TaxTMI 
TaxTMI 
2025 (11) TMI 2044
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.... price in respect of back office support services. He however reduced the margin to 25.11% as against 27.02% taken by the TPO by accepting one comparable given by the Appellant during the course of appellate proceedings thereby confirming the adjustment made to the arm's length price at 1,84,16,207 as against 2,07,44,132 made by the TPO. 2. Expenses apportioned against income exempted under section 10(15), 10(34) and 10(35)-Disallowance u/s. 14A: Rs.33,49,50,562 [Para 27, page 15 of the CIT(A) order] On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the apportionment of expenses at Rs.44,89,00,000 as against 11,39,49,438 made by the Appellant to the income exempt under section 10(15), 10(34) and 10(35) of the Act by applying provisions of Rule 8D(2)(iii) of the Income-tax Rules, 1962. 3. Disallowance of Provision for expenses 125,73,03,916 [Paras 40 to 42, pages 21 and 22 of the CIT(A) order) On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the disallowance of the amount of 125,73,03,916 in respect of provision for expenses created in March 2009 on which no tax wasdeduct....
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.... to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore" ignoring the facts that the undertaking given by the assessee was unconditional, irrevocable, it made the assessee a primary obligor. it was a risky obligation, and had benefitted the AE for starting of business, and therefore needs to be adequately compensated by the AE." 5 On facts and circumstances of the case and in law the Ld CIT(A) erred in holding that "no transfer pricing adjustments was required to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore" and thereby overlooking Section 92B(1) by way of ignoring the fact that the unconditional undertaking given by the assessee in the letter of undertaking tantamount to "any service, benefit or facility" to its AE and therefore is an international transaction." 6. On facts and circumstances of the case and in law the Ld CIT(A) erred in holding that "no transfer pricing adjustments was required to be made on account of the comfort letter given by the assessee on behalf of its AE to the Monetary Authority of Singapore" ....
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....ncurred. 14. On facts and circumstances of the case and in law the Ld CIT(A) erred in deleting addition made on account of notional interest being considered to work out annual value of the property, without appreciating that the rent received was much lower than the value at which the property might reasonable be expected to let out. 3. Brief facts of the case as gathered from the orders of lower authorities are that assessee is engaged in the business of banking and related activities. The assessee filed its return of income for A.Y. 2009-10 declaring income of Rs. 5135.83 crore which was subsequently revised to Rs. 5178.64 crore. The case was selected for scrutiny. During assessment, the assessing officer noted that assessee has entered into various international transactionswith its associated enterprises (AE). The assessee reported such international transaction in its report furnished in Form 3CEB. Consequently, the reference under section 92CA(3) was made to TPO for computation of arm's length price of such transaction. The TPO after allowing opportunity to the assessee made adjustment of Rs. 2.07 crore towards under-charge mark up of back office support serv....
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....13 3 Acropetal Technologies (Seg) 26.00 4 Coral Hubs Ltd. (formerly Vishal Information Technologies Ltd.) 35.51 5 Cosmic Global Ltd. 43.11 6 Cross domain Solutions Ltd. 29.4 7 Informed Technologies India Ltd. 22.6 8 Infosys BPO Ltd. 24.49 9 Microgenetics Systems Ltd. 7.76 10 Omega Healthcare Services Pvt. Ltd. 15.43 11 Tata Commnications Transformation Services Ltd. 15.11 Average 27.02 5. The TPO made following adjustments Sr. No Particulars Amount Rs. A Operating Cost 12,18,80,915 B Mark up @ 27.02% 3,29,32,223 C ALP (A+B) 15,48,13,138 D Price actually charged 13,40,69,006 E Adjustment (C-D) 2,07,44,132 6. On appeal before ld. CIT(A), all the comparables selected by TPO was accepted however one of the comparable of assessee was allowed/accepted that is Maple eSolutions Ltd. Thus, further aggrieved the revenue has challenged the acceptance of Maple eSolutions Ltd. and the assessee in its grounds of appeal has challenged the adjustment of other comparables and adjustment upheld to the extent of Rs. 1.84 crore out of total adj....
