TaxTMI 
TaxTMI 
2019 (4) TMI 2142
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.... 2008-09 & 2009-10. The Assessee has also 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....
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....or office work and establishment work including these data processing machines had to 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....
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....o tax under this Act" is much wider than the expression "incomes which do not form part of total income" and hence it also covers the income deductible under 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 ....
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....tly supported the order of the AO. 5. The Ld. AR before us filed two paper books as index I and Index-II running from pages 1to 275 and submitted that the amount was incurred for the training of employees. The payment was 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 an....
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....order of authorities below. 10. On the other hand, the Ld. AR before us submitted that in the identical facts and circumstances in the own case of the assessee in ITA No. 792/Ahd/2006 pertaining to AY 2001-2002 the impugned expenses treated as revenue 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....
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....made would not bring into existence an asset of enduring advantage to the Indian participants. This Circular therefore states that the payment should be regarded if expenditure incurred for the purpose of running the business during the period of agreement. An another argument has 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....
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.... in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrariness and whims and fancies of the individuals presiding over the Courts or the Tribunals and not reached objectively on the basis of the facts placed before the authorities. 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 diff....
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....ersing Golaknath does not militate against the vires of Art. 31A. Suffice it to say that in the Kesavananda Bharati's case. Article 31A was challenged as beyond the amendatory power of Parliament and, therefore, invalid. But, after listening to the marathon erudition from eminent counsel, a 13 Judges Bench of this 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....
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.... 9 Fees for use of technology 57206850 11241715 68448565 10 Lumpsum knowhow fees 2203413 2203413 11 Receipt of consultancy fees 20483345 20483345 Total 219535197 413020866 243644865 876200928 12.1 The assessee also furnished vide letter dated 30-10-2006 segments wise operating margin of its Business in respect of its manufacturing ( DTA & EOU) and distribution segments as detailed 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 ou....
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....this connection, the assessee vide letter dated 28/12/2006 replied as under:- Regarding the addition of Rs. 7,71,00,000/- * TPO ought to have accepted the basis and working of operating profit margin (for short OPM) as submitted in the letter dated 3010-2006 and 9-11-2006. * TPO has bifurcated the profit and loss account into DTA and EOU unit separately and compared the OPM of the comparable companies as a whole with OPM of DTA units. TPO ought to have made a comparison at Company level without bifurcating the business in segment wise. * TPO has calculated PBIT as against the PBDT. * TPO has excluded 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 y....
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.... that Deccan Bearing is not incurring losses continuously but losses were incurred only in the year 2002-03 and 2003-04. Therefore the TPO was not correct to exclude the same from working of comparable margins. * Further, regarding the inclusion of MBL, it is submitted that MBL is not comparable one since out of total sales of MBL only 11.57% belong to sales of bearing while 44% belong to sales of bushes. * Without prejudice to its claims as stated above that it has further made a reference to the order of the Ld.CIT (A)-111, Baroda for AY 2002-03 in its own case who held that profit margin cannot be applied to the entire sales of DTA unit and profit margin should be applied only to the transaction with AE. The assessee further 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 ....
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....d ground of lower comparable profits and thereby confirming action of the TPO and AO in determining the comparable profit margin (ci 10.66% instead of 6,97 %, 14. The Ld. DR before us submitted as under: "Assessee ground No. 5 CIT(A) erred in partially confirming the adjustment proposed by TPO u/s. 92C and alternatively u/s.42A(2) in respect of royalty and total adjustment of Rs. 179 lakh. CIT(A) erred in holding that only royalty and FTS paid at 1.5% of sales value may be treated as arm's length price. The TPO/AO erred in rejecting the Report in form no. 3CEB. The TPO and AO erred in computing ALP on a basis different than that adopted by the appellant company despite the fact that the ALP had been correctly computed and certificate of CA obtained. The CIT(A) erred in holding 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 pro....
