TaxTMI 
TaxTMI 
2022 (2) TMI 1326
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.... the appeal before this Tribunal. The Ld. A.R. filed a petition stating reasons for delay that the assessee came in appeal with regard to two adjustments made in the order. The assessee in exercising abundant option is filing the present appeal against the order giving effect to DRP's direction passed u/s 154 of the Income-tax Act,1961 ['the Act' for short] dated 22.6.2015. 3. The assessee submits that the assessee was under the bonafide belief that the assessee raised the grounds in the main appeal filed against the final assessment order and there was no requirement to file another appeal. However due to change in the counsel, the present counsel examined and advised the assessee on 02.11.2021 to file the appeal against the order giving effect to the DRP's direction in order u/s 154 of the Act dated 22.06.2015 by abundant caution. Immediately after obtaining proper professional advice from the present counsel, the Assessee within a reasonable time has made all the efforts to file this present appeal challenging the order giving effect to the DRP's direction in order u/s 154 of the Act before this Hon'ble Tribunal. The assessee humbly prays that the Tribunal....
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....liance on the decision of the Hon'ble High Court of Madras in the case of Commissioner of Income-tax Vs. K.S.P. Shanmugavel Nadar (1987) 30 Taxmann 133 (Madras). The assessee further placed reliance on the decision of the Hon'ble Tribunal in the case of M/s. Midas Polymer Compounds Pvt Ltd Vs. ACIT in ITA No.288/Coch/2017 dated 25.06.2018. The assessee craves leave of the Tribunal to file additional submission at the time of hearing of this appeal. Assessee finally prayed that this Tribunal may take a lenient and compassionate view and condone the delay of 1694 days in filing the present appeal against the order of the learned Assessing officer giving effect to the directions of the learned Dispute Resolution Panel under section 154 of the Act dated 22.06.2015 before this Tribunal and hear the same on merits for the advancement of substantial cause of justice. 3. The Ld. D.R. strongly opposed the admission of appeal as there was inordinate delay in filing this appeal and submitted that appeal shall not be admitted. In this case, the assessee filed appeal against the order passed u/s 154 r.w.s. 144C of the Act dated 22.6.2015 passed by Deputy Commissioner of Income-tax (L....
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.... of the Limitation Act, wherein assessee required to show utmost good faith and must make a full disclosure of all relevant facts. It is needless to say that it is the duty of the assessee to explain the delay for every day that elapses beyond the period allowed by the Act for filing an appeal. In the absence of sufficient cause, the Tribunal has no power to extend the time. The time allowed to file appeal before this Tribunal is 60 days from the date of receipt of first appellate order. Here in this case assessee filed the appeal with inordinate delay of 1694 days and the assessee failed to discharge the onus to explain the delay and the law of limitation is not statute to condone this kind of delay. It is a statute of repose. In our opinion, there is no good and sufficient reason to condone this inordinate delay of 1694 days and the appeal is dismissed unadmitted. Accordingly, we decline to admit the appeal and dismiss the appeal in limine. ITA No.468/Bang/2015 (A.Y. 2010-11) (Assessee's appeal):- 4. Grounds urged by the assessee in this appeal are as under: Transfer Pricing 1.1. The learned Additional Commissioner of Income-tax, LTU, Circle - 1, Bangalore ("learned A....
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....eivables t the same time not paying any interest towards its payables to AEs. 1.7 The Hon'ble DRP has erred in not adjudicating the contention with regard to imputing guarantee commission with respect to the corporate guarantees provided by the appellant to the AEs. 1.8 The learned AO/learned TPO have erred in arbitrarily arriving at the arm's length commission rate at 3% while computing the transfer pricing adjustment. 1.9 The learned AO/learned TPO have ignored the fact that Guarantee in the instant case is not in the nature of service and therefore not an international transaction. 2. Corporate Tax 3. Disallowance of deduction claimed under section 35(2AB) of the Act 3.1 The learned AO erred in disallowing the weighted deduction Rs.53,72,75,727 claimed by the appellant under section 35(2AB) of the Act in relation to approved units located at JP Nagar Bangalore JNR Bangalore 3.2 The learned AO erred in contending that the activity of "product development" carried out by the approved units does not constitute "scientific research" as defined under section 43(4) of the Act by holding that it results in acquisition of intellectual property rights in, or arising ....
