TaxTMI 
TaxTMI 
2019 (4) TMI 2142
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....filed appeals for AYs 2005-06, 2006-07, 2007-08 & 200809 Since the appeals are inter-connected, these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. First, we take Revenue appeal in ITA bearing No. 4565/Ahd/2007 for A.Y. 2004-2005. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the disallowance u/s 40A(9) of Rs. 20,38,747/-, being contribution to Presanna Trust made by the assessee as an employer, with the observation that this contribution was not shown to have been made for setting up or formation of the aforesaid trust, without appreciating that section 40A(9) equally prohibits deduction in respect of contribution to any fund or trust etc. for any purpose other than that provided in section 36(1)(iv) and (v) and the impugned contribution was not covered by section 36(1 )(iv) and (v). 2.(a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in holding the payment of Rs. 5,54,00,000/- to the associate concerns covered by section 40A(2)(b), in the name of fee for use of technica....
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....be apportioned between the DTA unit and the EOU unit, as was done by the Assessing Officer. 6 On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing the entire advertisement expenses of Rs. 2,06,78,311/- in the computation of DTA unit, without appreciating that the advertisement expenses helped to cerate brand affinity in the global market and promoted the sale of all categories of the assessee's products directly or through foreign group companies, thus requiring apportionment of these expenses in a reasonable manner between the DTA unit and the tax-free EOU unit, as was done by the Assessing Officer. 7.(a) On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in negating the exclusion of 90% of the income from write back of credit balances of Rs. 25,51,856/- and gain from foreign exchange fluctuation of Rs. 1,16,29,805/- under clause (baa) of the Explanation below section 80HHC, without appreciating the import of residuary clause of "any other receipt of a similar nature", which excludes all those receipts which do not form part of turnover akin to export turnover in order to avoid distortion in the work....
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....r section 10B as amended w.e.f. 01-04-2001. (c) The Id. CIT(A) erred in overlooking the ratio of CIT vs Shirke Construction Equipment Pvt. Ltd. 291 ITR 380 (SC), IPCA Laboratories Ltd. vs DCIT 266 ITR 521 (SC) and A.M. Moosa vs CIT 294 ITR 1 (SC), holding that section 80AB overrides the provisions of section 80HHC as well and hence the incomes which are deductible under any other provision have to be excluded from the profits of the business while computing deduction u/s 80HHC. (d) The Id. CIT(A) ignored the fundamental rule of interpretation laid down in Escorts India Ltd. vs Union of India 199 ITR 43 (SC) that no Legislature could have intended a double deduction in regard to the same income unless it is expressly provided in the statute and section 80HHC(4B) specifically prohibits such deduction. 9. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal The order of the CIT(A) to the above extent may be set aside and that of the A.O be restored. The first issue raised by the Revenue in ground No. 1 is that the Ld.CIT (A) erred in deleting the addition made by AO u/s 40A(9) for Rs. 20,38,747/- on acc....
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....as not made for the formation or setting up or as a contribution to any fund or trust. The same is therefore not hit by the provisions of section 40A(9) of the Act. The Ld. AR vehemently supported the order of the Ld.CIT (A). 6. We have heard the rival contention and perused the materials available on record. The Ld. DR argued that the payment made to Persanna Trust are not covered u/s 36(1)(iv) and section 36(1)(v) of the Act. As such these expenses are prohibited u/s 40A(9) of the Act. 6.1 From the preceding discussion we note that there is no evidence brought on record by the AO that the assessee has made payment for setting up or formation of trust. Admittedly the assessee made the payment to the trust, but the payment to the trust does not mean that it is not a business expense. As such if the expenses are incurred in connection with the business, then it is eligible for deduction u/s 37(1) of the Act provided the same is not in the nature of capital and personal expenses. 6.2 In the case on hand the AO has not brought on record whether the expenditures are capital or personal nature. The AO has not doubted the genuineness of the transaction. 6.3 The AO did not call any in....
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....enue expenses and accordingly addition was deleted by the ITAT vide order dated 30-09-2011. 11. We have heard the rival contentions and perused the materials available on record. At the outset we find that in the identical facts and circumstances in the own case of the assessee, the ITAT in the AY 2002-03 and 2003-04 has deleted the addition made by the AO after having reliance on the order of the ITAT in the AY 2001-02 in ITA No. 792/Ahd/2006 vide order dated 30-092011 by holding that impugned expenditure as revenue in nature. The relevant extract of the order is reproduced as under: "6. We have heard the parties at some length. We have carefully perused the orders of the authorities below in the light of a voluminous compilation filed before us containing almost 400 pages and the case laws cited. Before us, an agreement dated 30/03/2000 was referred which was executed between FAG AUTOMOBILTECHNIK AG on one part referred as "the Collaborator" and "FAG Bearings (India) Ltd." as other part mentioned as "the Indian Company". The said Collaborator is a subsidiary of FAG Kugel Fischer George Schaefer AG incorporated under the laws of the Federal Republic of Germany. Clause -(c) on p....
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....s also been extended that there were series of agreements, however, the know-how initially was acquired out of an agreement dated 30/08/1996. The changes in the provisions of section 32 were made subsequently from 1st day of April, 1998, therefore not applicable in the case of the assessee. It has been clarified that the agreements executed later on, had in fact, arose out of the original agreements which were in operation since inception of the company. In the light of the factual background, we have scrutinized the case laws cited before us. We have noted that in one of the case it was held that if the payment is made for exclusive acquisition of technical know-how, then the expenditure is capital in nature, but if the payment is for securing the use of know-how, then allowable as revenue expenditure. 6.3. In these decisions, it has been conveyed that the expenditure towards improvisation for the existing business is to be considered a revenue expenditure. In the present appeal, undisputedly the know-how related to the existing manufacturing operation of ball bearings, i.e.stated to be same type of product. It cannot be ruled out that in a fast growing era of new technologies t....
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....horities. If a Bench of a Tribunal on the identical facts is allowed to come to a conclusion directly opposed to the conclusion reached by another Bench of the Tribunal on an earlier occasion, that will be destructive of the institutional integrity itself. That is the reason why in a High Court, if a single Judge takes a view different from the one taken by another Judge on a question of law, he does not finally pronounce his view and the matter is referred to a Division Bench. Similarly if a Division Bench differs from the view taken by another Division Bench it does not express disagreement and pronounce its different views, but has the matter posted before a Fuller Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal, so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the IT Act itself." 11.2 We also find that the Hon'ble sup....
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.... Court upheld the vires of Article 31A in unequivocal terms. That decision binds, on the simple score of stare decisis and the constitutional ground of Art. 141. Every now discovery or argumentative novelty cannot undo or compel reconsideration of a binding precedent. In this view, other submissions sparkling with creative ingenuity and presented with high-pressure advocacy, cannot persuade us to re-open, what was laid down for the guidance of the nation as a solemn pre-posion by the epic Fundamental Rights case. From Kameshwar Singh and Golak Nath (supra) through Kesavananda (supra) and Kanan Devan to Gwalior Rayons and after Art. 31A has stood judicial scrutiny although, as stated earlier, we do not base the conclusion on Art. 31A. Even so, it is fundamental that the nation's Constitution is not kept in constant uncertainty by judicial review every season because it paralyses, by perennial suspense, all legislative and administrative action on vital issues deterred by the brooding threat of forensic blowup. This, if permitted, may well be a kind of judicial destabilisation of State action too dangerous to be indulged in save where national. crisis of great moment to the life,....