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....sed 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 allowed the appeal for statistical purposes. The relevant extract of the order for the issue of the Revenue and the assessee is reproduced as under: Finding of the ITAT in Assessee's appeal ITA No. 793/AHD/2006 in respect of adjustment in DTA segment "28.3. We have considered the rival contentions of the respective representative parties. We find force into the contention of the ld.counsel for the assessee that the Artificial Bifurcation of DTA and EOU is de hors the provisions of Law, DTA Segment has no exports but comparable companies has exports and incorrect computation by the ld.CIT(A). It is pointed out by the ld. counsel for the assessee that it can be seen that the figure of Rs. 8,43,42,316/- is arrived at by the following 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....
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....ing margin to the international transactions is concerned. However, the figure of Rs. 8,43,42,316/- as worked out by the ld.CIT(A) is not correct, therefore this issue is required to be restored to the file of ld.CIT(A) for recomputation of the international transactions. Needless to say that the ld.CIT(A) would give sufficient opportunity of being heard to both the parties. Thus, ground No.6 is allowed for statistical purposes. Finding of the ITAT in Assessee's appeal ITA No. 793/AHD/2006 in respect of adjustment in Royalty segment 29. Coming to ground No.7, we have heard the parties and gone through the written submissions. We find that the ld.CIT(A) in its order has held that royalty @ 1.5% only represent reasonable royalty. This finding is on the basis of the appellate order pertaining to AY 2001-02. It is also held that the benchmarking of royalty is to be done for EOU as well as DTA. The grievance of the assessee is that the ld.CIT(A) erred in relying upon the rates of royalty 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", ....
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.... case of the assessee as discussed above, we restore both the issue, i.e., adjustment in the DTA segment and the royalty payment to the file of Ld.CIT (A) for fresh adjudication and in the light of above discussion as per the provisions of law. 16.3 Hence the grounds of appeal of the assessee are allowed for statistical purposes, and the grounds of appeal of the Revenue are dismissed. The interconnected issue raised by the Revenue in ground no. 4, 5 and 6 is regarding the error committed by the ld. CIT-A as detailed below: * Entire depreciation of Rs. 2,56,519/- on the residential quarters allocated in the computation of income of DTA units * Entire depreciation of Rs. 34,22,521/- on data processing machines allocated in the computation of income of DTA units. * Entire advertisement expenses of Rs. 2,06,78,311/- allocated in the computation of income of DTA units. In other words, all the grounds of appeal relate to the apportionment of expenses between DTA and EOU units of the assessee. 17. There were certain common 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....
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....e its claim that the residential quarters were used exclusively by the employee of DTA unit only. Therefore, the depreciation of Rs. 33,844/- out of total depreciation of Rs. 2,56,519/- was allocated to EOU unit and accordingly the remaining amount was added to total the income of the assessee. b. The data processing machines work as network systems to connect all the offices/ units for coordinating various functions of DTA and EOU unit. Therefore the segregation of its use between DTA and EOU unit is not possible. Therefore the depreciation of Rs. 4,51,547/-out of total depreciation of Rs. 34,22,521/- is allocated to EOU unit. Accordingly the same was added to total income of the assessee. c. Regarding the use of the car, the assessee failed to furnish any evidence by way of logbook or any other record to substantiate that the CAR was used exclusively for DTA unit. Moreover, the cars in question are used by the chairman and managing director who are equally responsible for the DTA unit and EOU unit. Therefore depreciation of Rs. 2,43,403/-out of total depreciation of Rs. 18,44,480/- is allocated to EOU unit. Accordingly the same was added to the total income of t....
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....Para 28 for A.Y 2003-04. Under the circumstances, in this year also the action of the Assessing Officer with regard to the apportionment of expenses in respect of these three items is cancelled. However, it is seen that the action of the Assessing Officer with regard to the depreciation on motor car had been confirmed. The facts remaining the same, the action of the Assessing Officer in this year is also confirmed. As regards the depreciation of SAP costs, it is observed that the appellant has not brought any material on record to show that the expenditure incurred in this behalf relate only to the activities of the DTA unit and does not relate to the activities of EOU unit. It is observed that SAP R-3 is applied equally to the maintenance of accounts and records of both the DTA and the WOU. Similarly, it has not been shown that the renovation of building is only relating to the DTA building. Under the circumstances, it cannot be said that the expenditure relates only to the DTA unit. Therefore, the re-apportionment of expenditure as done by the Assessing Officer in respect of two claims of expenditure is upheld to be correct." Being aggrieved by the order of L....
