total 3,188 273.04 AE- Europe 1,50,000 182.66 All four instances are not comparable is there is huge difference in quantity of the product sold AE and Non-AEs. Even if nearer quantity is taken into consideration i.e 3000 at average rate ofRs. 252.02, then also it is for the required to be discounted considering huge difference of quantity sold to Non AE and AE i.e 3000 ....
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....ference, comparison cannot make transfer pricing adjustments. Geographical factors : As Above (1). Regularity of transaction : As above (1). 18 Myristyl DBA Chloride Powder 59,71,613 * FAR Analysis : As Above. Quantity Factor : Only one instance has been taken into consideration by the ld. TPO i.e only 25 Kgs sold to customer in Egypt, whereas the appellant has sold 24,494.40 kgs. to AE. Certainly this instance is not comparable looking into huge difference in quantity as well as only single transaction has been entered into by the appellant with such Non AE. Geographical factors : As (1) Above. Regularity of transaction : As (1) above. Upward adjustment of Rs. 4,68,04,255/- in respect of contract research receipts : At the outset the appellant most respectfully submits that in respect of upward adjustment in with regards to transaction in the nature of contract research receipt from Dishman USA Inc is amounting to Rs. 2,96,26,763/- is concerned, the same is not at all tenable as the total contacts research receipt with the said entity is only in the sum of Rs. 87,38,550/-. The following table would clarify this aspect : Nature of transa....
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....ertinent to observe that the ld.TPO in the order dated 21.10.2008 has not made any such analysis. He has not pointed out the alleged defect as contended in the written submissions. The analogy adopted by the TPO in the order passed under section 92CA is that CUP method is far better method than TNMM. How, TNMM is not applicable on the given set of facts has nowhere been discussed by the TPO in the impugned order. Therefore, the ld.DR cannot improve the case of the TPO at this level. More so when, consistently from the Asstt.Year 2002-03, it has been held that method adopted by the assessee is an appropriate method. In the assessee's own case, this aspect has been accepted upto the level of ITAT. There is no justification for disturbing of that method by taking different opinion from order of the ITAT passed in similar facts of the same assessees. Taking into consideration earlier orders of ITAT passed in assessee's case for the Asstt.Year 2002-03 to 2004-05, we are of the opinion that the ld.CIT(A) has based his finding on the orders of predecessor. There is no independent discussion in this order. Thus, the findings have been upheld by the ITAT, and therefore, we do not see any re....
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....00/- (Ten Lakhs) only, and thus the assessee gets a further part relief. Accordingly, this interconnected ground raised in the appeal of the Revenue and CO of the assessee is partly allowed. 16. Now we take ITA No.2447/Ahd/2011 (Revenue's appeal) 17. In the first ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs. 2,41,04,933/- which was added by the AO with the aid of section 2(22)(e) of the Income Tax Act. 18. Brief facts of the case are the AO has observed that during the assessment proceedings of A.Y 2006-07, it was seen that Schutz Dishman Biotech P.Ltd. ("SDBPL" for short) has given loans to the assesee. Assessee holds 22.3% share holding of SDBPL. Thus, the ld.AO was of the view that loans given to the assessee deserves to be treated as deemed dividend under section 2(22)(e) of the Act. Similarly, the assessee has received loan from B.R. Labs P.Ltd. amounting to Rs. 16,03,933/-. Both these loans were treated by the AO as deemed dividend in the hands of the assessee and addition of Rs. 2,41,04,933/- was made under section 2(22)(e) of the Act in reassessment order. Dissatisfied with the addition, the assessee carried the ma....
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....-06. In both the years, CIT(A)-XXl, Ahmedabad by order dated 28-09-2010 held that transactions entered into by the appellant which its associate concern would not attract the provisions of section 2(22)(e) of the act. And accordingly there would not be any obligation to deduct tax under section 194 and therefore the assessee cannot be treated as the assessee in default within the meaning of section 201(1) of IT act. The relevant extract of the said appeal order in para-six is quoted below- "There is large number of debit and credit transactions. Meaning thereby, the appellant has given and received funds as and when required to and from its associate concern. It is not on account whereby loans and advances have been given to the associate concern. It is on account payments in the nature of current adjustment accommodation account wherein there is a movement of funds both ways, on the basis. Unlike transactions of loan and advances, the movement funds is both ways and the same is more in the nature of current account rather than a loan account. Transactions in the nature of loans and advances are usually very few and for a longer duration. In the facts of the present case, the na....