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....ed under: DTA EOU Total manufacturing Trading Total Manufacturing Trading OP/Net sales (%) 6.97 35.83 11.32 9.29 11.05 OP=PBIT 3) However, the assessee further revised its and comparables PLI vide letter dated 9-11-2006. According to this letter, the assessee determined its PLI at 13% and the comparable PLI at 9.05% by using the TNMM method. The necessary details relevant to the determination of ALP stand as under: * Assessee selected itself as a tested party, * Used TNMM for ALP * Worked out its PLI @13%(at entity level ) as PBIT on net sales. * Worked out PLI of comparable @9.05%. * 4) In view of the above calculation the assessee submitted before the TPO that its PLI is greater than the mean of the PLI of the comparable companies. Hence the transactions pertaining to its AE were carried out at ALP. Note: The working of the PLI of the comparable is placed on page 98 of the PB. 12.2 However, the TPO being dissatisfied recalculated the PLI by removing Deccan Bearing and HMT Bearing as they were showing loss consistently. Further, the TPO added another comparable namely M/s Menon Bearing and worked out the ....
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....d two companies and added one new company in a comparable list of companies without giving the opportunity. * PBIT of it (assesses) is 13% as computed vide its letter dated 9.11.2006 while TPO computed at 10.03% without giving the opportunity. Regarding the addition of Rs. 1,12,41,715/- for royalty for EOU division: * The technology keeps on regularly updating which requires a cost in such up-gradation. Therefore it cannot be assumed that the AE has recovered the cost of the technology incurred by it in the earlier years. Thus the technology cost cannot be assumed as nil. * The adjustment on account of royalty payment has been made by the TPO without any method as prescribed under the law. 12.8 However the AO rejected the contention of the assessee and made an addition of Rs. 7,71,00,000/-as proposed by TPO in DTA unit. 12.9 Regarding royalty expenditure the AO observed that the actual royalty amount in EOU unit is of Rs. 1,46,67,000/- which needs to be disallowed. 12.10 In view of the above, the aggregate amount of Rs. 9,17,67,000/- ( 7,71,00,000/- + 1,46,67,000) was added to total income of the assessee. The aggrieved assessee preferred an appeal before the Ld.CIT (A....
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....ther submitted that if the same is followed, the addition would work out to Rs. 81,00,848/(21,95,35,197/- *3.69%) only as against the addition of Rs. 7,71,00,000/-. 13.2 The Ld. CIT (A) after considering the submission made by assessee held that difference of profit margin of 3.69% (10.66-6.97) should be applied in respect of the transaction with the AE only. Accordingly the Ld. CIT-A directed the AO to re-work the disallowance on this basis and check the arithmetical accuracy of the appellant's submission. Being aggrieved by the order of Ld.CIT (A), Revenue and the assessee are in appeal before us. The Revenue is in the appeal for Rs. 7,38,23,552/- (royalty payment of Rs. 48,24,400/-+ margin of DTA unit 6,89,99,152/-) and the assessee is in appeal for Rs 1,79,43,448/-( royalty payment of Rs. 98,42,600/+ margin of DTA unit 81,00,848/-). The assessee has raised the following ground in ITA bearing No.80/Ahd/2008 for A.Y. 2004-05. 5) The Ld, CIT (A) erred in fact and in law in partially confirming the adjustment proposed by the Transfer Pricing Officer - IV. West Zone. India ("the TPO") / AO U/s, 92 C r.w.s, 92 (1) in respect of international transaction in as much as it pertaine....
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....ing that royalty and FTS paid to the extent of only 1.5% of sales may be treated as ALP thus confirming addition to the extent of Rs. 98.42 lakh. The TPO and AO erred in determining the comparable margin at 10.66% instead of 6.97 worked out by Appellant. CIT(A) erred in confirming action of TPO/AO in separating profits of DTA and EOU and comparing profits of DTA on account of lower profits acce3pting comparable margin at 10.66% instead of 6.97%. CIT(A) erred in confirming allocation of expenses between DTA and EOU on the basis of turnover and not accepting allocation made by the assessee company. Revenue Ground of Appeal : 3 -CIT(A) erred in reducing the addition of Rs. 9.18 crore u/s.92CA(3) to Rs. 1.79 crore ignoring the detailed reasons given by the IPO. The method in 02-03 followed in this year. The TPO has taken segmental accounts of the assessee company and the DTA margins have been adjusted in light of the higher comparable margins. The use of TNMM at independent transaction level has been advocated in a number of decisions as mentioned in the submission made for AY 2002-03 and reproduced below. The claim of the assessee that the rejected comparable i.e. Decc....
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....ng method:- a. International Transactions in the nature of Revenue Expenses debited to the Profit and Loss Account (other than Royalty) of Rs. 4,01,14,355 (Rs. 8,88,38,750 minus 4,87,24,395 of Royalty). b. Added to above, the Royalty of the DTA Segment of Rs. 4,87,24,395 giving aggregate of Rs. 8,88,38,750. c. Added to above, the International Transaction in the nature of Revenue Expenditure CREDITED to at the P&L Account of Rs. 74,03,728. d. Added to above, the International Transaction in the nature of capital Goods, part of the Balance Sheet of Rs. 5,19,25,936, aggregating to Rs. 14,81,68,414. e. From the above, reduction of the Royalty (of DTA and EOU Segment both) of Rs. 6,38,26,098. It may be noted that Royalty of EOU of Rs. 1,51,01,703 was not included in the above aggregate. Despite this fact, it was reduced from the aggregate. The ld. counsel for the assessee submitted that for the purpose of benchmarking the international transactions the assessee had bifurcated its activities into manufacturing segment and distribution segment. However, the Transfer Pricing Officer (TPO) has further bifurcated the activities of the assessee into domestic unit (DTA) and export....
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.... for the controlled transaction of SKF. The contention of the assessee is that the fundamental principle of CUP is that the comparable transaction has to be "uncontrolled Transaction", meaning thereby that it has to be a transaction between two parties who are not related to each other. SKF transaction is not eligible to be treated as CUP as it is with related party. The another contention of the assessee is that the TPO and ld.CIT(A) has relied upon the rates of royalty paid by the assessee during the earlier years. The contention is that this transaction is also with related parties as it is given to a related party of the assessee for the earlier period. It is also the contention of the assessee that no material is available on record that any enquiry of any nature has been carried out by any person including TPO to conclude that the transactions of SKF and for the earlier years for the assessee were the correct ALP or were done in circumstances so as to be at the ALP. The contention is that the only available option is to adopt TNMM as the method for determination of the ALP. 29.1. We have given our thoughtful consideration to the rival contentions. We find force into the con....