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....sessee (supra), the ITAT has deleted / confirmed the addition made by the AO. The relevant extract of the order is reproduced as under: Regarding the deletion of the additions (depreciation on data processing machine and allocation of advertisement expenses) "14. We have heard the rival contentions. We find that there is nothing on record to show that the DTA processing machines have actually been used for the EOU unit We also find merit in the contention of the learned consul that the assessee was not required to market its product to the EOU unit as the entire production was sold to F AG Germany which was responsible for the marketing and selling of the product in foreign markets. In view of the above facts and taking into consideration the detailed finding of the learned Commissioner of Income tax appeal we do not find any reason to interfere in the finding of the learned Commissioner of income tax appeal." Regarding the confirmation of the addition (depreciation on motor car) "37. The assessing officer has allocated the depreciation on motor car between the DTA unit and EOU unit of Rs. 3,70,458-. The learned Commissioner of income tax has con....
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....refore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12." 21.3 In view of the above, we hold that there cannot be any allocation of the depreciation claimed by the assessee in respect of its residential quarters towards the DTA unit. Now coming to fresh issue of apportionment of depreciation on SAP R3 cost and depreciation on renovation of building. Regarding the allocation of the depreciation on SAP R3 expenses 21.4 At the outset we note that the SAP R3 expenses have been treated as revenue expenditure by us vide paragraph no. 73 of this order. Thus the question of allocating the depreciation on SAP R3 does not arise. 21.5 However, it is important to note that the AO has not disputed allocation of the expenses of SAP R3 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 fo....
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....confirming action of the Assessing Officer in reworking deduction u/s.80HHC of the Income Tax Act, 1961 by making various adjustments 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 Amount (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 2.65 v) DEPB Income 55.39 vi) Discount on early payments of Suppliers Bills 12.39 vii) Octroi Refund 39.00 viii) Reversal of Provisions 19.93 ix) GEB deposit 6.68 x) Others 17.09 b. The learned CIT(A) erred in fact and in law in confirming action of the AO in exclu....
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....26. 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 of Alfa Laval India Ltd Vs. DCIT reported in 133 taxman 740 wherein it was held as under: "In our opinion, the submissions made on behalf of the assessee deserves to be accepted. In the present case, the Assessing Officer has computed the income by way of interest from the customers, sales tax set off, claims, refunds, etc. under the head 'Profits & gains of business or profession'. To put it differently, the Assessing Officer has not assessed the interest income from customers, sales tax set off, etc. under the head 'Income from other sources' or under any other head. Having assessed these income under the head 'Pr....
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....We considered the matter in detail. The "profits of the business" means the profits and gains computed under the provisions of sections 28 to 43C of the Income-tax Act, 1961. Section 41(1), comes therefore, among the provisions relating to the computation of business profits/gains. Section 41(1) provides for treating the assessment of liability as income, provided those liabilities were claimed as deductions in computing the taxable income for earlier assessment years. It shows that section 41(1) is not creating any income as such independently without any basis. On the other hand, the income is created under section 41(1) on the ground that the corresponding amounts were claimed as deductions in the earlier assessment years. The profits and gains of the assessee were reduced to that extent in the earlier assessment years. When those liabilities ceased to exist, it is very necessary to write back the liabilities as a result of which the amount needs to be offered as income in the accounts under section 41(1). Therefore, there is no force in the argument of the Revenue that the income deemed under section 41(1) stands alone differently and distinctly from the computation of business....
