TaxTMI 
TaxTMI 
2025 (6) TMI 653
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....yment of royalty to Inventio AG as Nil instead of INR 20,49,44.986 by: a. ignoring the transfer pricing documentation prepared by the Appellant; b. exceeding his jurisdiction in questioning the commercial expediency of the Appellant for payment of royalty, c. exceeding his jurisdiction in applying the benefit test to the payment of royalty and holding that the Appellant had not received any benefit from payment of royalty; d. not taking into cognizance the commercial/business rationale justifying the payment of royalty, documents demonstrating availing of technology/tradename/trademark, intercompany agreement and the benefit test documentation submitted by the Appellant; e. holding that the Appellant had not been provided with a single new technology from the AE during the year, for which the royalty payment was necessary, and f. holding that payment of royalty should not be made by the Appellant as the Schindler Group had certain obligations towards the Appellant as shareholder activity. The Appellant prays that the addition of INR 20,49,44,986 be deleted. Ground. No. 2: On the facts and in the circumstances of the case and in law, the TPO/ DRP erred in determini....
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....79,95,590 appearing in Form 26AS, thereby resulting in a short credit of Rs. 26,36,208 to the Appellant. The Appellant prays that the Ld. AO be directed to allow additional TDS credit of Rs. 26,36,208. Ground No. 6: On the facts and circumstances of the case and in law, the Ld. AO has erred in not granting MAT credit of Rs. 1,87,30,304 under section 115 JAA of the Act. The Appellant prays that the Ld. AO be directed to allow the MAT credit of Rs. 1,87,30,304 as per section 115JAA of the Act. Ground No. 7: On the facts and circumstances of the case and in law, the Ld. AO has computed interest (consequential) of Rs. 5,69,46,890 under section 234B of the Act. The Appellant prays that the Ld. AO be directed to re-compute interest under section 234B of the Act. Ground No. 8: On the facts and in the circumstances of the case and in law, the Ld. AO has erred in computing interest of Rs. 22,61,164 under section 234C of the Act. The Appellant prays that the Ld. AO be directed to re-compute interest under section 234C of the Act on the basis of the returned income of the Appellant. Ground No. 9: On the facts and in the circumstances of the case and in law, the Ld. AO ....
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....e under the normal provisions of the Act. It was submitted that the AO has taken note of the said fact in the assessment order that the impugned amount of provision was reduced from the debtors balance appearing in the Balance Sheet and accordingly constituted an actual write off and the assessee's claim under the normal provisions of the Act was allowed by the AO. At the same time, it was submitted that while computing the book profits, the AO has made an addition of the said amount under clause (i) of the Explanation to Section 115JB of the Act. 9. It was submitted that a similar issue had arisen in assessee's own case for the AY. 2008-09 and the same has been decided by the Co-ordinate Bench of the Tribunal in assessee's favour in M.A. No. 89/Mum/2022, following the decision of the Hon'ble Bombay High Courtin case of CIT vs. Tainwala Chemicals and Plastics India Ltd. 215 Taxman 153 and the Hon'ble Karnataka High Court decision in case of CIT vs. YokogawaIndia Ltd. 204 Taxman 305. 10. It was further submitted that the assessee also wishes to place reliance on the decision of the Hon'ble Karnataka High Court in case of CIT vs. Kirloskar Systems Ltd. 220 Taxman 1 (Kar) and the la....
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....tions of section 36(1)(vii) are satisfied. Assessee also placed reliance on the recent ruling of Hon'ble Mumbai Tribunal decision in the case of KEC International Ltd Vs. DCIT (33 taxmann.com 243) which was passed by relying on the decision of the Hon'ble Supreme Court in the case of Vijaya Bank reported in 323 ITR 166 and therefore, requested that their claim of provision for bad and doubtful debts be allowed. The assessee company also relied upon the judgement in the case of Arrow Coated Products Ltd vs ACIT (136 ITR 315) (The ITAT, Mumbai) 6.2 The facts of these cases do not match to that of the assessee's case. The submissions of the representative have been duly considered with regard to the computation of income under normal provisions in view of several case laws. However, the aforesaid ruling does not provide any directions with regard to the computation of book profits as per the provisions of u/s. 115JB of IT Act. 6.3 In the instant case, the amount of Rs. 1,09,72,163/- representing provision for doubtful debts has been held to constitute a write off as the same has been reduced from the debtors appearing in the balance sheet. Therefore, by virtue of such ....