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....on expenses incurred amounting to Rs. 4,60,20,828.00 for its DTA and EOU unit, but the assessee charged all of them towards DTA unit only. However, the AO being dissatisfied with the working of the assessee, proposed to allocate such expenses in the manner as detailed below: Total Amount DTA EOU 1. Depr. On Residential Building 256,519 222,675 33,844 2 Depr. On Data Processing Machines 3,422,521/- 2,970,974 451,547 3 Depr. On Motor cars 1,844,880 1,601,477 243,403 4 Advertisement Expenses 20,678,311 17,950,137 2,728,174 5 Dep. On Account of SAP-R/3 Cost (60% of Rs.3,29,44,739/-) (1,06,93,270/- + 2,22,51,469/-) 19,766,844 17,158,924/- 2,607,920 6 Depr. On Renovation of Building 31,753 44,925 6,828 Total 46,020,828 39,949,112 6,071,716 17.1 Regarding the above, the assessee submitted as under:- I. Regarding the depreciation on the residential quarters, it was submitted that all the residential units were constructed for the staff of DTA units only. These are old staff quarters and no fresh quarters were constructed for the EOU units. II. Regarding the depreciation on data processing machines, it was submitted that the ....
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....d. Regarding the advertisement expenses, it was noticed that it pertains to the company as a whole and therefore it cannot be attributable to any one unit. The ordinary customer in the market whether local or overseas identifies the product with the company and not with the units operating under the umbrella of the company. Therefore expenses of Rs. 27,28,174/-out of Rs. 2,06,78,311/- were allocated to EOU unit and accordingly the same added to the total income of the assessee. e. From the submission of the assessee, it does not reflect that the use of SAP R3 software is limited only to DTA or EOU. Therefore depreciation of Rs. 26,07,920/- out of total depreciation Rs. 1,97,66,844/- allocated to EOU unit and accordingly the same was added to total income of the assessee. f. The assessee has not furnished any evidence to justify that major renovation work was carried out in respect of the DTA unit. Therefore the depreciation of Rs. 6,828/-out of total depreciation Rs. 51,753/- was allocated to EOU unit and accordingly the same was added to total income of the assessee. 17.3 Therefore, in view of above the aggregate addition made by the AO by way of allocation of the expenses to....
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....e Revenue is in the appeal for the deletion of the following: i) Allocation of depreciation of residential quarters, ii) Allocation of the depreciation on data processing machines iii) Allocation of advertisement expenses On the other hand, the assessee is in appeal for the confirmation of addition for the allocation of the following: i) Allocation of depreciation on motor car, ii) Allocation of depreciation on SAP R3 software, iii) Allocation of depreciation on repairs to building. The ground of appeal raised by the assessee in ITA bearing No. 80/Ahd/2008 is as under: "6 The learned CIT(A) erred in fact and in law in confirming action of the AO in allocating the following expenses between DTA unit and EOU in the ratio of their respective turnover despite the fact that the appellant had made detailed submissions with respect to the allocation made by it and it was therefore requested that no further adjustment is required to be made. Particulars Total Amount (Rs.) Allocated to DTA (Rs.) Allocated to EOU (Rs.) Depreciation on Motor Car 18,44,880 16,01,477 2,43,403 Depreciation on Software Upgradation/Development of Addl.Programme of SAP R/3 treated as capita....
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....nterfere in the finding of the Ld.CIT(A)." 21.1 In view of the above order being having a binding effect on us, we delete the addition for the allocation made by the AO towards the depreciation on data processing machine and advertisement expenses and confirm the addition made by the AO regarding the depreciation on the car. The AO is directed accordingly to delete/ confirm the addition made by the AO. The relevant extract of the order has already reproduced here-in-above. Now coming to the issue relating to the depreciation on residential quarters 21.2 The Ld. CIT (A) in the AY 2003-04 deleted the allocation of depreciation on residential quarters made by the AO. On verification of grounds of appeal filed by the Revenue for AY 2003-04 in appeal no. ITA 1976/AHD/2007 it is found that the Revenue has not raised any ground against the action of the Ld.CIT (A) for deletion of allocation of depreciation on residential quarters between DTA and EOU unit. Thus it is clear that once the Revenue has not challenged the action of the Ld.CIT (A), then the order of the Ld.CIT (A) reaches its finality. As such it is settled law that the Revenue cannot challenge the same in the subsequent yea....
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....rved to both the assessee and the Revenue if the matter is restored back to the file of AO for fresh adjudication. Accordingly, we set aside the issue to the file of the AO for de novo assessment regarding the allocation of SAP R3 expenses. Regarding the allocation of the depreciation on renovation of the building 21.6 At the outset, we note that the renovation expenses on the building have been treated as revenue expenditure by us vide paragraph No. 63 of this order. Thus the question of allocating the depreciation on renovation expenses does not arise. 21.7 However, it is important to note that the AO has not disputed the allocation of renovation of the building expenses in his order. As such the AO treated such expenses as capital in nature and accordingly the same was disallowed. But the AO allowed the depreciation on such expenses which was allocated between DTA and EOU unit of the assessee. Thus the issue for the allocation of renovation expenses remained untouched by the AO. Thus the question arises whether such expenses needs to be allocated between DTA and EOU unit. For this limited purpose, we are of the view that the justice will be served to both the assessee and th....
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....) under section 80HHC(3) of the Act. * Write back of credit 25,51,856/- * Forex gain 1,16,29,805/- * Service income 2,48,11,456/- * Income from investment 14,00,000/- * Income from UTI 34,00,000/- * Write back of provision 64,00,000/- * Scrap sales 70,47,075/- * Freight recovered 6,01,371/- * Insurance claim 4,59,318/- * Handling charges 2,65,150/- * DEPB income 55,39,540/- * Discount on early payment of suppler bills 12,39,571/- * Octroi refund 39,00,000/- * Reversal of provision 19,92,966/- * GEB deposit 6,68,412/- * Others 17,09,574/- Total 7,36,16,094/- Aggrieved, assessee preferred an appeal before the Ld.CIT (A). 23. The assessee before the Ld.CIT (A) submitted as under: Note : the finding of the CIT-A & ITAT has been given for all the items listed above in subsequent paragraphs together for the sake of convenience. In relation to write back of credit balance of creditors/debtors for Rs. 25,51,856/- 24. The assessee before the CIT-A claimed that the deduction is allowable under section 80HHC of the Act on the amount written back as it is arising in the connections of business. The assessee in support of hi....
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....gains of business or profession'. Under section 80HHC(3) relevant to assessment year 1989-90, the deduction was to be computedwith reference to the profits of the business as computed under the head 'Profits & gains of business or profession'. In the present case, the interest income from customers and sales tax set off have been computed and assessed under the head 'Profits & gains of business or profession' as part of the operational income and not under the head 'Income from other sources'. Therefore, the said income could not be deducted from the business profits while computing the deduction under section 80HHC of the Income-tax Act. The decisions relied upon by the Tribunal have been distinguished in the case of Bangalore Clothing Co. (supra). In the case of Bangalore Clothing Co. (supra), it is held that the Assessing Officer must ascertain the nature of receipt in each case independently. Interest income may or may not be out of business activity. If it is not part of operational business income, then, the Assessing Officer would have been justified in excluding the same for the purpose of deduction under section 80HHC of the Act. However, in the present case, the Assessing....
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....he sum referred to in clauses (iiia), (iiib) and (iiic ) of section 28 or of any receipts by way of brokerage commission, interest, rent charges or any other receipt of a similar nature included in such profit. Any other receipt of similar nature means receipt similar to brokerage, commission, interest, rent, charges. The write back provided under section 41(1) for the purpose of nullifying the effect of earlier deductions claimed towards central excise liability is not a receipt similar to brokerage, commission, interest or rent charges. Therefore Explanation (baa ) has no application either. 10. On the other hand, we emphatically find that any amount of profit construed under section 41(1) is nothing but business profits in its texture, colourand character. Therefore, the Assessing Officer is not justified in excluding the amount of Rs. 1,71,35,268 in computing the business profits for the purpose of section 80HHC. We direct the Assessing Officer to accept the computation of deduction under section 80HHC rendered by the assessee by including the income of Rs. 1,71,35,268. 26.2 In view of the above, we do not find any reason to interfere in the order of the Ld.CIT-A. Hence the ....