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.... aggrieved by the order of Ld. CIT (A), Revenue is in appeal before us. 28. The Ld. DR and the Ld. AR, both before us, relied on the order of authorities below as favorable to them. 29. 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 of Alfa Laval India Ltd (Supra). The relevant extract has already been reproduced in the preceding paragraph. 29.1 In addition to the above, we also note that the Delhi ITAT in case of Smt. Sujata Grover (Supra) where in it was held that the assessee is entitled to deduction under section 80HHC of the Act in respect of the impugned income as discussed above. The relevant extract of the order is reproduced as under: "Section 80HH....
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....A), assessee is in appeal before us. 31. The Ld. AR before us submitted that the aforesaid incomes are directly connected with the business. Therefore such incomes are eligible for the deduction under section 80HHC of the Act. The Ld. AR alternatively submitted that if the deduction is denied, then the net income should be considered. 32. On the other hand, the Ld. DR relied on the order of authorities below. In relation to service income of Rs. 2,48,11,456.00 33. We have heard the rival contentions of both the parties and perused the materials available on record. The deduction under section 80HHC is available to the assessee in respect of export of the goods. The provisions of this section do not speak about the deduction in respect of service income. Therefore in our considered view, the assessee is not entitled 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 service income as discussed above. Thus the AO will reduce 90% of the balanced service income for ....
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.... assessee would be permitted to, in terms of section 37, claim as deduction, expenditure laid out for the purposes of earning such business income. (vii) In the second stage, the Assessing Officer will deduct from the profits of the business computed under the head "Profits and gains of business or profession", the following sums in order to arrive at the "profits of the business" for the purposes of section 80HHC (3): (a) 90 per cent of any sum referred to in clauses (iiia), (iiib) and (iiic) of section 28, i.e., export incentives; (b) 90 per cent of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (c) profits of any branch, office, warehouse or any other establishment of the assessee situate outside India (viii) The word "interest" in clause (baa) of the Explanation connotes "net interest" and not "gross interest". Therefore, in deducting such interest, the Assessing Officer will take into account the net interest, i.e ., gross interest as reduced by expenditure incurred for earning such interest. (ix) Where, as a result of the computat....
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....f section80HHC speaks of only "Profits of business" as computed under the head "Profits and gains of business or profession" and not profits derived from export. Further, the items of receipts such as miscellaneous incomes like gunny bag sales, scrap sales, insurance claim, premium on hank yarn obligation, etc. do not have even a semblance of the items mentioned in Expln. (baa) viz., brokerage, commission, interest, rent, charges or any other receipts of similar nature. The purpose of Expln. (baa) is only to exclude certain items mentioned therein while arriving at the "profits of the business" and not the profits derived from the export. There is force in the contention of the learned counsel that the case laws relied upon by the learned Departmental Representative are not relevant or applicable to the facts of the case on hand as we are not arriving at the income derived from export as contended by the learned Departmental Representative but only arriving at the profits of the business. Hence, we are of the opinion that the Revenue authorities have committed a mistake in removing these items of income from the profits of the business while computing deduction under s. 80HHC of th....
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.... order of Ld. CIT (A), the assessee is in appeal before us. 35. 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. 36. We have heard the rival contentions of both the parties and perused the materials available on record. The deduction under section 80HHC is available to the assessee in respect of export of the goods. The provisions of this section do not speak about the deduction in respect of income from the investment/ UTI. Therefore, in our considered view, the assessee is not entitled to the deduction under section 80HHC of the Act in respect of such income as discussed above. 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 income of investment/ UTI as discussed above. Thus the AO will reduce 90% of the balanced income from the investment/ UTI 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 income ....
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....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. 39.1 In view of the above, we reverse the order of the Ld. CIT-A. Hence the ground of appeal of the assessee is allowed. In relation to DEPB income Rs. 55,39,540. 40. The assessee before the Ld.CIT (A) submitted that the DEPB income covered under the first proviso to section 80HHC(3) of the Act. Thus it should be allowed as deduction u/s 80HHC of the Act. CIT-A order 40.1 The Ld.CIT (A) observed that the assessee company having a turnover exceeding Rs. 10 crores but the assessee failed to satisfy the condition specified in the third proviso to section 80HHC(3) of the Act. Therefore the Ld. CIT-A confirmed the action of the AO. ITAT order Being aggrieved by the order of Ld. CIT (A), the assessee is in appeal before us. 41. 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. 42. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the impugne....
