ITAT Cochin Judgments — May 2018

The Tribunal found that while the seller admitted to receiving more than the documented value, the Assessing Officer did not provide sufficient evidence to prove the assessee made the alleged on-money payment. Therefore, the addition was not substantiated.

The Tribunal held that Explanation 5A to Section 271(1)(c) cannot be invoked as the search did not unearth any unaccounted income or assets. The additional income was offered voluntarily after the notice under Section 153A, and therefore, no penalty for concealment can be levied.

The Tribunal held that the disallowance of provision for legal and professional charges was partly justified, and the imputation of interest on expenses incurred for AEs should be for a period exceeding 60 days, not 15 days as directed by the DRP. The rate of interest was also adjusted.

The Tribunal held that the benefit test is not a precondition for justifying arm's length price and allowed the ground related to the determination of arm's length price for management support services. However, it dismissed grounds related to the disallowance of expenses under section 40(a)(ia) and the taxability of management fees. The issue regarding the applicability of the first proviso to section 40(a)(ia) was remitted to the Assessing Officer.

The Tribunal held that the 'benefit test' is not a precondition for justifying arm's length price and allowed the ground related to the determination of arm's length price for management support services. The Tribunal dismissed grounds related to disallowance of expenses as reimbursement and confirmed the disallowance of management fees. Issues regarding the curative nature of the proviso to Section 40(a)(ia) were remitted to the Assessing Officer.