TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1326
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....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 considering the facts of the present case m....
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....gh 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 (LTU) Circle-1, Bangalore. The said order was re....
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....red 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 AO"), learned Additional Commissioner of Income Tax (....
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.... 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 out of, scientific research since the assessee is registering various patents and acquiring ....
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....d 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 the appellant has not concealed income. 7. Interest under section 234B of the Act. The learned AO erred in levying inter....
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....ng/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 a sum of Rs.1,91,05,549/-. After hearing both the parties it has been observed that this issue is covered by the decision rendered in assessee's....
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....on 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 correct amount a sum of Rs.39,47,41,359/- for the purpose of quantification of disallowance under section 14A read with Rule 8D(ii) of the Act on the facts and circumstances of the case. 6. The....
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....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, the assessee submits that this ground raised by the revenue is identical to the ground raised by the revenue in ITA No.296/Bang/2015 in which the Tribunal has dismissed the appeal. On perusal of the aforesaid order in....
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....se ("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 computing the transfer pricing adjustment. 6. The learned AO/learned TPO/ Hon'ble DRP erred in not appreciating that the corporate guarantees should be construed as passive support rendered by the Appellant to its AEs in the ordinary course of its business. 7. The....
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....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 credit for Tax Deducted at Source ("TDS") amounting to Rs. 1,59,21,739. In the final assessment order, the learned AO erred in granting an incorrect TDS amount of Rs. 1,39,70,950 which has resulted in short credit of TDS amounting to Rs. 19,50,789. 13. Interest under section 244A 13.1. The learned AO erred in granting incorrect interest under section 244A of the Act. ....
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....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 by the AO on this issue and direct the AO/TPO to make TP adjustment in respect of Corporate Guarantee @ 0.50% in all the years under consideration. 9. The next common issue urged by the assessee in all the years relate to the disallowance made u/s 14A of the Act. The Ld. A.R. submitted that the AO has mechanically applied provisions of Rule 8D in all the years and accordingly computed the disallowance. He submitted t....
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..../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 contended that the assessee could make fresh claims only by filing revised return of income by placing reliance on the decision of Goetz India Ltd.(284 ITR 323). However, the Hon'ble Supreme Court, in the above said case, has specifically held that its decision will not impinge upon the powers of the Tribunal to admit additional claims. The Hon'ble Karnataka High Court has held in the case of Karnataka State Co-operative Federation Ltd (supra) that the assessee could ....
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....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 not correct in interpreting that the commission amount itself will accrue only when the payment is received by the assessee. The Ld. A.R. placed his reliance on the decision rendered by Hon'ble A.P. High Court in the case of CIT(A) Vs. KCP Ltd. (2018) 94 Taxman.com 46, wherein it was held that the mere postponement of the payment of commission will not disentitle the assessee from claiming the deduction when it accrued. It was further held that the liability to pay commission accrued when ....
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....he 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 and also non-granting of refund. Both the issues require verification at the end of the A.O. Accordingly, we restore this issue to his file for examining the claim of the assessee. 17. We shall now take up the appeal filed by the revenue. The first issue relates to disallowance of deduction claimed u/s 35(2AB) of the Act. 18. The assessee claimed a sum of Rs.103,88,54,734/- as deduction u/s 35(2AB) of the Act @ 200% of the expenditure of Rs.51,94,27,366/- incurred on Research and development. The A.O. noticed that t....
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....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. Accordingly, we confirm the decision rendered by Ld. CIT(A) in deleting this disallowance for the reasons stated above. 24. In the result, the appeal filed by the assessee is treated as allowed and the appeal of the revenue is dismissed. Hence, these issues are remitted back to the file of the A.O. for fresh consideration to decide in the light of the above order of the Tribunal. 26. Ground No.10.1 of the appeal is regarding depreciation. This ground is also remitted back to the file of the A.O. for fresh adjudication. 26.1 Facts are that assessee claimed depreci....
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....llowed 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 12.12.2018. the Ld. CIT after examination of the assessment records noticed that A.O. had failed to make necessary verification before computation of book profit and with regard to the excess provision withdrawn from book profit. Accordingly, after giving due opportunity of hearing to the assessee, he gave direction to the A.O. that an amount of Rs.96,37,269/-, which is added to the income under normal provision should be added back to the book profit as per the provisions of section 115JB of the Act with regard to the expenditure incurred in earning exempted income u/s 14A of the Act. Further, he observed that whi....
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....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 of the Act that there was no proper enquiry on the issues dealt by the Ld. CIT. As such, he supported the order of the Ld. CIT. 36. We have heard the rival submissions and perused the materials available on record. We have considered the rival submissions on the legal issue with regard to invoking the provisions of section 263 of the Act by the Principal CIT. The Principal CIT can exercise revision proceedings u/s 263 if he is satisfied that the order of the AO sought to be revised is erroneous and prejudicial to the interests of the revenue. Section 263 empower the Principal CIT to initiate section 263 proceedings where the AO either takes a wrong decision w....