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....tion;- "Whether on facts and in law the ITAT wax right in cancelling the order passed u/s 201(1) and 201 (A) of the Act, without appreciating that the amount advanced was in the nature of deemed dividend u/s 2(22)(e) of the Act'.'" 9. And the relevant findings of the Hon'ble High Court reads as under:- 4. It can thus be seen that the Commissioner as a matter of fact found that the payments were not in the nature of current adjustment. There was movement of fund both ways on need basis. The transactions in the nature of loans and advances are usually very few in number whereas in the present case, such transactions are in the form of current accommodation adjustment entries. The Commissioner therefore, held that the transactions were not in the nature of loans and advances. The Revenue carried the matter in appeal. The Tribunal concurred with the view of the. CIT (Appeals) and held that the amounts were not in the nature of Inter Corporate Deposits and were therefore, not to be treated as loans or advances as contemplated in section 2(22)(e) of the Act. 5. The issue is substantially one of appreciation of facts. When the CIT(Appeals) as well as Tribunal concurr....
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....and Revenue are in cross appeals i.e. Revenue's appeal is ITA No.817/Ahd/2011 and assessee's appeal is in ITA No.773/Ahd/2011, against order of the ld.CIT(A) dated 3.1.2011. These appeals have arisen from the proceedings under section 143(3) of the Act. 28. The assessee and Revenue have also filed appeal being ITA No.3086 and 2957/Ahd/2013 against the order of the ld.CIT(A) dated 31.10.2013. These appeals arose from penalty proceedings under section 271(1)(c) of the Act. Penalty order was passed by the AO on 30.3.2012. 29. First we take ITA No.817/Ahd/2011 filed by the Revenue. However, if any ground found to be inter-connected with ground of appeal taken by the assessee, then we will take up those grounds together. 30. In the first ground of appeal, grievance of the Revenue is that the ld.CIT(A) has erred in deleting addition of Rs. 15,71,69,588/-. 31. Brief facts of the case are that the assessee has filed its return of income on 31.12.2006 declaring a total income at Rs. 9,55,84,979/-. It has international transaction with its "AE". Therefore, a report under section 92E of the Income Tax Act, 1961 relating to international transactions was submitted in Form No.3CEB. The ld.A....
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....ve that the assessee is engaged in the business of bulk drugs and fine chemicals. It had entered into various international transactions with its "AE" for sale of bulk drugs and fine chemicals. The assessee has bench marked its international transactions by adopting TNMM method. The TPO did not accept this method as most appropriate method and observed that the assessee should have supported its transactions at ALP for following CUP method as most appropriate method. We have discussed this issue while dealing with the appeal of the Revenue in the assessment year 2005-06 in the earlier part of this order. We have specifically observed that this issue has been come up for consideration starting from assessment year 2002-03 and consistently it has been held that since TNMM adopted by the assessee is most appropriate method, its international transactions ought to be valued for the purpose of bench marking by adopting TNMM method. If that method is being adopted then the profit level indicator is 23.59% as compared average profit of similar entity at 18.46%. Thus, the ld.CIT(A) has observed that ALP of the assessee in respect of 14 international transactions, with regard to which upwar....
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....lowed and not opening balance. Therefore, after looking into the finding of the ld.CIT(A), we do not find any error in it. This ground of appeal is rejected. 36. Ground no.3: Grievance of the Revenue is that the ld.CIT(A) has erred in directing the AO to allow correct figure of depreciation. 37. Brief facts of the case are that the assessee has claimed depreciation of Rs. 13,67,45,462/- in the return of income. During the assessment proceedings, it has made a revised claim at Rs. 14,15,32,235/-. This claim was disallowed by the AO by observing that the assessee failed to file revised return of income. The ld.AO has made reference to the decision of Hon'ble Supreme Court in the case of Goetze India Ltd. The ld.CIT(A) has observed that it was the duty of the AO to determine the correct amount of depreciation available to the assessee. He further observed that as per Explanation 3 to section 32(1)(i), the AO has to assess upon correct amount of depreciation on the assessee. 38. With assistance of the ld.representatives, we have gone through the record carefully. It was not a fresh claim made by the assessee. Thus, the ld.AO has erred in not considering the claim of the assessee. Th....
