TaxTMI 
TaxTMI 
2016 (10) TMI 1224
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....self is invalid. 3. The Learned AO should have appreciated that the appellant is not an 'Eligible Assessee' as defined in section 144C(15)(b), since it is not a foreign company but an Indian company, and therefore the provisions of section 144C do not apply and also the provisions of the Transfer Pricing does not apply. 4. The Learned DRP has erred in holding that only TP issue has been objected without considering the fact that all the adjustments and additions made by the AO have been objected vide letter dtd: 14.03.2013 filed before it. 5. The order under section 144C is barred by limitation in view section 144C (12) and therefore liable to be cancelled, since it amounts to non-compliance to Section 144C of the Act. 6. The Learned DRP has erred in not considering the objections made to disallowance of transportation charges, disallowance of expenditure under Explanation to section 37(1), and additions made on account of sale of land and accommodation entry. 7. Application of TP provisions: (A) The Learned Dispute Resolution Panel (DRP) and the lower authorities ought to have held th....
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....ew possible in law - and as such should have held in favour of the appellant regarding the application of Transfer Pricing provisions. (I) That participation in management or control or capital envisaged in clauses (a) or (b) of section 92A(l) can be exercised only by virtue of share holding specified in clauses (a) and (b) of section 92A(2) as per the settled law, and when Shri. Gali Janardhan Reddy is only a director without any share holding in M/s.GLA Ltd., and further without attracting either clause (e) or clause (f) of section 92A(2), such right of participation or management or control did not exist and therefore, there was no A.E u/s. 92A. (J) No individual or other person having any control or controlling interest in M/S. GLA International PTE Ltd., has any control over the appellant and therefore clause (j) or clause (k) of section 92A (2) is also not satisfied and as such it is not relevant that Sri Gali Janardhana Reddy became one of the directors of M/S. GLA International PTE Ltd., for the purpose of section 92A. 8. Determination of ALP: Without Prejudice That- (A) The authorities should have appreciated that th....
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....alleged associated enterprise outside India and therefore, only downward adjustment could be made to the ALP determined. 9. The addition made in respect of transportation charges is liable to be deleted since no statements are given and also no opportunity of cross examining the witnesses was given. 10. It should have been appreciated that the Explanation to sec. 37(1) has no application to the expenditure disallowed. 11. It should have been appreciated that no income has accrued and no addition could be made in respect of sale of land. The Appellant seeks your leave to add, alter, amend or delete any of the grounds urged at the time of hearing." 3. In Para 1.2 of the assessment order, the A.O. has given the reasons, for which he has held that the assessee's contention that M/s (GLAITPL) is not an AE of the assessee company is not acceptable. For the sake of ready reference, we reproduce this Para of the assessment order. This is as under:- "The assessee's contention that M/s GLA International Trading Pte Ltd. is not an associated enterprise (AE) of M/s Obulapuram Mining Co. Pvt. Ltd., cannot be accepte....
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....icular, our attention was drawn to page 11 as per which, on the date 12.05.2011, the current director of Inter Link Services Group Limited was Arangannal S/O Kathamuthu and he was appointed on 24.04.2001 and the current shareholder on that date was Iyer Corporate Services Pte Ltd. (Formerly known as Crest Services Pte Ltd.). Thereafter, he submitted that as per the assessment order, the A.O. has held that M/s GLA Trading International Pte Ltd. (GLATIPL) is an AE of the assessee company as per section 92A of the I. T. Act and his decision is on this basis that Sri G. J. Reddy, a director of the assessee company was appointed as a director of (GLATIPL) on 19.12.2007 and thereafter, on 21.12.2007, the entire share capital of (GLATIPL) being only one share of the value of 1 Singapore Dollar was transferred to GJR Holdings International ltd. (GJRHIL) registered in the isle of MAN and Shri G. J. Reddy is one of the directors of that co. also i.e. (GJRHIL). Thereafter, he submitted that the said one share of (GLATIPL) was transferred by GJRHIL to Inter Link Services Group Ltd. (ILSGL) on 22.12.2007 and the necessary evidence in this regard is available on page 169 of the paper book. He su....
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....ne or more executive directors or executive members of the governing board of one enterprise, are appointed by the other enterprise; or (f) more than half of the directors or members of the governing board, or one or more of the executive directors or members of the governing board, of each of the two enterprises are appointed by the same person or persons; or (g) the manufacture or processing of goods or articles or business carried out by one enterprise is wholly dependent on the use of know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or (h) ninety per cent or more of the raw materials and consumables required for the manufacture or processing of goods or articles carried out by one enterprise, are supplied by the other enterprise, or by persons specified by the other enterprise, and the prices and other conditions relating ....