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....ash discount. Therefore discount received by the assessee on account of earlier payment is in the nature of interest. Thus the AO correctly excluded it from the income eligible for deduction u/s 80HHC of the Act. ITAT order Being aggrieved by the order of Ld. CIT (A), the assessee is in appeal before us. 44. 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. 45. 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 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. 46.1....
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....ged in business of exporting goods and merchandise out of India, such amount have become part of income from such business only being incidental to such trade only." 46.2 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 octroi refund Rs. 39,00,000/-, reversal of the provisions, for the excise duty for Rs. 8,99,158/-and for the testing charges Rs. 10,93,808/-. 47. The assessee before the Ld. CIT-A submitted that Octroi payment has been made on account of the business transaction. Therefore refund of the same should be treated as business income. The assessee in support of his contention relied on the judgment of Aarti industries reported in 95 TTJ 14 and also on the judgment of Alfa Laval India Ltd reported in 186 CTR 390. 47.1 The assessee regarding the provision of excise duty and testing charges submitted that it has been made out of the profit of the company. Therefore at the time of reversal, it should be treated as income of the assessee. CIT....
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.... & export turnover of EOU units eligible for tax holiday u/s 10B of the Act in the computation of deduction u/s 80HHC of the Act. 54. The AO during assessment proceeding observed that the assessee while computing the deduction u/s 80HHC included the profit and the turnover of EOU units in export turnover and total turnover. However, the export turnover of the EOU unit was already subjected to deduction u/s 10B of the Act. 54.1 Therefore the AO was of the view that the assessee is claiming the double benefit for the profit of the EOU under section 80HHC & 10B of the Act which is against the provision of the law. Accordingly, the AO excluded the profit and turnover of EOU unit while computing the deduction u/s 80HHC of the Act. 55. Aggrieved, assessee preferred an appeal before the Ld.CIT (A) who deleted the addition made by the AO by observing as under: "34. I have considered the rival submissions. It is observed that the similar issue came up before me in the appellant's own case for a.y. 2003-04 wherein I have decided the issue in favour of the appellant as at Para 46 of my order dated 19/02/007. Following the same, the action of the Assessing Officer in excludin....
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....s cannot therefore form part of the profits under the head "Profits and gains of business or profession". For all the above reasons we are of the view that the order of CIT directing the AO to include export turnover also as part of the total turnover was correct and does not call for any interference." We find that the facts in the case of the assessee are identical to the facts of the case decided by the Mumbai ITAT in the case referred supra in this order. we also consider that 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). Therefore, we find that while computing deduction under section 80HHC the profits of s. 10B unit will not enter the computation of total income at all. In view of above facts and legal findings, we reverse the decision of the Ld.CIT(A) and confirm the findings of the assessing officer and direct to compute the deduction u/s 80HHC accordingly as per the direction given in the judicial pronouncement of ITAT Mumbai in the case of TATA BP SOLAR INDIA limited versus Additional Commissioner of income ....
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....ing the adjustment to the income of the Appellant aggregating to Rs. 1,79,43,448. a. The TPO and AO also erred in fact and in law in rejecting the Report in Form No. 3CEB despite the fact that all the facts and figures mentioned therein were correct. b. The TPO and AO also erred in fact and in law in computing arm's length price of the international transactions on a basis different than that adopted bv the appellant company despite the fact that the appellant had correctly computed arm's length price and had obtained the certificate thereon from Chartered Accountant for the same. c. The Ld. CIT (A) also erred in fact and in law in holding that Royalty and Fees for Technical Services paid to the extent of only (a), 1,5 % of the sales value may he treated as arm's length price and balance was required to be adjusted under Chapter X of the Act and thus continuing the adjustment to the extent of Rs. 98,42,600 on this count. d. The TPO and AO also erred in fact and in law in determining the comparable profit margin at 10,66 % instead of 6,97 % worked out by the Appellant. e. I he Ld, CI1 (A) also erred in fad and in law in confir....