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.... Considering our finding in the Asstt.Year 2005-06, we do not find any merit in this ground of appeal. It is rejected. No.692 /Ahd/2011 and 7 Others ACIT Vs. Dishman Pharmaceuticals & Chemicals 44. Ground No.6 and 7: These grounds are inter-connected with ground nos.26 and 27 taken by the assessee in its appeal i.e. ITA No.773/Ahd/2010. 45. The issue involved in all these grounds relates to computation of correct figure for the grant of deduction under section 10B of the Act. 46. Brief facts of the case are that in the return of income, the assessee has claimed deduction under section 10B of the Act at Rs. 33,19,35,229/- in respect of EOU units at Bavla and Naroda. The assessee has submitted audit report inform No.56G of the Act. On analysis of the returns and documents, the ld.AO as of the view that the assessee is not entitled for deduction under section 10B on some of the items. Accordingly, he made adjustments and reduced deduction by a sum of Rs. 10,21,60,135/-. In other words, the ld.AO has computed the deduction at Rs. 22,97,75,094/-. Six points which have been considered by the AO for making adjustment in the computation of deduction are as under: i) Unrealised export ....
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....ining separate books accounts and demonstrate all expenditure incurred by it; identifiable and allocatable, then on estimate basis such expenditure cannot be allocated on the basis of turnover or quantum of sales. The ld.CIT(A) has observed that accounts of the assessee were audited. It has maintained separate accounts. The AO did not pin-point specific defects in the expenditure debited by the assessee. In other words, if the AO is able to lay his hand on a particular expenditure, which is meant for EOU units, but debited either to the HO or in non-EOU units, then probably he would be justified in allocating expenditure on estimated basis. But no such exercise has been carried out by the AO, therefore, we do not find any merit in this ground of appeal. Grounds of appeal raised by the Revenue in this connection are rejected. 50. As far as first fold grievance of the assessee is concerned, the ld.AO has excluded unrealized exports from export turnover. The ld.CIT(A) confirmed his action. 51. The ld.counsel for the assessee submitted that no doubt unrealized export has been excluded from the export turnover, then simultaneously these amount should be excluded from the total turnove....
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....llenged the orders passed by Income Tax Appellate Tribunal (Tribunal, for short) dated 11th September, 2013 and 24th October, 2013 relating to assessment years 2008-09 and 2009-10, respectively. Tribunal has followed the decision of their Special Bench in the case of Maral Overseas Ltd. versus Additional Commissioner of Income Tax decided on 20th March, 2012, in which it has been held:- "78. Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100% EOU. Section 10B(4) lays down special formula for computing the profits derived by the undertaking from export. The formula is as under :- Profit of the business of the Undertaking X Export turnover Total turnover of business carried out by the undertaking 79. Thus, sub-section (4) of section 10B stipulated that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, not- with-standing the fact that sub-section (1) of section 10B refers the profits and gains as are derived by a 100% EOU, yet the manner of determining such eligible profits has been statutorily defined in sub-se....
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....ratories v. ACIT (supra). In the asses see's own case the I.T.A.T. in the preceding years, after considering the decision in the case of Liberty India held that provisions of section 10B are different from the provisions of section 80IA wherein no formula has been laid down for computing the eligible business profit. 80. In view of the above discussion, question no. 2 is answered in affirmative and in favour of the assessee. Accordingly, the assessee is eligible for claim of deduction on export incentive received by it in terms of provisions of section 10B( 1) read with section 10B(4) of the Act." The aforesaid view is in consonance with the decision of this Court dated 1st September, 2014 passed in ITA 438/2014, Commissioner of Income Tax-VII versus XLNC Fashions in which this court has held as under :- "Deduction under Section 10B of the Income Tax Act, 1961 (Act, in short) is to be made as per the formula prescribed by Sub-Section (4), which reads as under: "10B. Special provision in respect of newly established hundred per cent export- oriented undertakings- ......... ........... (4) For the purposes of sub-section (1), the profits derived from export of....