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..... 30. The assessee before the learned CIT (A) submitted as under: i. Service income includes consultancy fees of Rs. 2,04,83,835/- and inspection charges of Rs. 43,28,111/-. Consultancy fees were received from FAG Germany for providing consultancy service on marketing, industrial & commercial information of the product of FAG Germany in India. The service includes providing customer education by arranging seminars, conferences, exhibition, and distribution of technical information in respect of product of FAG Germany. ii. Regarding the inspection charges, the company deputes the engineers to certify the genuineness of FAG bearings. The company charge fees for the said service as inspection charges. This income is purely related to business of the assessee. The assessee in support of his claim relied on the Judgment of Bombay High Court in the case of CIT v/s International Data Management Ltd. Reported in 261 ITR 177. iii. Income from sale of scrap is directly related to the manufacturing activity of the appellant because it is generated due to the manufacturing process of the assessee. Similarly appellant has relied on the judgment of ITAT (Chennai Bench) in the case of JC....
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.... to exclude that which does not partake of profits that can be said to have been derived from the business of exports. (ii) In the specific context of clause (baa) of the Explanation to section 80HHC, while determining the "profits of the business", the Assessing Officer has to undertake a twostep exercise in the following sequence. He has to first "compute" the profits of the business under the head "Profits and gains of business or profession." In other words, he will have to compute business profits, in terms of the Act, by applying the provisions of sections 28 to 44. (iii) In arriving at profits of the business by the above method, the Assessing Officer will exclude all such incomes which partake the character of "income from other sources" which in any event are treated under sections 56 and 57 and are therefore not to be reckoned for the purposes of section 80HHC. The Assessing Officer will apply the law as explained in the judgments of the Kerala High Court which have been affirmed by the Supreme Court. (iv) Where surplus funds are parked with the bank and interest is earned thereon, it can only be categorised as income from other sources. This receipt merits separate....
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....ot apply to the facts of the case on hand. As such the case law relied upon by the AO/CIT-A is distinguishable from the facts of the present case. Therefore we are reluctant to place our reliance on the said case law. Hence, the ground of appeal of the assessee is partly allowed. Sale of scrap and insurance claim and handling charges 33.2 We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the impugned income is arising in the course of the business of the assessee. We also note that the AO in his assessment order has also not treated the impugned income as income from other sources. Therefore the same cannot be treated as income from other sources and accordingly the same is eligible for deduction under section 80HHC of the Act. In holding so, we find support and guidance from the judgment of Hon'ble Bombay High Court in the case ofAlfa Laval India Ltd Vs. DCIT reported in 133 taxman 740 wherein the issue was decided in favour of the assessee. The relevant extract has already been reproduced in the preceding paragraph. 33.3 In addition to the above, we also note that the ITAT (Chennai Bench) in the case of JCIT v/s ....
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....to the deduction under section 80HHC of the Act in respect of such income. However, the assessee is entitled to the deduction for the expenses incurred by it against such income. Therefore we direct the AO to reduce the expenses incurred by the assessee from the interest income as discussed above. Thus the AO will reduce 90% of the balanced interest income for working out the profit of the business eligible for deduction under section 80 HHC of the Act. As such the AO will consider only the net income of the assessee before reducing 90% of the interest income while working out the deduction under section 80HHC of the Act. In this regard, we place our reliance on the order of the Hon'ble Delhi HC in case of CIT Vs. Shri Ram Honda power equip reported in 207 CTR 689. The relevant extract of the judgment has been reproduced in the preceding paragraph. 33.6 In view of the above the ground of appeal of the assessee is partly allowed. In relation to Income from investment and income from UTI 34. The assessee before the Ld. CIT-A submitted that only net amount might be considered for working out the deduction under section 80HHC of the Act by relying on the Judgment of Delhi High Cour....
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.... should not be excluded from the profit to work out the deduction under section 80HHC of the Act. The assessee similarly submitted regarding the Insurance claim that it is not income rather it represents the reimbursement of expenses without no profit element. Therefore, there is no need to exclude the same from the profit to workout the deduction under section 80HHC of the Act. The assessee relied on various judgments including the order of ITAT Ahmedabad in case of Gujarat Alkalies & chemicals ltd reported in 77 TTJ 245 and also placed reliance on the judgment of Kadri mills (CBE) Ltd. Vs. reported in 76 TTJ 38. CIT-A order 37.1 The Ld.CIT (A) regarding the freight and insurance claim observed that these receipts are in the nature of income, but the same cannot be said to be business income. Therefore the Ld. CIT-A confirmed the action of the AO. ITAT order Being aggrieved by the order of the Ld. CIT (A), the assessee is in appeal before us. 38. The Ld. AR before us reiterated the submission as made before the Ld. CIT-A. On the other hand the Ld. DR relied on the order of authorities below. 39. We have heard the rival contentions of both the parties and perused the materi....
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.... to the assessees whose assessments have already been concluded. In other words, in this type of substantive amendment, retrospective operation can be given onlyif it is for the benefit of the assessee but not in a case where it affects even a fewer section of the assessees. 27. We, accordingly, quash the impugned amendment only to this extent that the operation of the said section could be given effect from the date of amendment and not in respect of earlier assessment years of the assessees whose export turnover is above Rs. 10 crore. In other words, the retrospective amendment should not be detrimental to any of the assessees." 42.1 In view of the above, we are inclined to reverse the order of the Ld. CIT-A. Accordingly, we direct the AO to consider the aforesaid amount for working out the deduction under section 80HHC of the Act. Hence the ground of appeal of the assessee is allowed. In relation to a discount of early payment of suppliers bill of Rs. 12,39,571/- 43. The assessee submitted before the Ld.CIT (A) that the assessee company received a discount from the supplier on account of early payment. Such early payment would lead to a reduction in the cost of purchase, a....
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....f business. It has also been noticed by the Tribunal that interest income to the tune of Rs. 68,534 directly related to the export business as such excess interest earned was credited by the bank on early payment of foreign bills of exchange. These findings are findings of fact. The Assessing Officer also while reducing the profit of business for the purpose of computing income of the assessee has not treated the receipt of interest differently. It clearly goes to show that while computing the taxable income of the assessee he has taken the basis as profit shown as profit and loss account which included deduction on account of outgoing of interest as noticed above. No separate treatment has been given by the Assessing Officer in considering the income from interest receipt. Neither has he adjusted the profits shown in the profit and loss account by making addition of Rs. 1,27,000 as income from interest to be treated separately nor has such income been computed under the head of income from any other sources. Under these circumstances, there is no reason to reduce profit of business as computed under the head of profits and gains of business further by such amount of interest recei....
