AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 526
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....d Commissioner of Income Tax (Appeals) erred in confirming interest disallowance on the ground that borrowed fund were given as advance to sister companies. The assessee reiterates that advances made to sister companies were for business purposes and not necessarily out of any specific borrowings. Therefore, charging notional interest as indirect interest debited by on the assessee on these business advances is not justified and needs to be deleted. 2. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in not appreciating the that the advance amount of Rs. 20,19,58,023/- given to Gokaldas Images Infrastructure Pvt Ltd is reimbursement of expenses and due to commercial expediency. 3. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in not appreciating the contentions of the company that the amounts due from Hinduja Realtors Pvt Ltd of Rs. 85,87,05910/- were on account of business transactions and advances made due to commercial expediency. Further, having given a finding that the amount of advance increased by Rs. 31,27,229/- has been directed to recalculate the intere....
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....for tax deducted at source of Rs. 6,20,622/- i.e TDS claimed as per return of Income filed Rs. 7,12,375/- minus Rs. 91,753/- credit given as per assessment order. 8. The learned Assessing Officer erred in initiating penalty proceedings u/s. 271 (1)(c) of the Income Tax Act, 1961 3. The Brief facts of the case are that the assessee is in the business of manufacture and export of readymade garments, and filed the Return of Income for the Assessment Year 2009-10 on 30.09.2009 with net loss of Rs. 81,72,35,289. Subsequently, the case was selected for scrutiny and Notice under Section 143(2) of the Act was issued. 4. The learned Authorized Representative appeared from time to time and submitted the information before the authorities. The Assessing Officer found that there are international transactions which are exceeding the limit; therefore the matter was referred to the Transfer Pricing Officer (TPO). Whereas TPO has passed the order dt.23.01.2013 and not suggested any Transfer Pricing Adjustment under Section 92CA of the Act. The Assessing Officer on perusal of the Balance Sheet as on 31.03.2009 found that the assessee has made advances to the sister concerns i. Gokal....
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....nces are out of surplus funds available with the assessee and supported his arguments with the decision of Hon'ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. 313 ITR 430 (Bom) , and the presumption that, advances are made out of surplus funds. The Ld. AR also relied on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Golf View Homes Limited 394 ITR 540 (Kar) for advances provided to the sister concerns on commercial expediency. And in assessee own case, the co-ordinate bench of this Tribunal for the Assessment Year 2008-09 dealt on this issue. Further the Ld. AR submitted that the Ground Nos.4, 5, 6, 7 & 8 are in respect of the grounds of appeal raised before the CIT(Appeals) which were not adjudicated by the CIT(Appeals) and prayed for allowing the appeal. Contra,the learned Departmental Representative supported the orders of the Assessing Officer and referred to the facts dealt by the Assessing Officer at page 5 Para 8 of the assessment order and relied on the CIT(Appeals) order. 6. We heard the rival contentions and perused the material on record. On the first disputed issue of disallowance of interest by the AO, the ....
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.... the findings of CIT(A)on the issue. Whereas in respect of advances to Hinduja Realtors Pvt. Ltd., the Tribunal observed at pages 13 to 15 para 11(c) which is read as under : c) HRPL - Rs. 54 crores : As far as the aforesaid loan is concerned, the plea of the assessee before the Assessing Officer was that the assessee was occupying the premises in the capacity of a tenant and it wanted the building to be customized as per the requirements of the assessee. The sum of Rs. 54 crores was stated to be for the aforesaid purpose. Before the CIT (A), the assessee took a stand that out of the sum of Rs. 54 crores, a sum of Rs. 29.17 crores was damages payable by HRPL to the assessee for breach of contract and not a loan as presumed by the Assessing Officer. The assessee further submitted that a sum of Rs. 24.60 crores was for carrying out renovations to the office premises of the assessee. It is thus seen that the stand taken by the assessee is contradictory. In any event, there is no material on record brought by the assessee to show that these were the real transactions. The CIT (A) in his order says that complete details submitted by the assessee with regard to the s....
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....an advanced by the assessee to its sister concern without charging any interest despite the act that the assessee was not able to prove the commercial expediency for the same and the loan bearing funds were diverted by the assessee by these transactions with sister concerns. 3. On the facts and in the circumstances of the case the learned CIT(A) erred in in directing the AO to rework the disallowance on the issue of allocation of common expenses between EOU units and non EOU units, by placing reliance on the order of CIT(A) in the case of assessee for AY 2008-09, which has not been accepted by the department and has not become final, without appreciating the fact that indirect common expenses have to be apportioned among all the units in proportion to the turnover as rightly done by the AO. 4. On the facts and in the circumstances of the case the learned CIT(A) erred in directing the AO to compute deduction u/s 10B without setting off of losses (depreciation/business) pertaining to non 10B units against the profit of 10B units by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s Yokogawa India Ltd., but without appreciating....
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....learned Departmental Representative could not controvert the observations of the CIT (Appeals) with cogent evidence. Accordingly, we are not inclined to interfere with the order of CIT (A) on this disputed issue and confirm the same and dismiss the grounds of appeal of the Revenue. 13. In the result, the Revenue's appeal is partly allowed for statistical purposes. 14. Now we shall take up the Revenue's appeal in IT(TP)A No.77/Bang/2015 for the Asst. Year 2010-11 and C.O. of the assessee in ITA No.82/Bang/2015. 15. The Revenue has raised the following grounds of appeal : 1. The directions of the Dispute Resolution Panel are opposed to law and facts of the case. 2. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in directing the AO to compute deduction u/s 10B without setting off of losses (depreciation/business) pertaining to non 10B units against the profit of 10B units by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s Yokogawa India Ltd., but without appreciating the fact that deduction u/s 10B has to be allowed from the total income of the assessee, and as per Section 2(45)....
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....in terms of margins obtained from transactions with AE viz-e-vis non AEs located in similar geography in USA, Europe and Asia. We, therefore of the considered view that TNM method is not an appropriate method to determine the arm's length price. The Internal CUP (comparable uncontrolled price) is the most appropriate method which shows that the sales to AEs are at arm's length price when compares with sales made to non -AEs. We also have noted that the TPO has not given any factual differences with regard to acceptance of assessee's TP documentation in earlier years, and justification for adopting method. In view of the above we accept the objection of the assessee and hold that no TP adjustment is called for in this case. We found the learned Departmental Representative could not controvert the observations of the DRP and relied on the TPO order. Accordingly, we do not find merits in the submissions and confirm the observations of the DRP and dismiss these grounds of appeal of revenue. 19. The assessee has filed C.O. No.82/Bang/2015 in support of the DRP. Since the Revenue appeal is dismissed, C.O. is infructuous and dismissed . In the result, the Revenue appeal and C.O. of ....
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....s under: "there is no difference in terms of functions, assets and risks relating to the manufacturing and export of garments by the assessee to the AE as also non AE. GI Inc. is the only owned subsidiary of the assessee and the goods have been sold prices fixed between the parties based on the orders specifications. We have also noted that there is no significant difference in terms of margins obtained from transactions with AE vis-a-vis non AEs located in similar geography in USA, Europe and Asia. We, therefore, of the considered view that TNM method is not an appropriate method to determine the arm's length price. The Internal CUP (comparable uncontrolled price) is the most appropriate method which shows that the sales to AEs are at arm's length price when compares with sales made to non- AEs. We also have noted that the TPO has not given any factual differences with regard to acceptance of assessee's TP documentation in earlier years, and justification for adopting TNM method. In view of the above, we accept the objection of the assessee and hold that no TP adjustment is called for in this case." The facts and circumstances involved in the issue fo....