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....a Birla Minacs Worldwide Ltd., Microgenetics Systems Ltd. and Omega Healthcare Services Pvt. Ltd. So far as other 8 remaining comparable companies are concerned, we find that out of 8 comparables, 6 comparables namely Accentia Technology Ltd., Acropetal Technologies, Coral Hubs Ltd., Cosmic Global Ltd., Cross domain Solution Ltd., and Infosys BPO Ltd., were excluded by co-ordinate bench of Tribunal in assesse's own in A. Y. 2007-08 and 2008-09. Therefore, respectfully following the same all 6 comparables are directed to be excluded from final set of comparables. So far as remaining 2 comparables that Informed Technology India Ltd. and Tata Communication Transformation services Ltd., we find that both the comparables are in business of BPO and their area of operations are quite different. Moreover, Informed Technology Ltd. has a low employee cost of 27% to sales. Tata Communication is engineering and design implementation. Thus, in our view both the companies are not comparable with the assessee company. The TPO / AO is directed to exclude all such 8 such comparables and recompute the adjustment with regard to back office support services. In the result, ground no. 2 & 3 of reve....
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....hve gone through the orders of lower authority carefully. We find that ld. Representative of both the parties have fairly explained the fact. Considering the decision of Mumbai Tribunal in Asian Paints Ltd. (supra), the AO/TPO is directed to reduce/chargeby the rate of 0.04% as per decision in Asian Pain (supra). In the result, ground no. 4, 5 & 6 of revenue's appeal are partly allowed. 14. Ground no. 7 in revenue's appeal relates to Mark to Market loss (MTM) on forex derivatives. Facts relating to this issue is that assessee entered into derivates transaction in the course of its banking and treasury business in accordance with the guidelines by Reserve Bank of India (RBI). The assessee acts as a counter party to the corporate to enable them to hedge the risk and also participate in the financial derivatives market as a part of its treasury activities. The assessee deals in derivaties for its own balance sheet management and also for market making purposes, whereby the assessee offers its own derivative products to the customers, enabling them to hedge the risk. The assessee also manages its foreign exchange and interest rate risk to hedge its own borrowings. The detail....
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....t order disregarded the suo moto disallowances and recomputed disallowance under section 14A of Rs. 557.21 crores. Suo moto disallowance of Rs. 11.39 crores was reduced. The disallowance made by assessing officer includes Rs. 523.72 crores as interest cost and Rs. 33.49 crores as administrative expenses as per rule 8D(2)(ii) and rule 8D(2)(iii) respectively. On appeal before ld. CIT(A), the disallowance of interest expenses was deleted on the basis of decision of jurisdictional High Court in Reliance Utilities and Power Lt. 313 ITR 340 by taking view that investments were made from interest available with the assessee-bank. The administrative disallowance of Rs. 33.49 crores was sustained. Thus, both the parties have challenged the action of ld. CIT(A). The revenue has challenged the action of ld. CIT(A) in deleting the interest disallowances of Rs. 523.72 crores. On the other hand, the assessee has challenged the action of ld. CIT(A) in sustaining the disallowance of administrative expenses. 19. The ld. CIT-DR for the revenue supported the order of assessing officer in his appeal as well as in assessee's appeal. 20. On the other hand, the ld. AR of the assessee submits t....
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....& 4951/M/2014, in para 11.3, the co-ordinate bench on furnishing fresh disallowance of rule 8D(2)(iii) restored the matter to assessing officer to consider such suo moto disallowance. Before us the ld. AR of the assessee has furnished the following fresh working of disallowance on account of administrative expenses as per rule 8D(20(iii). Particulars March, 2009 Opening Investment Shares (equity and preference) 957.66 Subsidiaries and/or joint ventures 1129.27 Venture funds 1177.23 Tota -a 3264.16 Closing Investment Shares (equity and preference) 850.07 Subsidiaries and/or joint ventures 1423.43 Venture funds 1256.07 Tota -b 3529.56 Average Investment (a+b)/2 3396.86 Section 14A disallowances c) Administrative expenses (0.5&) 16.98 Total 16.98 22. Thus, considering the decision of co-ordinate bench, we direct the assessing officer to verify the following working of suo moto disallowance and pass the order by following the decision of special bench of Delhi Tribunal in ACIT vs Vireet Investment P Ltd. In the result, the ground no. 8 of revenue's appeal is di....