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....her sources and accordingly the same is eligible for deduction under section 80HHC of the Act. In holding so, we find support and guidance from the judgment of Hon'ble Bombay High Court in the case of Alfa Laval India Ltd Vs. DCIT reported in 133 taxman 740. The relevant finding of the judgment has already been reproduced in the preceding paragraphs. 49.1 In view of the above, we are inclined to reverse the order of the Ld.CIT (A). Accordingly we direct the AO to consider the aforesaid amount for working out the deduction under section 80HHC of the Act. Hence the ground of appeal of the assessee is allowed. In relation to other Rs. 17,09,574/- 50. The assessee before the Ld. CIT-A submitted that these are small amount accruing during the normal course of the business. Therefore the same should be considered as business income. 51. At the outset, we note that the Ld. AR before us has not advanced any argument suggesting that income is arising in the course of the business. Thus in the absence of any information contrary to the finding of the Ld.CIT (A), we are inclined to uphold the same. Hence the ground of appeal of the assessee is dismissed. In relation write back of provis....
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....ouncement referred by the learned DR in the case of TATA BP SOLAR INDIA limited versus Additional Commissioner of income tax of ITA No. 3381 Mumbai/2009/A.Y. 2004-05. We find that in this case it was held that export turnover of the EOU which was enjoying deduction under section 10B was to be included in the total turnover but not in the computation of deduction under section 80HHC(3)(a).The relevant part of this judicial pronouncement is reproduced as under:- "We have already seen the provisions of s. 80HHC(3)(a) of the Act, which refers to profits derived from export of goods manufactured then the profit derived from such export shall be the amount which bears to the profits of the business the same proportion as the export turnover in respect of such goods bears to the total turnover of the business carried on by the assessee. The expression "such" before the expression export turnover only means that the export turnover referred to is the turnover of the goods manufactured whose profits are being computed under s. 80HHC(3)(a). We cannot therefore ignore the intention of the legislature expressed in such clear terms. With regard to the submission of the learned counsel for the....
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....f revenue expenditure as claimed by the appellant. 2. The learned CIT(A) erred in fact and in law in confirming action of the AO in making addition of Rs. 67.07,658 by disallowing expenditure on scientific research claimed u/s, 35(1) of the Act despite the fact that the appellant had furnished complete details for substantiating the claim. 3. The learned CIT(A) erred in fact and in law in confirming action of the AO in considering SAP R/3 running cost amounting to Rs, 3,29,44,739 as capital expenditure, .. 4. The learned CIT(A) erred in fact and in law in confirming the action of the AO in including an amount of Rs. 1,58.86.554 in the total income of the appellant on the ground that the valuation of the closing stock is required to be done by including therein the unutilized cenvat credit, despite the fact that the sum was already shcmn as current asset and not claimed as deduction. The learned AO also erred in fact and in law in not valuing the opening stock tor the year under consideration by the same method by including therein the amount of CENVAT credit. .. , 5. The Ld, CIT (A) erred in fact and in law in partially confirming the adjustment proposed by the Transfer P....
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....7 2,43.403 Depreciation on Software Upgradation / Development of Addl, Programme of SAP R/3 treated as capital expenditure 1.97.66.844 1.71.58,924 26,07.920 Depreciation on Repairs to Building 1.03.505 89,850 13.655 TOTAL 2,17,15,229 1,88,50,251 28,64,978 7. The learned CIT(A) erred in fact and in law in confirming action of the AO in revoking deduction u/s.80HHC of the Income Tax Act, 1961 by making various adjustment to the claim of the appellant. a. The learned CIT(A) erred in fact and in law in confirming action of the AO in reducing the following amounts from the profits of business for the purpose of computing deduction u/s.80HHC of the Act on the ground that they do not constitute business income. Sr. No. Nature of Income (Rs, In lacs) a) Service Income 248,00 b) Income from Investments 14.00 C) Income from UTI 34.00 d) Write Back of Provisions 64.00 e) Misc. Income i) Scrap Sales 70,47 ii) Freight Recovered 6.01 iii) Insurance claim 4.59 iv) Handling Charges 2lT v) DEPB Income 55.39 vi) Discount on early ....
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....eration the company already treated 209.90 lacs as capital expenditure being extension and expansion of the buildings. 59.3 However, the AO rejected the contention of the assessee and relied on the SC judgment in the case Ballimal Naval Kishore VS CIT reported in 224 ITR 414 and considered as capital expenditure. Further the AO pointed out that the assessee claimed theses expenses by way deduction in the computation of income and not debited theses expenses to P&L accounts. Accordingly the AO treated these expenses as capital in nature and allowed dep. @ 5 % amounting to Rs. 51,753/- and remaining balance amounting to Rs. 9,83,299/-added to the total income of the assessee. Aggrieved assessee preferred an appeal before the Ld.CIT (A). 60. The assessee before the Ld.CIT (A) reiterated the submission as placed before the AO. The assessee without prejudice to the above also stated that if these expenditures are considered as capital expenditure then rate of depreciation on it shall be 10%. 60.1 The Ld.CIT (A) has confirmed the order of the AO after having reliance on the order of his predecessor pertaining to the assessment year 2003-04 where the expenses as discussed above were t....
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....hable from the present facts of the case. In that case the Hon'ble Apex Court observed that there was a total renovation of the theatre. New machinery, new furniture, new sanitary fittings and new electrical wiring were installed besides extensively repairing the structure of the building. However in the instant case before us, there was mere repair on the existing building. There was no change brought to our notice about the structural in the existing building out of such expenses. 63.3 In view of the above, we disagree with the finding of the Ld. CIT-A. Accordingly we direct the AO to delete the addition made by him by treating the repairing expenses as capital in nature. Hence the ground of appeal of the assessee is allowed. The Second issue raised by the assessee in ground no 2 is that the Ld.CIT (A) erred in disallowing the expenditure on scientific research claimed u/s 35(1) of the Act amounting to Rs. 67,07,658/-. 64. The assessee in the year under consideration has been claimed expenses u/s 35 of the Act towards the acquisition, installation and commissioning of plant and machinery for the R&D division. The assessee to justify such expenses submitted as under: i. The m....
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....achines are also used for development and improvement of the product 65.4 Without prejudice to the above, the assessee also submitted that in case the deduction u/s 35(i)(iv) of the Act is not allowed then it is entitled for the depreciation at applicable rate. 65.5 The Ld. CIT (A) after considering the submission of assessee observed that the activities carried by the assessee as discussed above are not the nature of scientific research as specified u/s 35(1)(iv) of the Act. As such the scientific research would mean an activity that result in a substantial contribution to the existing fund of knowledge on the subject. 65.6 Further, activity in the nature of carrying out development to the existing knowledge/equipment/processes etc will not fall into the category of scientific research. 65.7 In view of the above, the Ld.CIT (A) held that activity in the nature of quality control, testing and style changes do not constitute scientific research. Thus the expenditure incurred on the purchase of the equipment used in undertaking such activity is not eligible for deduction u/s 35(1)(iv) of the Act. However, the Ld.CIT (A), treating such expenditure as in the nature of capital, allo....
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....(a) any scientific research which may lead to or facilitate an extension of that business or, as the case may be, all businesses of that class; (b) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business or, as the case may be, all businesses of that class; 68.2 It is clear from the definition of the scientific research defined u/s 43(4)(iii) of the Act that any activity of scientific research which may lead to or facilitate the extension of the business is eligible for the deduction under section 35 of the Act. 68.3 From the submission of the assessee as discussed above, it appears that the assessee has conducted the scientific research activity and therefore the assessee is eligible for deduction in respect of capital expenditure under section 35 of the Act. However, the onus lies on the assessee to prove on the basis of documentary evidence that it has carried out the scientific research activity. These evidences may include the following: i. The dedicated staff of the assessee engaged in scientific research activity along with the experience, qualification etc. ii. The project Details on which the asse....