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.... ix) GEB deposit 6.68., x) Others 17.09 b. The learned C1T(A) erred in fact and in law in confirming action of the AO in excluding gross amount ot above income from the profits for the purpose of computing deduction u/'s.80HHC and no deduction should be granted tor expenses incurred for earning the said income. 8. The learned CIT(A) erred in fact and in law in rejecting the following additional ground of appeal: The learned AO erred in fact and in law in not re-computing the depreciation allowable for the vear after taking into consideration various items of revenue expenditure treated as capital expenditure in the assessment and appellate proceedings," 9. The learned C1T (A) erred in fact and in law in confirming the action of the AO in charaina interest u/s. 234B of the income Tax Act. 1961. 10. The learned CIT(A) erred in fact and in law in confirming the action of the AO in charging interest u/s.234D of the Income Tax Act 1961. 11. The learned CIT(A) erred in fact and in law in confirming the action of the AO in withdrawing interest u/s.244A of the Income Tax Act, 1961. 12. The lea....
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....iation was allowed at the rate of 10% on such expenses. Being aggrieved by the order of Ld.CIT (A), the assessee is in appeal before us. 61. The Ld.AR before us reiterated the submission as made before the authorities below. 62. On the other hand, the Ld. DR vehemently supported the order of authorities below. 63. We have heard the rival contentions and perused the materials available on record. The issue in the instant case relates whether the repair expenses in the building carried out by the assessee represents the capital expenditure. There is no allegation of the revenue that any new asset has come into existence out of such expenditure. As such the repairing expenses were incurred to the existing building. Thus, we are of the view that such expenditure cannot be termed as capital in nature merely on the ground that it will generate enduring benefit to the assessee. Regarding this we find support and guidance from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Cominco Binani Zinc Limited reported in 204 ITR 56 wherein it was held as under: "If the advantage consists merely in facilitating the assessee's trading operations or enablin....
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....market and economic function for the product is different in the different area. Therefore it is necessary to make product as per local market requirement. Further in all these market various types of raw material, different quality at different price are available. ii. The above stated expenditure has been incurred for development and improvement of the product keeping in mind the Indian market and condition, iii. R& D expenses incurred to find out the most cost effective solution for the material which is produced under foreign technology. iv. To optimize the use and cost of the plant and machineries to be imported from outside India viz a viz to be procured within India. 64.1 However, the AO disagreed with contentions of the assessee by observing as under: i. The research and development activities carried out by assessee has neither been enlisted nor substantiated. ii. Moreover assessee has not given any evidence on record showing the result of such R & D activities conducted at the research and development facility. iii. Further the assessee has been in business since long, however no other new products have been manufac....
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....f the Act. However, the Ld.CIT (A), treating such expenditure as in the nature of capital, allowed the deprecation. Being aggrieved by the order of Ld.CIT (A) the assessee is in appeal before us. 66. The Ld.AR before us reiterated the submissions as made before the Ld. CIT (A). 67. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 68. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee has claimed the above said expenses as incurred for the purpose of product make suitable in accordance with the Indian market and also develop new product, accordingly expenses are eligible for deduction u/s 35(1)(iv) of the Act. At this juncture we find important to refer the provision contained under section 35(1)(iv) of the Act as well as the provisions contained under section 43(4) of the Act which reads as under: [Expenditure on scientific research. 35. (1) In respect of expenditure on scientific research, the following deductions shall be allowed- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (iv) ....
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....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 assessee is conducting scientific research activity. What was the outcome of such scientific research activity whether it was of failure or successful. If successful, what was the impact on the business. iii. Any testing activity was carried out by the assessee on such scientific research activity by any independent agency. iv. Whether the assessee has applied to any government agency for the certification of such scientific research activity. v. The details of revenue expenses incurred by the assessee in relation to such activity. vi. The minutes of the board meetings in which the activity of scientific research was approved and there was some budget allocation made for such activities. vii. The necessary details of the scientific instruments used by the assessee and the manner in which these scientific instruments were helpful in conducting such scientific research. 68.4 As such we note that, the Ld.AR for the assessee before us has ....