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....located at JNR and Noida units. 4.1 Disallowance under Rule 8D read with Section 14A 5.1 The learned AO erred in making an additional disallowance under section 14A read with Rule 8D(2)(ii) amounting to Rs. 98,99,166 on the contention that the appellant has earned exempt income in the nature of dividend without appreciating the fact that the dividend income earned did not bear any nex with the interest expenditure incurred for the relevant assessment year. 5.2The learned AO erred in contending that the loans raised by the appellant were on account of diversion of business funds to the investments and hence interest on such funds is partially attributable to such investments which are disallowable under section 14A of the Act. 5.3 the learned AO erred in not appreciating the fact that the secured loans were borrowed solely for the purpose of meeting working capital requirements which was also evident from the loan agreements. 6. Initiation of Penalty Proceedings The learned AO has erred in initiating proceedings under section 271(1)(c) of the Act without having regard to the fact that the appellant has fully disclosed all the facts in the return of income and that ....
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....2019 dated 12.4.2021, in the case of M/s. Manipal Global Education Services Pvt. Ltd. Vs. Deputy Commissioner of Income-tax in ITA No.236/Bang/2015 and in the case of Xchanging Solutions Ltd. Vs. Deputy Commissioner of Income-tax (2017) 78 taxmann.com 54, wherein it was directed to AO/TPO to make TP adjustments in respect of corporate guarantee at 0.50% for the assessment years under consideration. In view of the above order, we decide these issues in favour of the assessee. 8. With regard to ground Nos.3.1 to 3.9 and additional ground No.4, the issue is disallowance of deduction under section 35(2AB) of the Act. After hearing both the parties it has been observed that this issue is covered by this Tribunal in ITA No.1684/Bang/2012 & ITA No.10/Bang/2013 dated 31.12.2014 where in the Tribunal has reversed the findings of the A.O. in his assessment order passed for A.Y. 2008-09 and the appeals were decided in favour of the assessee. Hence, keeping in view of the above order of the Tribunal, these grounds of the assessee are decided in favour of the assessee and hence these grounds of appeal are allowed. 9. Ground No.4 is with regard to the deduction u/s 35(1)(iv) of the Act of ....
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....able under section 35(1)(i) of the Act on the facts and circumstances of the case. 2. The authorities below ought to have allowed a sum of Rs.3,62,56,000/-under section 35(1)(i) of the Act on the facts and circumstances of the case. 3. Without prejudice a sum of Rs.3,62,56,000/- being incurred as revenue expenditure for scientific research is an allowable expenditure as per the provisions of section 37(1) of the Act on the facts and circumstances of the case. 4. Without prejudice the appellant is entitled for claim weighted deduction under section 35(2AB) of the Act in respect of the amount of R 8s D expenditure quantified as per Form 3 CL issued by the DSIR by following the decision of the Hon'ble Jurisdictional High Court in the appellant's own case in W.P.No. 7004 of 2014 dated 24.04.2015 for the assessment year 2009-10 as per the issue of jurisdiction in quantifying the amount for deduction under section 35(2AB) of the Act on the facts and circumstances of the case. 5. Without prejudice the learned Assessing officer has erred in considering the average value of investment in tax free instruments at Rs.48,26,49,269/- as against the cor....
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....uantified as per form 3CL issued by the DSIR. In this regard it is observed that the assessee has raised this ground for the first time before this Tribunal. This additional ground no.4 is infructuous in view of our findings in ground Nos.3.1 to 3.9. Dismissed accordingly. 17. In the additional ground No.5, the assessee claims that without prejudice the Learned AO erred in considering the average value of the investment for quantification of disallowance u/s 14A read with Rule 8D(ii). In this regard it is observed that the assessee has raised this ground for the first time before this Tribunal. This additional ground is infructuous in view of our findings in ground Nos.5.1 & 5.3. Dismissed accordingly. 18. In the result, appeal filed by the assessee in IT(TP)A No.468/Bang/2015 for the A.Y. 2010-11 is partly allowed for statistical purposes. ITA Nos.1119/Bang/2015 (AY 2010-11) (Revenue's appeal):- 19. Revenue filed this appeal on the ground that DRP erred in directing to charge interest at the rate of LIBOR + 500 points. The loan has been given by the Indian Entity, therefore, the annualized average yield rating of interest rate of 14.74% is to be applied. In this regard....
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....ed AO"), learned Transfer Pricing Officer ("learned TPO") and the Honourable Dispute Resolution Panel ("Hon'ble DRP") grossly erred in adjusting the transfer price by INR 4,88,31,525 issued by the tax payer on behalf of its Associated Enterprise ("AE") u/s 92CA of the Income-tax Act, 1961 ("the Act"). 2. The learned AO / learned TPO/ Hon'ble DRP have ignored the fact that Guarantee in the instant case is not an international transaction. 3. The learned AO / learned TPO/ Hon'ble DRP erred in not considering that as per the amendment to the Explanation to Section 92B of the Income-tax Act, 1961, a corporate guarantee issued for the benefit of the AEs, does not have any bearing on profits, income, losses or assets of the enterprise and, therefore, it is outside the ambit of international transaction' to which ALP adjustment can be made. 4. The learned AO/learned TPO/Hon'ble DRP erred by imputing guarantee commission with respect to the corporate guarantee provided by the appellant to its AEs. 5. The learned AO / learned TPO/ Hon'ble DRP have erred in arbitrarily arriving at the arm's length commission rate at 3% while com....