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....erefore the assessee is entitled for the depreciation allowance. Accordingly the AO after relying on the order of his predecessor, treated the expense as capital in nature and allowed the depreciation at 60% amounting to Rs. 1,97,66,844/- and remaining amount of Rs. 1,31,77,895/- was added to the total income of the assessee . 70. Aggrieved assessee preferred an appeal to the Ld.CIT (A) who has confirmed the order of the AO after having reliance on the order of his predecessor pertaining to the assessment year 2003-04. Being aggrieved by the order of Ld.CIT (A) the assessee is in appeal before us. 71. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No. 793/AHD/2006 and 817/AHD/2006 pertaining to AY 2002-2003 the impugned addition was deleted by the ITAT vide order dated 14-11-2014. 72. On the other hand, the Ld. DR vehemently supported the order of authorities below. 73. We have heard the rival contentions and perused the materials available on record. At the outset we find that in the identical facts and circumstances in the own case of the assessee (supra), the ITAT has delete the addition made by the AO. Th....
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.... The fourth issue raised by the Assessee in ground no. 4 is that the Ld.CIT (A) erred in confirming the order of the AO by sustaining the addition of the unutilized CENVAT Credit for Rs. 1,58,86,554/- in the valuation of closing stock. 74. The assessee during the assessment proceeding submitted that it has valued the closing stock by following exclusive method of accounting. As such the assessee did not include the value of unutilized CENVAT Credit appearing in the balance sheet as on 31-3-2004 in the closing stock. 74.1 On a question by the AO, the assessee submitted that it follows exclusive method of accounting. Accordingly the material purchased is debited to the P/L Account without including the element of CENVAT Credit though the same is part of the purchase value. The amount of CENVAT Credit is shown as current assets in balance sheet. 74.2 The assessee further submitted that the provisions of section 145A of the Act require following the inclusive method of accounting. Consequently, the stock should be inclusive of the CENVAT Credit. But this will be tax neutral exercise as held by the Hon'ble Apex court in the case of Nippon Oxo chemical Ltd reported in 261 ITR 275 tha....
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....the assessee. Subsequently, the Ld. CIT-A confirmed the order of the AO. 79.1 From the preceding discussion, we note that the assessee has been recording its transactions of purchase, sales, and valuation of inventories, net of CENVAT consistently. Thus, if the inventory of closing stock is enhanced by the amount of CENVAT credit attributable to it, then the amount of corresponding purchases should also be increased by the said amount which will result in tax neutral exercise. Thus, in our considered view, the Assessing Officer erred in enhancing the value of closing stock without giving effect to the purchases. In this regard, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of Pr.CIT vs. Gujarat Gas Company Ltd. In Tax Appeal No.90 of 2017 vide order dated 07/02/2017, wherein it was held as under:- "3.03. Now, so far as question No. [B] i.e. with respect to addition made by the A.O. on account of unutilized modvat/cenvat credit of Rs. 56,08,089/- is connected, it is required to be noted that the learned tribunal has taken note that with respect to modvat receivable account, there is corresponding less debit to the purchase account and he....
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....hd/2007 in ground no. 7 vide Para No. 22 t0 53 of this order which has been decided by us in favour of the assessee in part. Please refer the relevant Para for our detailed discussion therein, we direct accordingly. Hence Ground no. 7 of the assessee is partly allowed. The eighth issue raised by the assessee in ground no. 8 is that the Ld.CIT (A) erred in not adjudicating the additional ground raised before him to direct the AO to allow the depreciation in respect of the expenses treated as capital in nature. 83. It is settled law that the assessee is entitled for the depreciation as per the provisions of law in respect of the capital expenditure. Therefore we direct the AO to allow the depreciation in respect of those expenses which have been treated as capital in nature as per the provisions of law. Hence the ground of appeal of the assessee is allowed for statistical purposes. The issues raised by the assessee in ground Nos. 9 to 12 are general, consequential and premature. Therefore we dismiss the same. In the result, appeal of the assessee partly allowed for statistical purposes. Now coming to appeal of the Revenue bearing ITA no. 1529/Ahd/2009 for the AY 2005-06 The Re....
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....f the assessee's products, directly or through foreign group companies, thus requiring apportionment of these expenses in a reasonable manner between the DTA Unit and the EOU Unit, as was done by the assessing officer. 6. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding the payment of Rs. 6,71,81,000/- to the associate concerns covered by section 40A(2)(b), in the name of fee for use of technical know how, for the manufacture of assessee's products, as revenue expenditure, instead of capital expenditure treated by the assessing officer. 7. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 18,17,00,000/- u/s.92CA(3) without considering the material contained in the order of the Transfer Pricing Officer on merits. 8. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. Relief claimed in appeal The order of the CIT(A) on the above issues may be set aside and that of the A.O. be restored. The issue raised by the Revenue in ground no. 1 is that the Ld.CIT (A) erred in allowing the expenses of Rs. 76,44,127/- in respec....
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.... filed by the Revenue. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 6 of the Revenue's appeal is dismissed. The issue raised in ground no. 7 is that Ld. CIT-A erred in deleting the addition made by the AO/TPO for Rs. 18,17,00,000.00 on account of upward adjustment in DTA Unit. 89. An identical issue has been considered and decided by us in Revenue's appeal vide ITA no. 4565/Ahd/2007 in ground no. 3 Para no 16 of this order by restoring the issue to the file of the ld. CIT-A for fresh adjudication. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence, Ground no. 7 of the Revenue's appeal is dismissed. In the result, the appeal of the Revenue is dismissed Now coming to appeal of the Assessee bearing ITA no. 1588/Ahd/2009 for the AY 2005-06 The assessee has raised the following grounds of appeal: All the grounds of appeal are mutually exclusive and without prejudice to each other. 1. The learned CIT(A) erred in fact and in law in confirming the action of the AO in disallowing R&D expenses of Rs. 58,59,987/- claimed u/s 35(1) of the income Tax Act, 1961 despite the f....
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.... assessee. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 1 of the Assessee is dismissed. The issue raised by the assessee in ground no 2 is that the Ld.CIT (A) erred in disallowing the up-gradation charges of SAP R3 software amounting to Rs. 2,08,32,699/- by treating it as capital expenses instead of Revenue expenses. 91. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no 80/Ahd/2008 in ground no. 3 Para no 73 of this order in favour of the assessee. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence, Ground no. 2 of the Assessee is allowed. The issue raised by the assessee in ground no. 3 is that the Ld.CIT (A) erred in confirming the allocation of certain expense i.e. Depreciation on Motor Car of Rs. 1,67,853.00 & SAP R/3 of Rs. 19,43,237.00 made by the AO to the EOU unit. 92. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no. 80/Ahd/2008 in ground no. 6 and Revenue's appeal vide ITA 4565/Ahd/2007 in ground no. 4, 5 & 6 Para no 21 of this order in favour of the assessee in part. For t....