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....a for computation of deduction in respect of exports. In view of the aforesaid, we do not find any merit in the present appeal and the same is dismissed." Karnataka High Court in Commissioner of Income Tax, Central Circle versus Motorola India Electronics (P) Ltd., ITA No. 428/2007, decided on 11.12.2013, reported as [2014] 46 taxmann.com 167 (Karnataka) has also taken a similar view, wherein it has been held:- "By Finance, Act, 2001, with effect from 01.04.2001, the present Sub- section (4) is substituted in the place of old Sub-section (4). No doubt Sub- section 10(B) speaks about deduction of such profits and gains as derived from 100% EOU from the export of articles or things or computer software. Therefore, it excludes profit and gains from export of articles. But Sub- section (4) explains what is says that profits derived from export of articles or things or computer software shall be the account which bares to the profits of the business of the undertaking and not the profits and gains from export of articles. Therefore, profits and gains derived from export of articles is different from the income derived from the profits of the business of the undertaking. The prof....
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....e, then alternatively, it has pleaded that net differential amount of Rs. 3,39,534/- be only taxed out of prior period income. 59. With the assistance of the ld.representatives, we have gone through the record carefully. The ld.AO while assessing prior period income of Rs. 46,50,648/- has observed that since it is taxable income offered by the assessee itself, an item has to be included in the total income of the assessee on the principles of taxability on accrual or receipt basis. This has been offered by the assessee on receipt basis. Therefore, it is to be taxed, with regard to the allowance of prior period expenditure, the ld.AO has observed that such item cannot be allowed because it is not ascertainable whether this expenditure has been crystallized in the current year or not. According to the AO, bills and vouchers were not produced by the assessee. On appeal, the ld.CIT(A) confirmed the view point of the AO by observing that set off prior period expenditure against prior period income could be granted if the such expenditure was incurred for earning such income. In this way, the ld.CIT(A) concurred with the AO. The ld.counsel for the assessee in support of its contentions ....
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....bited by the assessee at Rs. 7,28,42,748/-. The ld.AO calculated disallowance as per Rule 8D and made addition of Rs. 4,76,876/-. Before the ld.CIT(A) it was contended that Rule 8D is applicable from the assessment hear 2008-09 as held by the Hon'ble Bombay High Court in the case of Godrej & Boyce Vs. CIT. The ld.CIT(A) agreed to this proposition of the assessee, but observed that since the assessee has not offered any expenditure for disallowance under section 14A, therefore, some disallowance has to be made. In this way, the ld.CIT(A) has confirmed the disallowance made by the AO. 63. With the assistance of the ld.representatives, we have gone through the record carefully. The ld.counsel for the assessee pointed out that investment at the year-end are of Rs. 1,203.72 lakhs whereas the assessee has interest free funds available at Rs. 17,154.34 lakhs. The assessee has relied upon the judgment of the Hon'ble Gujarat High Court in the case of CIT Vs. Torrent Power Ltd., 363 ITR 474 (Guj), CIT Vs. Suzlon Energy Ltd., 354 ITR 630 (Guj) and judgment of Bombay High Court in the case of CIT Vs. Reliance Utilities & Power ltd., 313 ITR 340. On the other hand, the ld.DR relied upon the or....
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....l to the CIT(A) did not bring any relief to the assessee. 67. Before us, the ld.counsel for the assessee contended that it be remitted to the file of the AO for verification. In case such income has been offered in subsequent year, then addition for this year deserves to be deleted. Since the assessee itself admitted the income before the AO such admission must be after verification of the facts. The assessment order was passed on 26.2.2010. The assessee is not sure if it was offered and whether it has been taxed in subsequent year or not. Therefore, for making a roving inquiry and verification, we do not find it necessary to remit this issue to the file of AO. Thus, grounds no. 6 to 9 are dismissed. 68. Ground Nos.10 and 11. : In these grounds of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs. 2,40,940/- under section 43B of the Act. The finding recorded by the ld.CIT(A) including reproduction of the AO's finding reads as under: "6. The ground No. 5 of concise ground of appeal is against addition of Rs. 2,40,940/- u/s 43B of the Act. 6.1 The A.O. has stated in the assessment order dated 26.02.2010, which is as under: "As pe....