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....rities 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. Therefore the Hon'ble ITAT treated it as revenue expenditure the relevant extract of the order is reproduced as under: Relevant finding of the ITAT in ITA No. 793/AHD/2006 "21. We have heard the rival submissions and perused the material on record. The fact of incurring of expenditure for SAP on account of user licencee fee and on account of reimbursement is not in dispute. We find that Hon'ble Delhi High Court in case of CIT vs. Asahi India Safety Glass Ltd. (2011) 64 DTR (Del) 63 has concluded that the expenditure incurred by assessee on software is allowable as Revenue expenditure more so as the expenditure acquired by the assessee was an application software which enable it execute tasks in the field of accounting, purchases and inventory maintenance. In case of IBM India Ltd. vs. ACIT (2007) 108 TTJ (Bang) 531 the Co-ordinate Bench of Tribunal has held that expenditure on purchase of application so....
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....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 that under both the method same profit is determined and accordingly a tax neutral method. 74.3 The assessee further submitted that it has paid the amount of duty before the due date of furnishing the return of income as specified under section 139 of the Act. Therefore the amount of such duty will be allowed as deduction under section 43B of the Act. 74.4 However, the AO rejected the contention of the assessee by observing that it is mandatory to follow the provisions of section 145A of the Act. 74.5 Accordingly the AO added the unutilized CENVAT Credit for a sum of Rs. 1,58,86,554/- to the total income of the assessee. 75. Aggrieved assessee preferred an appeal before the Ld.CIT (A). The assessee before the Ld.CIT (A) reiterated the submission as made before the AO. 75.1 The CIT (A) observed that assessee has not denied the applicability of the provisions of section 145A of....
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....ar 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 hence to that extent there is already income offered for tax. If that be so, there was no question of further adding modvat/cenvat credit to the income of the assessee for the year under consideration. Under the circumstances, we see no reason to interfere with the impugned judgement and order passed by the learned tribunal so far as confirming the order passed by the learned CIT(A) deleting the addition made by the A.O. on account of unutilised modvat/cenvat credit of Rs. 56,08,089/-. We are in complete agreement with the view taken by the learned tribunal." 79.2 There is no ambiguity that the assessee has been following the exclusive method of accounting. In view of the above, we reverse the order of the Ld.CIT (A) and accordingly direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. The fifth issue ra....
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....ssee 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 Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the expenditure of Rs. 76,44,127/-, incurred in respect of monthly charges for operating the software paid to IBM Germany, as revenue expenditure instead of capital expenditure considered by the Assessing Officer. 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing to allow Rs. 1,55,86,554/- being value of unutilized cenvat credit u/s.43B of the Act. The Ld. CIT(A) failed to appreciate the fact that addition on account of cenvat credit was Rs. 22094726/- and the claim of the assessee u/s.43B was already allowed for this amount in the assessment order. Therefore, opening cenvat credit balance of Rs. 1,55,96,554/- already allowed....
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.... 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 respect of monthly operating charges of software as revenue expenses instead of capital expenses. 84. 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 assessee. For detailed discussion please refer the relevant Para, we direct accordingly. Hence Ground no. 1 of the Revenue is dismissed. The issue raised by the Revenue in ground no 2 is that the Ld.CIT (A) erred in allowing the deduction amounting to Rs 1,55,86,554/- of unutilized CENVAT credit u/s 43B of the Act. 85. An identical issue has been considered and decided by us in assessee's appeal vide ITA No. 80/Ahd/2008 in ground no. 4 Para no 79 of this order in favour of the assessee. For detailed ....