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....d.AR for the assessee has not brought any evidence in support of his contentions as discussed above. Thus in the absence of any documentary evidence, we are inclined to uphold the finding of the Ld.CIT (A). Hence the ground of appeal of the assessee is dismissed. The issue raised by the assessee in ground no. 5 is that the Ld.CIT erred in confirming the addition made by the AO/TPO amounting to Rs. 485.41 lacs on account of payment of Royalty to extent of 1.5% of sales. 98. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no. 80/Ahd/2008 in ground no. 5 Para no 16 of this order allowed for the statistical purposes. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence, Ground no. 5 of the Assessee is allowed for the statistical purposes. 99. The issues raised by the assessee in ground Nos. 6 to 8 are general, consequential and premature. Therefore we dismiss the same. In the result, the appeal of the assessee is partly allowed for statistical purposes. Now coming to the assessee's appeal bearing ITA No. 1453/AHD/2011 for the AY 2005-06 against the order passed under section 263 of the Act. Th....
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....es are made as per requirement of the business. The assessee has license to use the software ownership lies with the SAP. Software installed only tool to carry on the business. There is no advantage in capital filed. 100.4 However, the Ld. CIT after considering the submission made by the assessee find out that the case of the assessee pertaining to AY 2002-03 pending before the ITAT and hearing of appeal of such case fixed on 19-042011 but the 263 time barred after 31-03-2011. Further the decision of DRP cannot be treated as conclusive for AY 2005-06. Therefore the Ld.CIT directed to the AO allow depreciation @-25% instead of 60%. Being aggrieved by the order of the Ld.CIT the assessee is appeal before us. 101. The Ld. AR before us filed a paper book running from pages 1 to 193 and submitted that in the expenditure in question has been decided in the own case of the assessee bearing ITA Nos. 793/Ahd/2006 pertaining to AY 2002-2003 where the ITAT treated the expenditure on SAP-R3 as revenue expenses. 102. The Ld. DR vehemently supported the order of authorities below. 103. We have heard the rival contentions and perused the material available on record. At the outset we find th....
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....king upward adjustment of Rs. 339.24 2. Segregation of transaction in applying ALP 3. Rejection of TNMM and application of CUP 4. Alteration in comparable 5. Comparing average rate of royalty with individuals rates of royalty. 6. Adjustment not allowed in the ALP. 7. Not allowing the benefits of +-5% 104. The assessee during the year under consideration has entered into the following international transaction with its AE as detailed under: S.No. AE Name Nature of Transaction Value of Transaction 1. Schaeffler Germany KG, i) Purchase of Raw materials 21,35,17,272 ii) Import of Bearing for Resale 102,74,21,280 iii) Fees for Technical Service 2,48,88,415 iv) Testing charge 3,44,392 v) Charges paid for I.T.Project 1,71,04,984 vi) Reimbursement of expenses 64,06,377 2. Schaeffler Korea Corpn. South i) Purchase of Raw material 10,69,32,789 3 Schaeffler Co.Ltd. Japan i) Purchase of Raw material 2,10,87,147 4. Schaeffler Brazil Ltd. Purchase of Raw material Export of Bearing/Tools 81,22,220 6,805 5. Rolamentos FAG Ltd. 85,32,907 6 FAG Megyarooszag Kft.Hungary Purchase of Raw material 1,27,92,493 7 FAG Bearing Corpn.USA i) Export ....
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.... as detailed under: Sr.No. Reference of Agreement Effective date Rate of Royalty 1. Agreement dated 12st December 2000 1st June 2000 upto 31st may-2005 3% on scheduled products and 5% on Non-scheduled products. Agreement dated 2t5h September 2005 1-06-2005 Agreement dated 16th February 2006 1-1-2006 This agreement was executed in view of merger of collaborator. The rates of royalty have remained same. 2. Agreement dated 24th June 2002 5th February 2002 5% on domestic sale and 8% on export sales. 3. Agreement dated 30th March-2000 9th May 2001 5% of sales. 104.8 The rate of royalty has been fixed on the basis of classification of product as detailed under: Classification of product Rate of Royalty Schedule product 3% Non Schedule product 5% Export sales from EOU 8% 104.9 Totally royalty paid by the assessee on sales as detailed under: Sl.No. Gross Sales Rate of Royalty Royalty 1. 302259.06 3% 702.47 2. 4190.96 5% 172.58 3 1660.11 8% 115.,29 Total 36110.13 104.10 However, the assessee was paying Royalty at the rate 1.5% on all products till 2000. 104.11 The assessee also submitted the TP report prepared for Sche....
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....he basis of agreement but no clause in all these agreement related to purchase of material, sale of goods, provisions of services. * Further as per the OECD guidelines the transaction which are not possible to segregate are in the nature of composite agreement and packaged deal. No such type of agreement and deal is present in the case of the assessee. 104.18 The TPO also rejected the contention of the assessee for using the rate of royalty paid by the other AE by observing that these transactions are related party transaction. Therefore the same cannot be considered as internal/external CUP. 104.19 The TPO rejected the three agreements out of 11 agreements submitted by the assessee as comparable for the application of CUP method by observing as under: * Agreement no 10407:- On verification of the agreement it is found by the TPO that this agreement is composite agreement for patent, trade mark, and certain trade secrets and not for the technical know-how. Therefore this agreement is not considered as appropriate comparables. * Agreement no 5511:- On verification of the agreement it is found by the TPO that in this agreement in entry no 2 the Royalty rate appear as 50% and ....
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....ion of the assessee regarding the aggregation of the transactions to determine the ALP by placing the reliance on the ITAT judgment in case of UCB India (P) Ltd Vs ACIT reported in 121 ITD 131 wherein ITAT held that the international transaction has to be evaluated on a standalone basis. In view of the above the Ld. DRP rejected the aggregation of the transaction done by the assessee. 105.6 Further, the Ld. DRP also observed that the TPO during the assessment proceeding for AY 2007-08 computed the average rate of the Royalty as 2.3% on the basis of 5 agreements out of 11 agreements. Accordingly the Ld. DRP confirmed the addition of Rs. 339.24 lacs out of 350.56 lacs. 105.7 The Ld. DRP also reject the benefit of adjustment of +,-, 5% by placing the reliance on the ITAT order in case of Global Vantedge (p) Ltd. Vs. DCIT reported in 1 ITR 326. Being aggrieved by the order of the Ld. DRP the assessee is in appeal before us. 106. The Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No. 793/AHD/2006 and 817/AHD/2006 pertaining to AY 2002-2003 the impugned addition was deleted by the ITAT vide order dated 14-11-2014. 107.....
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.... unit. 112. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no. 80/Ahd/2008 in ground no. 6 and Revenue's appeal vide ITA 4565/Ahd/2007 in ground no. 4, 5 & 6 Para no 21 of this order in favour of the assessee in part. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 4 of the Assessee's appeal is partly allowed for the statistical purposes. The assessee in ground no. 5 & 6 is seeking the direction to allow the depreciation in respect of the expenditure treated as Revenue in the AY 200102 to 2005-06. 113. Regarding the ground raised by the assessee, we direct the AO to adjudicate the issue as per the provision of the law. Hence the ground of appeal of the assessee is allowed in terms of above. 114. The issue raised by the assessee in ground Nos. 7 to 9 is general, consequential and premature. Therefore we dismiss the same. In the Result, the appeal of the assessee partly allowed for statistical purposes. ITA NO 1197/AHD/2012 for AY 2007-08 The assessee has raised the following grounds of appeal: 1. Transfer Pricing Adjustment 1.1. The learned CIT(A) erred in fact and in ....