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....ce of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs. 2,86,051/-. 71. It emerges out from the record that the assessee has made payment for purchase of some machinery. However, it could not purchase machinery and wrote off such advance for purchase of machinery in the accounts. The ld.CIT(A) disallowed the claim of the assessee on the ground that it was a capital loss and not a revenue loss in nature. 72. Before us, the ld.counsel for the assessee contended that the assessee is not required to demonstrate whether debts have actually become bad or not. In support of his contention, the ld.counsel for the assessee relied upon the judgment of the Hon'ble Supreme Court in the case of T.R.F. Ltd. Vs. CIT, 323 ITR 397 (SC). The ld.DR on the other hand relied upon the order of the CIT(A). 73. We have duly considered rival submissions and gone through the record. A perusal of the finding of the ld.CIT(A) recorded in para 7.3 would show that the assessee itself admitted before the ld.CIT(A) that this amount is not allowable under section 36(2) of the Act. In other words, it could not be claimed as bad debt written off. The assessee alternatively claimed it has ....
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.... Law Dictionary the term "reimburse" means to pay back, to make restoration, to repay that is expended, to indemnify or make whole. As per the Concise Oxford Dictionary the term "reimburse" means repay (a person who has expended money) or repays (a person's expenses). 10.3 The above definitions make it clear that a pure reimbursement should not constitute a reward or compensation paid for a service rendered. Hence, a mere reimbursement of expenses cannot be construed as a "fee" for services rendered since what is achieved by a reimbursement is a mere repayment of what has been already spent and is not a reward or a compensation for services rendered. TDS on expenses/costs reimbursed to a non-resident do not give rise to any chargeable income in the hands of a non-resident and going literally by the above principle section 195 should not get attracted for reimbursements. In addition to the payment for services received from a non-resident, the Indian '" entity generally under the terms of the contract also reimburses at actual expenses like insurance, travel, lodging, boarding etc. incurred by such foreign entity for provision of the services. 10.4 In such situations, ....
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.... appellant submits that this payment is made to non-residents who do not have any Permanent Establishment (PE) in India and the compensation is paid for events occurring outside India therefore the same cannot be said to be from any business connection in India. The appellant submits that the said payments are exempt from tax in view of the CBDT Circular No. 786, dated 7th February, 2000. The relevant portion of which reads as under: "The deduction of tax at source under section 195 would arise if the payment of commission to the non-resident agent is chargeable to tax in India. In this regard attention to CBDT Circular No. 23, dated 23rd July, 1969, is drawn where the taxability of 'Foreign Agents of Indian Exporters' was considered along with certain other specific situations. It had been clarified then that where the nonresident agent operates outside the country, no part of his income arises in India. Further, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore, held to be not taxable in India. The relevant sections, namely, section 5(2) and section 9 of the ....
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....man USA in proportion to 40:40:20. Accordingly the Id. AO adopted the same for the year under consideration and made addition of Rs. 31,13,104/-. The Appellant, in this connection submits that when for the year under consideration, the expenditure has already been allocated on the basis of advice given by the Group Chairman considering the efforts, services and devotion of time of Dr. Henk, then ,"" the action of Id. AO in adopting the mechanism for allocation of such expenditure for subsequent year is incorrect. The Appellant submits that in subsequent year Dr. Henk had provided services in proportion to 40:40:20 to Dishman India, Dishman USA and Dishman UK but that does not mean that the same mechanism should be applied for the year under consideration when the Group Chairman has allocated such expenditure. Hence, the Appellant submits that this alternate addition is also required to be deleted." 78. The ld.CIT(A) did not accept the contentions of the assessee and confirmed addition. 79. Before us, the ld.counsel for the assessee contended that both authorities have based their finding on the decision of Hon'ble Karnataka High Court in the case of Samsung Electronics, 320 ITR 2....