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....s prepared in accordance with the Companies Act, in our view, the meaning of the terms "amount or amounts set aside as provision for diminution in the value of any asset has to be understood only in accordance with the Companies Act. The term "Provision" has been defined in Part III to Schedule VI as under: "7. (1) For the purposes of Parts I and II of this Schedule, unless the context otherwise requires:- (a) The expression "Provision" shall, subject to sub-clause (2) of this clause, mean any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy" Thus, it may be noted that, according to the definition of the term "Provision" given in Schedule VI of the Companies Act, even the "amount written off is treated as "Provision". Hence the contention of the assessee that the Actual er writing off" changes the character of "Provision" does not hold good under the Companies Act. Since the Profit and Loss Account is prepared u/s. 115JB of the Act in accordance with Schedule VI of the Companies Act, the "Prov....
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....ent case, the Tribunal recorded a finding of fact that the respondent-assessee has debited the provision of doubtful debt to the profit and loss account and correspondingly reduced the assets by reducing the amount of unsecured loans. On the aforesaid facts, the Tribunal held that this would amount to writing off of the debt. Thus, on examination of facts it concluded that the respondent-assessee has written off the loan and would be entitled to the claim of bad debts. The Tribunal by the impugned order also recorded a finding of fact that once the respondent-assessee has lent surplus money and offered the interest to tax as business income, then the activity of the respondent-assessee of lending money is a business activity. Therefore, the debt qualifies for deduction under Section 36(1)(vii) read with Section 36(2) of the Income Tax Act, 1961. In view of the finding of fact recorded by the Tribunal that the provision has been written off and reliance placed on the decision of the Apex Court in the matter of Vijaya Bank (supra), we see no reason to entertain question (c)" 13. Further, referring to the second related issue, the Hon'ble Bombay High Court held that for the purposes ....
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....ion for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the explanation to section 115JB. The judgment in case of Deepak Nitrite Ltd. (supra) fell in the former category whereas from the brief discussion available in the judgment it appears that case of Indian Petrochemicals Corp. Ltd. (supra), fell in the later category" 15. In the instant case, during the course of hearing, the Ld. AR has taken us through the audited financial statements of the assessee company for the year ended 31.03.2013 wherein in Schedule 20 (other expenses), the assessee has debited a sum of Rs. 1,09,72,163/- towards provision for doubtful debts and advances in the profit and loss account. Further, our reference was drawn to Schedule 11.1 (Trade receivable) forming part of the balance sheet wherein the opening balance for provision for doubtful debts receivable has been shown at Rs. 21,10,44,951/- and the closing balance at Rs. 22,20,17,114/- resulting in additional provision of Rs. 1,09,72,163/- which has been reduced from the gross trade receivable of Rs 50,21,39,062/- and only the net trade receivable of Rs 28,01,21,948/- has been shown in the balance....
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....ot require any separate adjudication. 22. Ground No. 9 relates to initiation of penalty proceeding u/s. 271(1)(c) of the Act. The same is premature in nature and, therefore, the same is dismissed. ITA No. 7311/Mum/2018 (AY. 2014-15): 23. In this appeal, the assessee has taken the following grounds of appeal: Ground No. 1: On the facts and in the circumstances of the case and in law, the Transfer Pricing Officer (TPO)/Dispute Resolution Panel ('DRP") erred in determining the Arm's Length Price (ALP) of transaction pertaining to payment of royalty to Inventio AG as Nil instead of INR 29,78,53.300 by: a. ignoring the transfer pricing documentation prepared by the Appellant; b. exceeding his jurisdiction in questioning the commercial expediency of the Appellant for payment of royalty: c. exceeding his jurisdiction in applying the benefit test to the payment of royalty and holding that the Appellant had not received any benefit from payment of royalty, d. not taking into cognizance the commercial/business rationale justifying the payment of royalty, documents demonstrating availing of technology/tradename/trademark, intercompany agreement and the benefit test docu....
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....70,14,1770 under section 234B of the Act. The Appellant prays that the Ld. AO be directed to re-compute interest under section 234B of the Act. Ground No. 5: On the facts and in the circumstances of the case and in law, the Ld. AO/ DRP erred in initiating penalty proceeding under section 271(1)(c) of the Act. The Appellant prays that the Ld. AO be directed that to drop the penalty proceedings initiated under section 271(1)(c) of the Act." 24. In Ground No. 1, the assessee has challenged the Transfer Pricing (TP) adjustment on account of payment of Royalty to Inventio AG. In this regard, during the course of hearing, the Ld.AR submitted that the assessee and the Central Board of Direct Taxes (CBDT) have entered into a Unilateral Advanced Pricing Agreement (APA) on 15-10-2024 for the period starting from FY. 2015-16 to FY. 2019-20 and also covering the period of FY. 2011-12 to FY. 2014-15 under the Rollback provisions for certain transactions between the assessee and its Associated Enterprises (AEs). It was submitted that the impugnedtransaction of payment of Royalty to Inventio AG stands covered under the said APA and hence, the assessee wishes to withdraw the Ground No.1 p....