TaxTMI 
TaxTMI 
2021 (12) TMI 1546
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....esolution Panel ('DRP'), Bengaluru dated September 13, 2017, under section 253 of the Income-tax Act, 1961 ('the Act') on the following grounds: That on the facts and in the circumstances of the case and in law and based on the directions of the DRP: A. General 1. The order of the learned AO and directions of the Hon'ble DRP are based on incorrect interpretation of law and therefore are bad in law. 2. On the facts and in the circumstances of the case and in law and based on the directions of DRP, the learned AO erred in assessing the total income of the Appellant at INR 6,95,28,295 as against returned income of INR 5,12,80,580 computed by the Appellant. 3. The learned AO has erred, in law and facts, by considering an incorrect amount of interest under Section 234B of the Act and Section 234C of the Act in the assessment order. 4. The learned AO erred, in law and in facts, in initiating penalty proceedings u/s 271(1)(c) of the Act. B. Grounds of appeal relating to Corporate tax matters 5. The learned AO has erred, in law and facts, by disallowing rent expense of INR 7,97,793 credited by the Assessee t....
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....not mentioned specifically herein above) included by TPO or Hon'ble DRP in comparable set and upheld by Honble DRP at the time of hearing. Although some of the companies were chosen as comparables in transfer pricing study, upon consideration of more details some of these comparables in case found to be not comparable for different reasons, appellant craves leave to urge the same at the time of hearing. 13. The learned TPO/ learned AO have erred, in law and in fact, by rejecting certain comparable companies identified by the Appellant using the employee cost less than 25% of the total revenues as a comparability criterion. 14. The learned TPO/ learned AO have erred, in law and in fact, by not applying a higher threshold while applying the turnover filter. 15. The learned TPO/ learned AO have erred, in law and in facts, by applying the filter of companies having different accounting year for rejecting the comparable companies (i.e., companies having accounting year other than March 31 or companies whose financial statements were for a period other than 12 months); 16. The learned TPO/AO have erred in law and in fact, by erroneously co....
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.... an earlier stage is neither wilful nor wanton but raised by way of abundant caution. 3. We have heard both the parties and perused the material on record with regard to adjudication of additional grounds. In our opinion, all the material required for adjudication of additional grounds is already on record and there is no necessity of any investigation of fresh facts so as to decide and accordingly we place reliance on the judgment of Hon'ble Supreme Court in the case of NTPC Vs. CIT as reported in 229 ITR 383 and we are admitting these additional grounds for adjudication. 4. At the time of hearing, Ld.AR not pressed ground nos. 1 to 4 which are general not pressed before us. 4.1 Ground nos. 9 to 17, 19 and 20 and additional ground no. 22 are also not pressed. Ground no. 5:- 5. The facts of this issue are that the company created rent equalisation reserve of Rs. 7,97,793/- during the year. This is only a provision, the assessee company was requested to showcase why the provision should not be disallowed by the AO. The contention of the Ld.AR is that this was provided in the books of accounts on the basis of AS-19 and this issue was considered by Hon'ble Delhi Hi....
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....nion, as long as the method employed for accounting of income meets with the rudimentary principles of accountancy, one of which, includes offering only revenue income for tax, we cannot find fault with the assessee debiting lease equalization charges in the AYs in issue, in its profit and loss account. This represents true and fair view of the accounts; a statutory requirement under Section 211(2) of the Companies Act. As explained by us above, the rationale is that over the entirety of the lease period the said debit would work itself out." 6. On the other hand, the Ld.DR submitted that this only a provision and it cannot be allowed and actual payment has been allowed from year to year and there is no error in the order of the lower authorities. 7. We have heard both the parties and perused the material on record. The main contention of the Ld.AR is that this rent equalisation reserve created to safe guard financial burden in subsequent Assessment Years and the actual payment of enhanced rent has not been claimed by assessee in the subsequent years and disallowance made in this AY as well as in the subsequent Assessment Years which will result in total disallowance which ca....
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.... case Nandini Delux vs. ACIT in ITA Nos. 446 to 448/Bang/2013, order dated 05.12.2014 wherein held as under. "7.4.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial decisions cited. It is not in dispute that the assessee has taken the hotel on lease. As per the details on record it is seen that the assessee has incurred expenditure on renovation of plant design system, computer cabling, fire detection and alarm system, card access system, plumbing and air conditioning work, electrical works, fixing of carpets, interior work, etc. In the course of assessment proceedings, the Assessing Officer on examination of the same observed that this expenditure indicated that major renovation works had been undertaken and therefore cannot be treated as revenue expenditure. The Assessing Officer, referring to Explanation 1 to Section 32 of the Act, was of the view that the assessee has incurred capital expenditure and therefore is entitled to depreciation thereon @ 10%. Accordingly, the Assessing Officer disallowed the assessee's claim for the aforesaid expenditure to be allowed as revenue expenditure, treat....