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....ment of insurance and foreign travel expenses are concerned, these expenses have been reimbursed to Dr.Henk Pluim who was responsible for procurement, chemical development and technological upgradation etc. These amounts have been calculated on the basis of services rendered and time devoted by him to three concerns viz. Dishman UK, Dishman India and Dishman USA. The AO was of the view that allocation of expenditure was on higher side. He also observed that in subsequent year such expenses have been allocated amongst these concerns in the ratio of 40:40:20 based on advice given by the group chairman. On the basis of that ratio, the ld.AO has allocated this expenditure in this year also and worked out allowance expenditure out of Rs. 81,02,622/- debited under the head "Administrative services". He observed that it should be allowed at Rs. 49,89,517/-. A perusal of the assessment order would indicate that the ld.AO has assigned two reasons for making disallowance, viz. (i) non-deduction of tax, and (ii) higher allocation of expenditure in the hands of the assessee which were incurred on Dr.Henk Pluim. As far as first party is concerned, these are simply reimbursement of administrativ....
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....d that decision of Hon'ble Supreme Court in the case of Goetze India puts a bar upon the power of the AO for maintaining any fresh claim if no revised return was filed. However, for appellate authorities, Hon'ble Supreme Court has not put any bar, and if a particular item is going to affect taxability of the assessee, then the appellate authorities would be justified in entertaining such claim. Details of assets are not in dispute. It has already claimed regular depreciation on these assets. The only question was whether additional depreciation could be allowed or not. Thus, the ld.CIT(A) ought to have entertained this claim of the assessee and ought to have decided the issue on merit. Taking into consideration all these aspects, we allow this ground of appeal for statistical purpose and restore this issue to the file of the AO for fresh adjudication The ld.AO shall decide this issue on merit whether additional depreciation as claimed by the assessee is admissible or not. These ground of appeal are allowed for statistical purpose. 86. Ground No.22: In this ground of appeal, grievance of the assessee relates to confirmation f disallowance of depreciation on electrical installation ....
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....accounting entries with regard to MODVAT or "exclusive method". It is explained that in the "inclusive method", the purchase of raw material debited in the books of accounts is inclusive of the corresponding MODVAT element. It is submitted that if the Appellant is following this method then the closing stock has to be valued inclusive of MODVAT element. On the other hand, in the "exclusive method" the cost of raw material debited in the purchase account is net of MODVAT element. In this system, the Appellant have a separate account for accounting for the excise duty payable and the MODVAT credit available to it. The Appellant submits that if the Appellant is following this method of accounting then the closing stock has to be valued exclusive of MODVAT element. It is however, explained that in either of the methods adopted as above, the profit of the Appellant would not change. It is, therefore, submitted that as the method adopted by the Appellant had not resulted into any reduction in the income of the Appellant, there was no justification in the Learned Assessing Officer making addition of Rs. 28,01,598/-. It is therefore, submitted that the addition made by the Id. AO u/s 145A ....
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....of unsold stock is to balance the cost of those goods entered on the other side of the account. Now question is, how this judgment is applicable on the facts of the assessee before us. The assessee itself has worked out a negative figure of Rs. 28,01,598/-. But it is unable to explain how this figure has come. The ld.CIT(A) has observed that once the assessee has been claiming deduction, then it is for the assessee to explain. We have reproduced the finding of the AO, written submissions of the assessee before the ld.CIT(A) and we are unable to draw any conclusion from this half-baked facts. It is quite difficult to arrive at firm conclusion and how to apply decision of the Hon'ble High Court. Therefore, we deem it appropriate to set aside this issue to the file of the AO. The assessee shall file complete details with working and its impact as to how it has worked out negative figure of Rs. 28,01,598/-. In view of the above, we allow this ground of appeal for statistical purpose. 93. Ground Nos.26 and 27: We have already taken up these two grounds along with ground no.6 and 7 of the Revenue's appeal. Hence, they are treated as allowed for statistical purpose. 94. Ground Nos.28 an....