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....ised by the assessee is that the ld. CIT-A erred in making the following adjustments: 1. Making upward adjustment of Rs. 3,11,98,000.00 on account of royalty payment. 2. Reimbursement of Insurance Expenses of Rs. 74,09,925.00 Making upward adjustment of Rs. 3,11,98,000 on account of royalty payment. 115. At the outset, we note that the identical issue regarding the upward adjustment of the Royalty expenses of Rs. 3,11,98,000.00 has been decided by us in ITA 3400/Ahd/2010 vide Para no. 108 of this order wherein we have restored the issue to the file of the ld. CIT-A for fresh adjudication. Respectfully following the same we restore the impugned issue to the file of the Ld. CIT-A for fresh adjudication. Hence the appeal of the assessee is allowed for the statistical purposes. Coming to the issue of Reimbursement of Insurance Expenses 115. The TPO on verification of form 3CEB found that the assessee has shown reimbursement of insurance premium of Rs. 74,09,925/- to its AE. The assessee regarding its claim submitted that the insurance policy was taken by the AE for entire Schaeffler group and allocated to entire premium to each of the group company. The assessee has made paym....
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....ny merit in the case of assessee. Hence the ground of appeal of the assessee is dismissed. The second issue raised by the assessee is that ld. CIT-A erred in confirming the order of the AO by treating the SAP R/3 up-gradation expenses for Rs. 50,53,000.00 as capital in nature. 120. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no. 80/Ahd/2008 in ground no. 3 Para no 73 of this order in favour of the assessee. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 2 of the Assessee is allowed. The 3rd issue raised by the assessee is that the Ld.CIT (A) erred in confirming the order of the AO by treating the repairs to the building for Rs. 48,23,252.00 as capital expenditure. 121. At the outset, we note that the identical issue regarding the repairs to the building expenses has been decided by us in ITA 80/Ahd/2008 in ground No. 1 vide Para no. 63 of this order wherein we have decided the issue in favour of the assessee. Respectfully following the same we reverse the order of the authorities below. Accordingly, we direct the AO to delete the addition made by him. Hence the ground of ....
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....ideration has claimed an expense of Rs. 196.61 lacs on account of repairs and maintenance of machinery and others. However the AO from the details submitted by the assessee found that certain expenses of Rs. 56,70,732.00 represents the purchases/installation of new assets. 124.1 On question by the AO, the assessee submitted that all the aforesaid expenses are representing the normal wear and tear expenses. Therefore the same cannot be treated as capital in nature. 124.2 However, the AO disagreed with the contention of the assessee and held that the expenses amounting to Rs. 56,70,732.00 represents the purchases of the new assets. Accordingly the AO treated these expenses as capital in nature. Hence the AO disallowed the claim of the assessee for Rs. 56,70,732/- and added to the total income of the assessee. 125. Aggrieved assessee preferred an appeal to the Ld.CIT (A), who deleted the addition made by the AO by observing as under: "5.2.1. Regarding expenditure claimed to be towards repairs of machinery, appellant's submission is that none of the items replaced were capable of working independently and the items were replaced due to normal wear and tear. As per the parameters l....
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.... the result the appeal of the Revenue is dismissed. ITA No. 2061 FAG Bearing Ltd. The assessee has raised the following grounds of appeals: All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. Transfer Pricing Adjustment 1.1. The learned CIT(A) erred in fact and in law in confirming the action of Transfer Pricing Officer-I, Ahmedabad ("the TPO") in proposing and the learned Deputy Commissioner of Income Tax, Circle 1(2), Baroda ("the AO") in making adjustment of Rs. 394.24 lacs in determination of Arm's Length Price ("ALP") of International transaction in respect of payment for Royalty and reimbursement of Insurance Charges. 1.2. The learned CIT(A) erred in fact and in law in confirming the action of the TPO and the Assessing Officer in applying the Arm's Length Principle on segregated transactions. 1.3. The learned CIT(A) erred in fact and in law in confirming the action of the TPO and the AO in applying CUP method as the most appropriate method rejecting the TNMM as selected by the Appellant for determining the ALP of payment of Royalty. 1.4. The learned CIT(A) erred in fact and in law in confirming the action of t....
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....g to the issue of Reimbursement of Insurance Expenses of Rs. 92,63,039.00 129.1 At the outset, we note that the identical issue regarding the adjustment of the Insurance expenses of Rs. 92,63,039.00 has been decided by us in ITA 1197/Ahd/2012 vide Para no. 119 of this order wherein we have dismissed the ground of appeal of the assessee. Respectfully following the same we dismiss the impugned ground raised by the assessee. The second issue raised by the assessee is that Ld. CIT-A erred in confirming the order of the AO by treating the SAP R/3 up-gradation expenses for Rs. 6,22,00,000.00 as capital in nature. 130. An identical issue has been considered and decided by us in Assessee's appeal vide ITA no. 80/Ahd/2008 in ground no. 3 Para no 73 of this order in favour of the assessee. For the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 2 of the Assessee is allowed. The issue raised by the assessee in ground No. 3 is that the Ld. CIT-A erred in treating the repairs to the building expenses as capital in nature amounting to Rs. 8,34,893 only. 131. At the outset, we note that the identical issue regarding the repairs to the ....
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....to the file of the ld. CIT-A for fresh adjudication. Hence the ground of appeal of the Revenue is allowed for the statistical purposes. Note : we find that the Revenue in its ground of appeal has agitated the issue of the Insurance expenses claimed by the assessee, though there was no prejudice to the Revenue as the ld. CIT-A decided the issue in favour of the assessee. Therefore we treat the ground of appeal of the Revenue qua the Insurance expenses as infructuous. Accordingly we dismiss the same. In the result, the appeal the Revenue is partly allowed for statistical purposes. Coming to Assessee's appeal in ITA No. 798/AHD/2016 The assessee has raised the following grounds of appeal: All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The learned Commissioner of Income Tax-1, Baroda ["the CIT"] erred in fact and in law in revising the assessment by invoking powers u/s.263 of the Income Tax Act, 1961 ("the Act") despite the fact that the conditions stipulated for invoking such extraordinary jurisdiction were not satisfied. 2. The learned CIT and in fact and in law in not appreciating the fact that the assessment u/s.14....
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.... addition is required to be made as per provisions of section 145A. 4. Without prejudice to Ground No.3, the learned CIT(A) erred in fact and in law in not appreciating the fact that even if section 145A is made applicable in that case the cenvat credit would have been claimed as expenditure and therefore under no circumstances even as per section 145A addition could have been made. 5. The learned CIT(A) erred in fact and in law in upholding the action of AO in not allowing excise duty paid, u/s 43B of the Income Tax Act, 1961 ("the Act"]. 6. The learned CIT(A) erred in fact and in law in upholding the action of AO in not allowing deduction of excise duty u/s.43B of the Act, despite the fact that the duty had been paid by the Appellant before furnishing the Return of Income for the year under consideration. 7. The learned CIT(A) erred in fact and in law in confirming the action of AO in initiating penalty u/s.271(1)(c). 8. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal. The only issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by sustaining t....