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115 orders · Page 3 of 3
The Tribunal first admitted the additional ground regarding the validity of DRP directions issued without DIN, following the Supreme Court's judgment in M/s National Thermal Power Co. Ltd. However, as the primary issue regarding the capacity transfer addition was decided on merits, this additional ground became academic. The Tribunal dismissed the grounds related to reassessment jurisdiction and interconnect charges as not pressed. On the main issue of capacity transfer, the Tribunal held that the revenue failed to discharge its onus to prove that any taxable event occurred in AY 2012-13. The AO's basis for taxation was the commencement of the EIG project in FY 2011-12, but the revenue did not provide concrete evidence to substantiate this claim or refute the assessee's evidence, including an email from the EIG Management Committee Chairman confirming commencement in February 2011. The Tribunal noted that the AO sought further time to submit a conclusive report, indicating a lack of supporting material. Citing the Supreme Court's decision in K.P. Varghese v. ITO, the Tribunal held that the assessee cannot be burdened with proving a negative. Therefore, the addition of Rs. 102 crores was deleted as there was no basis for taxation in AY 2012-13. Grounds 15-17 (consequential) were also rendered academic.
The Tribunal, in its decision, focused on the benchmarking of royalty payments. It referred to the OECD Guidelines on the application of the Transactional Profit Split Method (PSM), emphasizing the need for unique and valuable contributions from each party and a two-sided functional analysis. The Tribunal noted that the assessee leverages technology from the AE and does not contribute unique intangibles. Therefore, PSM was deemed not applicable. The Tribunal held that the Transactional Net Margin Method (TNMM) is the Most Appropriate Method (MAM) for benchmarking the royalty transaction, citing its own previous orders and the Karnataka High Court's affirmation of TNMM as MAM for earlier assessment years. The Tribunal directed the AO to re-determine the ALP by applying TNMM as the MAM, after providing the assessee an opportunity to be heard. The issue regarding the determination of ALP under PSM was considered academic. The Tribunal also referred to its decisions for AY 2013-14 and 2014-15, where TNMM was applied as MAM. The grounds related to the determination of ALP under PSM were thus allowed in favor of the assessee. The Tribunal also noted that grounds 30 & 31 were consequential. The appeal was partly allowed for statistical purposes.
The Tribunal held that the admission of the assessee's husband in his statement under section 132(4) cannot bind the assessee. Considering the evidence of bills for jewellery purchased in 2009 and the assessee's substantial declared income over several years, her creditworthiness to purchase the jewellery was established.
The Tribunal held that the AO's extrapolation of unaccounted sales was not based on evidence. It also ruled that the assessee was eligible for presumptive taxation under Section 44AD and that treating the entire sales as income was incorrect, opting for an estimated income.
The Tribunal noted a contradiction between the Managing Director's admission of forfeiture and the continued reflection of the amounts as liabilities in the assessee's balance sheet. It also observed that the books of the parties who paid the advances were not examined.
The Tribunal noted that similar issues in the assessee's own case for earlier assessment years were set aside to the AO/TPO for reconsideration. The Tribunal found that the DRP/TPO had not properly considered the assessee's objections and had followed previous directions that were themselves set aside.
The Tribunal held that employees' contributions to PF and ESI must be remitted before the due date as per the explanation to Section 36(1)(va) to be allowable as a deduction. Therefore, the disallowance was upheld.
The Tribunal set aside the ex parte order of the CIT(Appeals) and remitted the issue back to the CIT(Appeals) for a decision on merits. The assessee was granted one more opportunity to present their case.
The Tribunal held that Rule 128 of the Income Tax Rules cannot override the DTAA provisions and that filing Form 67 is a procedural and directory requirement, not mandatory. Therefore, the assessee is entitled to foreign tax credit.
The Tribunal confirmed the CIT(A)'s findings, holding that the assessee failed to produce any evidence to substantiate the brokerage payment. Therefore, the disallowance was upheld.
The Tribunal held that employee's contribution to PF/ESI must be paid before the due dates specified in the respective Acts to be eligible for deduction. Payment before the return filing due date is not sufficient for employee contributions.
The Tribunal condoned the delay in filing the appeal, finding that the assessee was likely unaware of the ex-parte order. The NFAC's order was set aside, and the case was remanded for a decision on merits.
The Tribunal addressed the grounds of appeal. Regarding Ground No. 2, concerning the imputation of interest on outstanding receivables, the Tribunal noted that this issue was settled by a Coordinate Bench in the assessee's own case for AY 2017-18. The Coordinate Bench had held that outstanding receivables are akin to a loan advanced to a foreign AE and constitute an international transaction. However, the Tribunal also considered the argument that in TNMM, working capital adjustments subsume sundry creditors, and computing interest on receivables would amount to double taxation. The Tribunal acknowledged the Delhi Tribunal's decision in Orange Business Services India Solutions Pvt. Ltd. vs. DCIT, which emphasized the need for proper inquiry by the TPO into the impact on working capital. The Tribunal ultimately held that Ground No. 2 was partly allowed for statistical purposes. For Ground No. 3, concerning export incentives, the Tribunal considered the arguments and judicial precedents, including the Mumbai Tribunal's decision in Welspun Zucchi Textiles Ltd. v ACIT, which held that DEPB benefit should be considered part of turnover and operating in nature. The Tribunal also referred to the OECD Guidelines and CBDT's Safe Harbour rules. It concluded that export incentive income, being directly linked to the provision of IT-enabled services, qualifies as operating revenue for computing the operating profit margin. Therefore, Ground No. 3 was allowed in favour of the assessee. Grounds 1, 4, and 5 were not pressed by the assessee's counsel. Ground 6 (penalty under Section 270A) was considered premature, and Ground 7 (interest under Section 244A) was deemed consequential. The appeal was partly allowed for statistical purposes.
The Tribunal, following the Supreme Court's decision in the Totgars Co-operative Sale Society Ltd. case, held that interest income earned by a co-operative society from a co-operative bank is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The matter was remanded for fresh adjudication.
The Tribunal held that interest on outstanding receivables is not warranted for a debt-free company, and directed the exclusion of several comparable companies due to functional dissimilarity. The issue of working capital adjustment was remitted back to the AO/TPO for further adjudication.