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....year 2451,44,58,129/- Less; Credit balance as on April 1, 2008 Viz. Deduction under section 36(1)(viia) claimed as per original return for A.Y. 2007-08 filed on September 30, 2008) 430,80,00,960/- Bad debts claimed under section 36(1)(vii)of the Act 2020,64,57,169/- 27. The bad debts claim of the assessee consists of bad debts written off on retail and corporate portfolio and loss of sale of asset (loans) transferred to asset reconstruction company. (i) Corporate bad debts Rs. 57,28,68,568/- (ii) Retails bed debts, (a) Vehicles/ home/ personal, Rs. 1025,26,53,614/- (b) Credit cards- Rs. 964,36,80,917/- (c) Loss on sale to ARCs Rs. 310,03,60,855/- (d) Others - Lonas on SME and SEG Rs. 94,48,94,175/- 28. The assessing officer disallowed entire claim of bed debts by taking view that in earlier years similar claim was disallowed.it was also held that the assessee has not satisfied the condition of section 36(1)(vii) that the assessee failed to prove that the debts have become bad. On appeal before ld CIT(A) entire claim of the assessee was allowed. The ld CIT(A) while allowing relief to the assessee ....
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....ance discount expenses on issue of discount of rupee and foreign currency bonds of Rs. 28,11,296/-. Fact leading to the additions are that assessee incurred certain expenses by way of discount and issue expenses on rupee loan, debenture and foreign currency bonds during the period relevant to A.Y. 2002-03. In the assessment for that year, the allowance of such expenses had been restricted on the ground that they were required to spread over the period of concerned debentures and bond in accordance with decision of Supreme Court in Madras Industrial Development Corporation 225 ITR 802. The addition in A.Y. 2002-03 were upheld by ld. CIT(A) and that appeal at the time of assessment was pending. The assessing officer on the basis of order of his predecessor disallowed such expenses. The ld. CIT(A) on the prayer of assessee that in the event of success in appeal of A.Y. 2002-03, the deduction allowed in this year will be offered to tax. The ld. CIT(A) recorded that in each succeeding year similar directions were given. The ld. CIT(A) further noted that deferred revenue expenses of Rs. 28,11,296/- relatable to the period presently under consideration would be a permissible deduction and....
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....set 2,06,64,72,397/- 2 Loss on discrepent notes 4,42,71,284/- 3 Fraud cases 30,45,489/- 4 Gain on disposal of non-banking assets (15,81,89,231) 5 Others 5,58,84,796/- Total 2,01,14,84,735/- 37. The assessing officer disallowed that all these items were in the nature of bad debts and the assessee has not proved that such losses had actually been incurred and disallowed. The ld. CIT(A) in para 34 & 35 of his order considered this issue and held that such losses had been incurred in the course of regular business. Complete details were provided to the assessing officer. Further, similar losses has been accepted by assessing officer in assessment proceeding for A.Y. 2011-12. Thus, assessing officer was not justified in disallowing such claim and allowed full relief to the assessee. Aggrieved by the order of ld. CIT(A), the revenue is in appeal before Tribunal. 38. The CIT-DR for the revenue supported the order of assessing officer. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR submits that complete details and bifurcation was provided to the assessing officer. The assessing office....
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....security deposit and thereby added Rs. 8,40,000/-. The ld. CIT(A) deleted such addition by holding that there is no statutory provision for enhancing rental value. We find that on similar ground of appeal the assessee consistently been allowed relief by Tribunal in A.Y. 2002-03 in ITA No. 836/M/2008 and ITA No. 392/M/2008 dated 07.07.2017, which was followed in A.Y. 2005-06 in ITA No. 3841 & 5276/M/2013 dated 03.11.2017. Thus, we do not find any infirmity in the order of ld. CIT(A) for our interference. In the result, this ground of appeal is also dismissed. 43. Ground no. 3 in assessee's appeal relates to disallowance of provision of expenses. Facts leading to this addition are that assessee made provision as on 31.03.2009, for year and expenses of Rs. 125.73 crore which comprises as a courier expenses, staff welfare, printing and stationery, professional fess, conveyance etc., the provision made in particular period was reversed on 01.04.2009. The expenses for which provision was made were debited to the respective account when payments were made and tax were deducted wherever applicable. The assessing officer disallowed such amount by taking view that provision for year e....