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...., the said one share of (GLATIPL) was transferred by (GJRHIL) to Inter Link Services Group Ltd. (ILSGL) on 22.12.2007 and the necessary evidence in this regard is available on page 169 of the paper book. Hence, on and from 22.12.2007, (ILSGL) is the shareholder of (GLATIPL) holding its entire share capital and the only director of (ILSGL) as per Notarial certificate issued to (ILSGL) on 12.05.2011, the current director of Inter Link Services Group Limited was Arangannal S/O Kathamuthu and he was appointed on 24.04.2001 and the current shareholder on that date was Iyer Corporate Services Pte Ltd. (Formerly known as Crest Services Pte Ltd.). Hence, it is seen that from 22.12.2007 till 12.05.2001 at least, the entire share capital of (GLATIPL) was held by (ILSGL) and with this company, the assessee company or its directors has no relationship. 8. From the provisions of section 92A, as per sub section (2) of section 92A, for the purpose of Sub Section (1) of section 92A, at least one condition out of 13 conditions prescribed in sub section (2) as per clause (a) to (m) has to be satisfied. Since, the only one share of GLATIPL was held by ILSGL and the assessee company or its director....
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....y that the mere fact of participation of one enterprise in the management or control or capital of the other enterprise or the participation of one or more persons in the management or control or capital of both the enterprises shall not make them associated enterprise unless the criteria specified in sub-sec (2) are fulfilled." The resultant of the amendment is thus explained that unless the requirements of sub-sec. (2) are fulfilled, the sub- section (1) cannot be applied at all. This implies that in order to constitute relationship of an AE, the parameters laid down in both sub- sections (1) and (2) should be fulfilled. If we were to hold that there is a relationship of AE, once the requirements of sub-sec. (2) are fulfilled, then the provisions of sub-sec. (1) renders otiose or superfluous. Now, it is well settled canon interpretation of statutes that while interpreting the taxing statute, construction shall not be adopted which renders particular provision otiose. When interpreting a provision in a taxing statute, a construction, which would preserve the purpose of the provision, must be adopted. 11.1 As observed in State of Tamil Nadu v. M.K. Kandaswami [(19....
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....ere is no relationship of AE between the Assessee Company and GLATIPL and therefore, the provisions of Chapter X of I. T. Act have no application. 11. Now, we deal with grounds relating to Corporate Tax issue as per Grounds No. 6, 9 and 10. Learned AR of the assessee submitted that three issues are involved in this ground i.e. (1) Disallowance of Transportation charges, (2) Disallowance of Expenses under Explanation to section 37 (1) and 3) Addition made on account of sale of Land. He submitted that all these three issues are covered in favour of the assessee by the tribunal order rendered in assessee's own case for A. Y. 2010 - 11 in ITA No. 653/Bang/2015 dated 29.07.2016 in Obulapuram Mining Co. (P.) Ltd. v. Dy. CIT 160 ITD 224 (Bang. - Trib.). He submitted a copy of this tribunal order and pointed out that as per Para 8 of this tribunal order, Transportation charges was deleted by the tribunal in that year and accordingly, in the present year also, this disallowance should be deleted because facts are same. Thereafter, he submitted that Para 14 and 15 of this tribunal order are relevant in respect of Disallowance of Expenses under Explanation to section 37 (1), which was ....
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....see for facilitating to carry out the illegal mining alleged by the AO or for any penalty in respect of such illegal mining because the disallowance has been made by the AO to the extent of 40% of the total mining expenses and since 60% of the expenses are allowed by the AO, the remaining 40% of the same expenses cannot be considered as expenses for the purpose of offence or unlawful purposes. Hence, this disallowance is not justified. 15. Now we examine the applicability of various judgments cited by the Id. AR of the assessee. The first judgment cited by him is of the Hon'ble Apex Court rendered in the case of CIT v. Piara Singh (supra). In this case, it was held that loss arising of confiscation by Customs authorities is deductible from the income derived from smuggling activities. Hence, expenses incurred in course of an illegal business is allowable for computing income from such business but this judgment is prior to introduction of Explanation-1 to sec.37 of the IT Act and therefore this judgment is not relevant in respect of those expenses which are hit by this explanation and in our considered opinion, the normal mining expenses are not hit by this explanation....