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.... on lease, Parliament intended to grant / allow depreciation on the capital expenditure incurred on such leased premises. On a careful perusal of the provisions of section 32(1A) of the Act and the circumstances in which it was introduced in the statute, it is clear that in case revenue expenditure was incurred by the assessee on the premises taken on lease, the question of allowing any depreciation u. 32(1A) of the Act would not arise for consideration. In other words, section 32(1A) of the Act introduced w.e.f. 1.4.1971 by Taxation Laws (Amendment) Act, 1970 would not be applicable in case the assessee incurred revenue expenditure on the leased premises. 7.4.5 However, sub-section 1A of Section 32 of the Act introduced by Taxation Laws (Amendment) Act, 1970 was omitted and Explanation 1 to Section 32 was introduced by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 w.e.f. 1.4.1988. This was done when the concept of depreciation on individual asset was changed to depreciation on the block of assets. When Parliament introduced depreciation on block of assets, sub-section (1A) of Section 32 of the Act was deleted, an identical provision was incorporated in ....
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....xpenditure on the leased premises, the assessee has neither obtained any enduring benefit nor has any new capital asset has come into existence. The assessee continued to run the hotel in the very same leased premises. It is not anybody's case that the seating capacity was not increased after the expenditure. The expenditure incurred was only for carrying on the business and was an integral part of the profit earning process. Therefore, we find that no case has been made out to say that the assessee has obtained any enduring benefit by virtue of this expenditure. The nature of the work undertaken by the assessee is to carry on the business and not obtain any asset. Further, as already observed, no capital asset of an enduring nature came into existence. In other words, the assessee has not acquired any asset / income earning apparatus. It is well settled principle of law that the expenditure incurred for acquisition of an asset is a capital expenditure and expenditure incurred in the process of earning profit is revenue expenditure. In the case on hand, we are of the view that the assessee incurred the expenditure for efficient running of the business and therefore the expendit....
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....erial available on record. The contention of the Ld.AR is that correct MAT credit benefit to be given to assessee. We direct the AO to give correct MAT credit to assessee. This issue is after verification of records remitted to the file of AO for fresh decision. TP Issues:- Ground No. 21:- 14. The assessee want exclusion of following comparables. i. CG-VAK Software and Exports Ltd. ii. Larsen and Toubro Infotech Ltd. iii. Persistent Systems Ltd. 15. At the time of hearing, the Ld.AR of assessee has not pressed the comparable CG-VAK Software and Exports Ltd. and dismissed this issue as not pressed. Larsen & Toubro Infotech Ltd.- 16. The CIT (A) observed as under on this: "Having considered the submissions, and on perusal of the Annual Report, for the financial year 2012-2013, from the Directors Report it is evident that the IT services have been recognized in three clusters, i.e., service cluster, industrial cluster and telecom cluster. Product engineering services does not mean the engineering services but as per page-1 of the Directors Report, "Product engineering service business unit (PESBU) of the company has been....
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....T Infotech Ltd. is concerned, the Tribunal vide para 17 of the aforesaid order came to a similar conclusion to hold that L&T Infotech should not be regarded as a comparable company. In the light of judicial precedents which remain uncontroverted, we are of the view that the aforesaid two comparable companies should be excluded from the list of comparable companies." 18. Accordingly we direct the TPO to exclude this from the list of comparables while determining the ALP of international transactions. Persistent Systems Ltd.:- 19. As this was not considered as a comparable in the case of MetricStream Infotech (India) Pvt. Ltd. vs. DCIT (supra), we direct the TPO to exclude this from the list of comparables while determining the ALP of international transactions. Ground no. 18 with regard to negative working capital adjustment 20. We have heard both the parties and perused the record. This issue was considered by the Tribunal in the case of MetricStream Infotech (India) Pvt. Ltd. vs. DCIT(supra) as follows. "20. The last submission of the ld. Counsel for the assessee was that the TPO while concluding his order u/s. 92CA of the Act, allowed adjustment on account....