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....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 fact that appellant had furnished complete details for substantiating the claim. 2. The learned CIT(A) erred in fact and in law in confirming the action of the AO in disallowing SAP R/3 charges amounting to Rs. 2,08,32,699/- on the ground that the said expenses are capital expenditure. 3. The learned CIT(A) erred in fact and in law in confirming the action of the AO in allocating the following expenses between DTA unit and EOU in the ratio of their respective turnover and reworking deduction claimed u/s.10B of the Act despite the fact that Appellant had made detail submission with respect to allocation made by it and it was requested that no further adjustment is required to be made. Particulars Total ....
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....dingly. 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 the detailed discussion please refer the relevant Para therein, we direct accordingly. Hence Ground no. 3 of the Assessee's appeal is partly allowed for the statistical purposes. The issue raised by the assessee in ground no. 4 is that the Ld.CIT (A) erred in treating the repair & maintenance expenses amounting to Rs. 3,00,745/- as capital expenditure. 93. The assessee in the year under consideration has incurred certain expenses on the purchase of the computer and the software amounting to Rs. 2,30,557.00 and Rs. 70,188.00 respectively. The assessee treated these expenses as revenue in nature. However, the AO was of the view th....
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.... 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. The assessee has raised the following grounds of appeal: 1. The learned Commissioner of the Income Tax-I, Baroda ("the CIT") erred in fact and in law in revising the assessment by invoking powers U/S. 263 of the act, which was completed by way of assessment made U/s.143(3) despite the fact that the conditions stipulated for invoking such extra-ordinary jurisdiction were not satisfied. 2. The learned CIT erred in fact and in law in directing the AO to allow depreciation @25% instead of 60% on computer software as done by the Assessing Officer in assessment u/s.143(3) of the Act. The o....
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....ected 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 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. Therefore the Hon'ble ITAT treated it as revenue expenditure the relevant extract of the order is reproduced as under: "21. We have heard the rival submissions and perused the material on record. The fact of incurring of expenditure for SAP on account of user licencee fee and on account of reimbursement is not in dispute. We find that Hon'ble Delhi High Court in case of CIT vs. Asahi India Safety Glass Ltd. (2011) 64 DTR (De....
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.... 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 of Bearing/Tools 6,06,86,727 8 FAG China company Ltd. China Export of components 9,78,159 9 The Barden Corpn.UK Export of components Reimbursement of expenses 5,25,32,054 11,75,260 10 Schaeffler Group USA INC d/b/a USA i) Export of Bearing 48,201 11 FAG Bearings Ltd., Canada i) Purchase of Raw material 24,45,445 12 Schaeffler Portugal S.A. i) Purchase of Raw m....
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....5h 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 Scheffer Group for automotive components where 11 transaction (agreement) available for comparable as external CUP. 104.12 The TPO on verification of S....
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....le 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 in absence of complete agreement no reason found for such higher Roya....
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....sessee 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. Th....
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.... to the EOU 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. Th....
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....dd, alter, amend, substitute, delete or modify all or any of the above grounds of appeal The first issue raised 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 ta....
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.... ambiguity that the assessee cannot claim the deduction of the insurance expenses paid to the foreign insurance companies. Therefore we do not find any 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. Respectf....
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....ue is that the learned CIT (A) erred in deleting the addition made by the AO for Rs. 56,70,732.00 treating the repairs of machinery expenses as capital in nature. 124. The assessee in the year under consideration 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 c....
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....tored 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 ground of appeal of the Revenue is dismissed. In 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 ....
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.... 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 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 th....
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....et, we note that the identical issue regarding the upward adjustment of the Royalty expenses of Rs. 2,60,77,000.00 has been decided by us in ITA 3400/Ahd/2010 vide Para no. 108 and in the appeal of the assessee in ITA 1197/Ahd/2012 vide Para No. 115 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 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 wi....
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....asing the total income of the Appellant from Rs. 1,46,05,00,286 to Rs. 1,51,97,16,785. 2. The learned C1T(A) erred in fact and in law in conforming the action of the AO in making addition of the un-utilized cenvat credit despite the fact that the unutilized CENVAT credit represents an asset on the debit side of the balance sheet which otherwise would have been claimed as an expenditure. 3. The learned CIT(A) erred in fact and in law in confirming the action of the AO in holding that 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.....