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....dition of ESIC outstanding (3) Disallowance of sundry balances written off (4) Disallowance of MODVAT u/s.14A Penalty levied with reference to the following balance disallowances/additions is cancelled. (1) Addition of prior period income (2) Disallowance /s.14A (3) Disallowance u/s.40(a)(ia) (4) Disallowance of miscellaneous expenses (5) Disallowance of deduction u/s.10B AO is directed to re-compute the penalty accordingly. These grounds of appeal re partly allowed." 99. Thus, Revenue is aggrieved qua items on which penalty has been deleted by the ld.CIT(A) whereas the assessee in its appeal impugning confirmation of penalty by the ld.CIT(A). 100. With the assistance of the ld.representatives, we have gone through the record carefully. Section 271 (1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section. "271. Failure to furnish returns, comply with notices, concealment of income, etc. (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person (a) and (b)** ** ** (c) has concealed the p....
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....irst whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the ....
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....phold the order of theld.CIT(A) on this issue. 105. Next item is with respect to addition of Rs. 15.00 lakhs out of misc. expenses. The assessee has claimed expenditure of Rs. 18,10,423/- under various heads viz. library books, club membership fees, R&D expenses and deferred revenue expenses. Expenditure of Rs. 14,84,530/- was claimed towards library books as revenue expenditure. On an ad hoc basis, a disallowance of Rs. 15 lakhs has been confirmed. We have partly confirmed disallowance of Rs. 10 lakhs on ad hoc basis. The assessee has disclosed complete facts with regard to the above books, and alternatively claimed that depreciation on books be provided to it in case this expenditure is disallowed. Considering ad hoc disallowance, we are of the view that this is not an item which could be alleged that the assessee has intentionally furnished inaccurate particulars of income. The dispute between the assessee and the Revenue relates to whether expenditure incurred on books should be allowed as capital expenditure or revenue expenditure. Since the assessee failed to substantiate its explanation, therefore, adhoc disallowance was confirmed. But assessee does not deserve to be visite....
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....n support thereof he relied on the cases cited at 147 TTJ 67 (Delhi), 136 ITD 177 (Indore Special Bench) and Ahmedabad Tribunal's decision in Kadam Exports Pvt. Ltd. Vs. ITO in ITA No.2890/A/2011. The deduction u/s.10B was claimed on the basis of the certificate of CA in No.56G. The disallowance made in the assessment order was reduced by order u/s.155 by the AO. All the necessary details in support of the claim were very much placed on record by the appellant. The disallowance confirmed by the CIT(Appeals) was with reference to the unrealized export turnover, which came to be rectified later by the AO u/s.155 and other items not considered for eligible deduction (since they were held to have not been derived from the EOU). Thus, it cannot be said that appellant furnished any inaccurate particulars of the deduction claimed or concealed any particulars. In the case relied on by the Id. A.R. of ACIT Vs. DSL Software Ltd. (147 TTJ 67) (Delhi) (2012), it was held as under: - "In terms of provisions of sec. 10A(5) and 80HHE(4) deduction under these sections is not admissible unless assessee furnishes in the prescribed form, along with the return of income, report of an accounta....
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...., we have observed that unrealized export turnover excluded from the eligible profit for grant of deduction under section 10(B) ought to be excluded from the total turnover. We have directed the AO to re-calculate the deduction admissible to the assessee, after this exercise. The ld.CIT(A) in quantum appeal further did not concur with the contention of the AO that custom duty ought to be re-allocated on the basis of raw-material imports in EOU and Non-EOU units. We have confirmed action of the ld.CIT (A) by holding that in EOU units no custom due was payable, and therefore, there is no requirement of re-allocating custom duty in EOU units from Non-EOU units. Thus, this addition has not been upheld by the Tribunal, and therefore, penalty qua this item could not be imposed upon the assessee. 108. Similarly, in this very order, we have rejected ground no.7 in Revenue's quantum appeal by holding that expenditure from non-EOU units ought not to be allocated to EOU units for the purpose of deduction under section 10(B). On an analysis all these records would indicate that the ld.CIT(A) has appreciated the controversy in right perspective and held that on the adjustment made in the eligi....