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....ce allowable under section 37(1) of the Act (and capital expenditure under section 32 of the Act). 10. Depreciation 10.1. The learned AO erred in not grating depreciation under section 32 of the Act eligible to the Appellant (pertaining to product development expense disallowed during AY 2010-11 and treated as eligible for depreciation under section 32 of the Act by the learned AO in its order for AY 2010-11) despite the fact that the same was allowed in draft assessment order. The learned AO arbitrarily withdrew the depreciation in the final assessment order. 10.2. The learned AO ought to have provided depreciation to the assessee, which is consequential to the assessment proceedings of AY 2010-11. 11. Non-grant of foreign tax credit 11.1. The learned AO erred in not granting eligible foreign tax credit to the assessee as claimed in the return of income amounting to Rs. 218,470. The learned AO granted the foreign tax credit in the draft assessment order and has arbitrarily not allowed the same in the final assessment order. 12. Short credit of tax deducted at source 12.1. The learned AO erred in not considering the cre....
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....red to be examined under Arms length principles. There should not be any dispute that the provision of Corporate guarantee to its subsidiary in order to enable it to avail loans would bring benefit to the subsidiary, in which case, it is proper to compensate the assessee for those benefits under Arms length principles. We notice that the TPO has made an adjustment of 2%, considering the interest benefit @ 4% and taking the view that half of the same should be attributed to the benefit of the assessee. However, we notice that the Hon'ble Bombay High Court has approved the TP adjustment of 0.50% in respect of Corporate guarantee given in the case of Everest Kento Cylinders Ltd. (supra). Though the Ld. A.R. has pleaded for an adjustment of 0.20% by placing reliance on the decision of Asian Paints Ltd. (supra), yet we notice that the Ld. A.R. did not highlight the parity of facts between the assessee and the case of sian Paints Ltd. Hence, on a conspectus of the matter, we are of the view that the TP adjustment in respect of Corporate Guarantee may be made @ 0.50% as per other decisions of Tribunal and Hon'ble Bombay High Court referred above. Accordingly we set aside the order passed ....
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.... on Corporate Guarantee. Accordingly, we are of the view that the legal issues urged by the assessee would be rendered academic in nature. Accordingly we decline to adjudicate the same. 14. In the result, all the appeals of the assessee are treated as partly allowed. Keeping in view of the above, the issues raised in these grounds are decided in favour of the assessee. 24. Ground Nos.8.1 to 8.2 are regarding disallowance of expenditure u/s 14A read with Rule 8D, which is covered by the order of this Tribunal in assessee's own case for the A.Y. 2014-15 in ITA No.2848/Bang/2018 & ITA No.3191/Bang/2018 dated 8.10.2021. Keeping in view of the above, the issues raised in these grounds are decided in favour of the assessee. 25. Ground Nos.9.1 to 9.3 are regarding deduction u/s 35 & 37 of the Act. These issues came for consideration before this Tribunal for the first time. However, assessee claims that these issues were covered by the order of this Tribunal in assessee's own case for the A.Y. 2014-15 in ITA No.3191/Bang/2018 dated 8.10.2021 in which it was held as under:- 8. We heard the parties on this issue and perused the record. Before us, the Ld D.R contend....
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.... equivalent to the proportion which such instalments bear to the total Price. The Ld. CIT(A), on a reading of highlighted portion of paragraph 3.3 of the agreement, took the view that service fee (commission) shall become due to the agent within 30 days after the assessee receives payment from its customers. The Ld CIT(A) noticed that, during the year under consideration, the assessee has not received payment from the customers. Accordingly, the Ld. CIT(A) took the view that the commission amount has not become payable in this year. Accordingly, he confirmed the disallowance made by the A.O. 11. The Ld. A.R. submitted that the assessee is following mercantile system of account and hence the assessee is required to provide for all known expenses. Since the above said agent has procured the orders, the commission expenses has accrued in this year itself. He submitted that, as per the agreement entered by the assessee with the above said agent, the payment of commission is postponed, i.e., it shall become payable only after receipt of payments against sales, i.e., only payment of commission amount is postponed. Accordingly, the Ld A.R submitted that the Ld CIT(A) was....
