TaxTMI 
TaxTMI 
2024 (12) TMI 1675
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....e lease and hence, accordingly, were eligible revenue expenditures. 2. The learned CIT(A) erred in assuming that the assessee still operates from the old address considering the inadvertent mentioning of the old address in its submissions during the CIT proceedings, thereby completely ignoring the new lease agreement executed by the assessee from 09/12/2022. Also, the learned CIT(A) erred in treating the new lease agreement as a service agreement." 4. The facts of the case, in brief, are that the assessee is a company engaged in the business of software related services and filed its return of income 28.11.2013 declaring total income at Rs. Nil. The case was selected for scrutiny under CASS and accordingly notices u/s 143(2) and 142(1) were issued along with questionnaire. After considering reply of the assessee, the Assessing Officer made following three disallowances /additions to the returned income :- (a) Addition of Rs. 4,40,88,228/- on account of disallowance of leasehold improvement expenses of Rs. 4,64,08,661/-. (b) The assessee has not set-off of unabsorbed depreciation of past years of Rs. 36,68,211/- before computing current year's deduction....
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.... below: xxxxx Therefore it appears that the appellant is continuing to operate in the old premises even today, 12 years after the initial lease started and after the expiry of initial lease agreement. The mention of the supposedly old address in the letter dtd 19.10.2023 was pointed out to the AR during the hearing on 06.11.2023, but the old address is repeated in the letter dtd 10.11.2023 as seen above. One can infer safely that the appellant till today is continuing in the old office at Magarpatta. I agree with the AO that the nature of expenses are not in the nature of current repairs or renovation, but capital expenditure to make the space ready for functioning of a office by building glass partition, false ceilings, furniture and fixtures so on and so forth. The provisions of explanation-1 to Section 32 extracted above is directly applicable in the existing facts of the case. In any case, the AO has granted 10% depreciation rate on such expenditure and thus appellant would have recuperated this expenditure over so many years now. The appellant has furnished a new agreement for its claim of shifting to Kharadi. But the agreement is a service agreement and does....
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....t. Ltd. and the Developer, M/s. Magarpatta Township Development & Construction Company Ltd.- SEZ has also issued no objection certificate. Ld. Counsel of the assessee tried to demonstrate that the lease property which was obtained by him has been left by the company, therefore, the contention of the Assessing Officer and Ld. CIT(A) that the expenditure of Rs. 4,64,08,661/- incurred by the assessee has brought enduring benefits to the assessee and not in the nature of current repairs is not correct. Ld. Counsel of the assessee further submitted that the expenditure on leasehold improvement is with respect to electrical fittings, interior decoration, expenses of renovation of leasehold property as per assessee's business requirement and since the assessee is not owner of the leased property, the said expenditure is coterminous with the lease and thus the assessee is not going to enjoy any enduring benefit from it. Accordingly, it was requested before the bench to delete the disallowance of Rs. 4,64,08,661/- incurred towards leasehold improvements being expenditure in nature of revenue. 9. Ld. DR appearing from the side of the Revenue relied on the order passed by Assessing Officer....
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....acts and the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to compute deduction u/s 10AA of the Income Tax Act without setting off of brought forward unabsorbed depreciation of Rs. 38,68,211/-. iii. On the facts and the circumstances of the case and in law, the Ld. CIT(A) was not justified in interpreting the words "so arranged" used in section 80IA(10) to impose burden on AO to prove tax avoidance before invoking section 80IA(10), of the Act when bare reading of the provision does not impose such burden of proving tax avoidance on AO. iv. Oh the facts and the circumstances of the case and in law, the Ld. CIT(A) was not justified in imposing burden of proving tax avoidance ignoring the fact that section 80IA(10) of the Act is a "domestic transfer pricing" provision and proving tax avoidance is not one of the pre-condition for invoking transfer pricing provisions. v. On the facts and the circumstances of the case and in law, the Ld. CIT(A) was not justified in concluding that net profit percentage of the assessee could not be considered "more than ordinary" in the I.T industry and disregarding the fact that tax avoidance is....
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....e profits of comparable entities in the TP study. 5.3.1 However I feel that AO has to establish the arrangement before proceeding to disregard the profits declared by the assessee and determine the amount of profits which may reasonably deemed to have been derived from such business. There are two pre-requisites to invoke section 80-IA(10) Viz. (i) existence of a close connection between the assessee carrying on eligible business and any other person; and, (ii) that the course of business is so arranged that the business transacted produces to the assessee more than the ordinary profits. There is no doubt regarding the close connection between the appellant and its AE. But The basic condition, which is to be satisfied for invoking the provisions of Section 80-1A(10) is that the business transactions are so arranged so as to produce to the assessee more than the ordinary profits, which might be expected to arise in such eligible business. The Assessing Officer has to indicate any material or evidence to disclose any such arrangement between the assessee and the other person. This view has been held in various decisions including jurisdictional honourable I....
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....uested before the Bench to confirm the order of Ld. CIT(A). 17. We have heard Ld. Counsels from both the sides and perused the material available on record as well as case laws relied on by both the parties. We find that the decision of the Jurisdictional Tribunal in the case Calsoft Pvt. Ltd. (supra) wherein deletion of similar addition was approved by the Tribunal by observing as under :- "4.3 We find that the Hon'ble Karnataka High Court in the case of CIT & Another Vs. H.P. Global Soft Ltd. (2012) 342 ITR 263 (Kar), wherein, it was found that the profit margin as revealed by the assessee is a reasonable profit in comparison to other similar units. The Assessing Officer having failed to show that is it a course of business, so arranged as to result in inflated profit provisions of section 10I(9) could not be to reduce the deduction under the provisions of section 10A. We also found that ITAT Mumbai 'D' Bench in the case of ITO Vs. Novel Consumer Products (P) Ltd. (2006) 7 SOT 615 (Mumbai), wherein the Bench held that in the absence of any efforts by the Assessing Officer to ascertain the exact profit rate from comparable case, sub-section of section 80IA, has not jus....