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....uld be liable to pay commission amount to Md. Ziaul Hassan Khan when the sales is finalized and this commission expenditure is related to the revenue generated during the year under consider. Hence it is also a known liability for this year. Hence, as per accounting principles discussed above, the said commission expenditure should be provided for in the books of accounts when the relevant sales are accounted. On this count also, the claim of the assessee is admissible. Accordingly, we are of the view that the commission expenditure claimed by the assessee is allowable in the year under consideration. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the commission expenditure claimed by the assessee. 15. The assessee has raised an alternative ground that if the commission expenditure is not allowed in this year, then A.O. should be directed to allow it in the year of payment. In view of the decision rendered by us in the preceding paragraph, this additional ground shall become infructuous. 16. The other issues urged by the assessee related to non setting off of brought forward losses and unabsorbed depreciation an....
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....on to interfere with the decision rendered by Ld. CIT(A) on this issue. Accordingly, we confirm his order passed on this issue. 22. The next issue urged by the revenue relates to disallowance made u/s 14A of the Act. The assessee had disallowed a sum of Rs.3,96,417/- by applying Rule 8D(2)(iii) of the I.T. Rules. The A.O. took the view that the assessee should have disallowed part of interest expenditure by applying Rule 8D(2)(ii). Accordingly, disallowed a sum of Rs.34,798/- out of interest expenses under Rule 8D((2)(ii). The Ld. CIT(A) deleted the same by observing that the A.O. has not given suitable reason for making this addition. 23. We heard the parties and perused the record. A perusal of balance sheet furnished by the assessee would show that the assessee is having own funds of Rs.334.12 crores while the investments made by the assessee stand at Rs.4.58 crores only. Admittedly, the own funds available with the assessee is in far excess of the investments made by the assessee. Accordingly, as per decision rendered by Hon'ble Karnataka High Court in the case of Micro Labs Ltd. 383 ITR 490, no disallowance out of interest expenditure is called for. According....
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....may be necessary at the time of hearing. 30.1 We have heard the rival submissions and perused the materials available on record. With regard to admission of additional ground, in our opinion, the facts relating to this issue are already on record and there is no necessity of investigation of fresh facts. Accordingly, this additional ground is admitted by placing reliance on the judgement of Hon'ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383. 31. The contention of the Ld. A.R. is that A.O. not allowed the above amount as reduction in book profit u/s 115JB of the Act when the same was allowed under normal computation of income. We have heard the rival submissions and perused the materials available on record. This ground was raised by the assessee for the first time before this Tribunal. Accordingly, this issue is remitted to the A.O. for reconsideration while passing fresh order. 32. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. ITA No.1674/Bang/2018 (A.Y. 2011-12): (Assesse's appeal):- 33. This appeal filed by the assessee is directed against the order of the Ld. CIT(A) passed u/s 263 of the Act dated 12.12.201....
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....Jewellers 259 ITR 502 5. CIT Vs. Saluja Exim Ltd. 329 ITR 603 34. Further, he submitted that the Principal CIT cannot substitute his own views on the issues whether AO has taken conscious decision after due verification of the books of accounts as such exercising of jurisdiction u/s 263 of the Act is bad in law. Further, he submitted that the A.O. passed the assessment order after considering the due application filed by assessee in response to the various questions raised by him and after being satisfied with the said explanation chose not to make any further enquiry. Endless enquiry is not possible and it is for the A.O. to decide when to end the enquiry. According to the Ld. A.R., the Principal CIT cannot transgress jurisdiction u/s 263 of the Act by mentioning that no proper enquiry was made by the A.O. Therefore, he prayed that the impugned order passed u/s 263 of the Act has to be set aside. 35. On the other hand, Ld. D.R. submitted that enquiry conducted by the A.O. is not sufficient to come to the correct conclusion that there is no addition warranted on the issues raised by the Principal CIT. As such, the very reason to invoke the provisions of section 263 o....
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....r section 263 of the Act a sum of Rs.96,37,269/-. The assessee submits that addition made under section 14A of the Act should not be added to book profit of the assessee under section 115JB of the Act. The decision relied by the learned Commissioner of Income-tax in the case of Shoba developers Ltd is reversed by the Hon'ble High Court of Karnataka in the case of Sobha Developers Ltd Vs. DCIT (2021) 125. The assessee places reliance on the following decisions: 1. CIT Vs. Gokaldas Images (2020) 429 ITR 526 (Kar) 2. Karnataka State Industrial and Infrastructure Development Corpn Ltd Vs. 3. DCIT (2021) 281 taxman 312. 38. Regarding ground Nos.10 to 13 i.e. grounds relating to reversal of provision for doubtful debts the assessee inadvertently claimed the lower amount of Rs.1,95,17,376/-as against the correct amount to be claimed a sum of Rs.4,79,49,431/-. The assessee in the normal computation of income correctly claimed a sum of Rs.4,79,49,431/- and the same was not disturbed by the lower authorities. The amount of benefit given under normal computation has to be extended to the calculation of book profit under section 115JB of the Act. Without preju....