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“profit element”

DisallowancesSection 69CSection 69C5,654 judgments

The decision most relied on for profit element is CIT v. Simit P. Sheth (356 ITR 451), cited in 1,465 judgments on BharatTax.

Leading authorities on profit element

CIT v. Simit P. Sheth
356 ITR 451 · 2013 · High Court
1,465
citing judgments

Additions for alleged bogus purchases should be restricted to the profit element, not the entire turnover. The profit element is often estimated at 12.5% of the purported bogus purchases.

CIT v. President Industries
258 ITR 654 · 2002 · High Court
471
citing judgments

When books of account are rejected and unaccounted sales or receipts are discovered, the income addition is restricted to the net profit element embedded in these undisclosed transactions, not the entire sale proceeds or receipts, especially if corresponding purchases are not proven to be outside the books.

Sanjay Oilcake Industries v. CIT
316 ITR 274 · 2009 · High Court
460
citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

CIT v. Siemens Aktiongesellschaft
310 ITR 320 · 2009 · High Court
259
citing judgments

Reimbursements of actual expenses without any profit element are not taxable income. Additionally, mere amendments to the Income-tax Act do not override the provisions of Double Taxation Avoidance Agreements (DTAAs).

CIT v. Vijay M. Mistry Construction Ltd.
355 ITR 498 · 2013 · High Court
252
citing judgments

In cases of alleged bogus or hawala purchases where the existence of transactions is not entirely denied, only the profit element embedded in such purchases, and not the entire purchase price, can be added to the assessee's income. The focus is on determining a reasonable profit percentage for such additions.

CIT v. Balchand Ajit Kumar
263 ITR 610 · 2003 · High Court
212
citing judgments

When making an addition for unaccounted receipts, on-money, or non-genuine purchases/sales, the addition should be restricted to the estimated profit element embedded in such transactions, rather than the entire gross amount, particularly when evidence of corresponding expenditure is incomplete. This estimation often involves applying a net profit rate.

CIT v. Gurubachhan Singh J. Juneja
302 ITR 63 · 2008 · High Court
147
citing judgments

When unaccounted receipts or suppressed sales are detected and books of account are rejected under Section 145(3), additions to income must be restricted to the profit element embedded in such transactions, not the entire transaction value. This profit element is to be estimated by considering the assessee's regular profit ratio as per books of account.

PCIT v. Mohommad Haji Adam & Co.
103 Taxmann.com 459 · 2019 · High Court
146
citing judgments

Where purchases are found to be bogus, the profit element embedded in such purchases is to be brought to tax, not the entire purchase value. An addition for non-genuine purchases may be justified.

Judgments citing profit element

Kanaiyalal S.Shah, Mumbai vs. ITO 23(2)(4), Mumbai

In the result, all the captioned appeals of the assessee are partly allowed, as above

ITA 2725/MUM/2015[2007-08]Status: DisposedITAT Mumbai30 Jun 2016AY 2007-08

Bench: Shri G.S.Pannu

For Appellant: Shri Jalpesh VoraFor Respondent: Shri Santosh Mankoskar
Section 143(3)Section 44ASection 69C

impugned purchases were merely accommodation entries obtained from such parties. Be that as it may, the CIT(A) proceeded to hold that only profit element on such bogus purchases be brought to tax. Accordingly, CIT(A) estimated the profit on such alleged bogus purchases @15%. 4. In this background

DCIT 8(3), Mumbai vs. Sar Engineering Ltd, Mumbai

In the result, the appeal of Revenue is dismissed

ITA 6954/MUM/2014[2010-11]Status: DisposedITAT Mumbai24 Jun 2016AY 2010-11

Bench: Shri Shailendra Kumar Yadav & Shri Rajesh Kumar.

For Appellant: Shri Vachaspati TripathiFor Respondent: None
Section 131Section 133A

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that only the profit element of bogus purchases earned from M/s. Newzone Multritrade Pvt, Ltd. can be added to the total income of the assessee ignoring the decision

Ravi Mohan Gehi, Mumbai vs. DCIT 20(2), Mumbai

In the result, this appeal filed by the assessee is dismissed

ITA 5127/MUM/2014[2009-10]Status: DisposedITAT Mumbai24 Jun 2016AY 2009-10

Bench: Shri Joginder Singh & Shri Ashwani Tanejaassessment Year: 2009-10 Ravi Mohan Gehi, Dcit 20(2) Ms. Growmore Estate 6Th Floor, Piramal बनाम/ Consultants, Chambers, Lalbaug, Vs. B-7, Navakar Chambers, Mumbai-400012 Andheri Kurla Rd, Andheri(E) Mumbai -400059 (Assessee) (Revenue) P.A. No.Aeppg1674M "नधा"रती क" ओर से / Assessee By None राज"व क" ओर से / Revenue By Shri Kakesh Rangan (Dr)

Section 143(3)Section 14A

Portfolio Management Schemes (PMS) the fee charged ranges between 2 and 2.5 per cent of the portfolio value which would be inclusive of a profit element for the portfolio manager. While the fixed administrative expenses were excluded, on the ground that in the case of a large corporate taxpayer they

Regina Jayprakash, Mumbai vs. ITO 22(2)(4), Mumbai

In the result, the appeals filed by the assessee and revenue are partly allowed for statistical purposes in terms of our order as discussed above

ITA 1006/MUM/2013[2009-10]Status: DisposedITAT Mumbai24 Jun 2016AY 2009-10

Bench: Shri Joginder Singh & Shri Ashwani Taneja

Section 139Section 143(3)Section 194CSection 201Section 40

pipe in connection with the polishing works between the customers and the person doing polishing job. Accordingly, it was submitted that there is no profit element in the said transactions. The Ld A.R further submitted that the assessee has included the cost of polishing works in the sale value ... fiduciary capacity is also liable to be rejected. In this kind of factual situation, in our view, the existence or absence of profit element in the polishing works does not make any difference. 7.2 The Ld Counsel, by placing reliance on the decision of special bench in the case

Regina Jayprakash, Mumbai vs. I.T.O.22(2)-4, Mumbai

In the result, the appeals filed by the assessee and revenue are partly allowed for statistical purposes in terms of our order as discussed above

ITA 2561/MUM/2012[2008-09]Status: DisposedITAT Mumbai24 Jun 2016AY 2008-09

Bench: Shri Joginder Singh & Shri Ashwani Taneja

Section 139Section 143(3)Section 194CSection 201Section 40

pipe in connection with the polishing works between the customers and the person doing polishing job. Accordingly, it was submitted that there is no profit element in the said transactions. The Ld A.R further submitted that the assessee has included the cost of polishing works in the sale value ... fiduciary capacity is also liable to be rejected. In this kind of factual situation, in our view, the existence or absence of profit element in the polishing works does not make any difference. 7.2 The Ld Counsel, by placing reliance on the decision of special bench in the case

M/S Quetzel Designs India Pvt. Ltd., Bangalore vs. DCIT, Bangalore

In the result, the appeals of the assessee are partly allowed

ITA 1563/BANG/2013[2004-05]Status: DisposedITAT Bangalore24 Jun 2016AY 2004-05

Bench: Shri Vijay Pal Rao & Shri Inturi Rama Rao

For Appellant: Shri Sandeep, C.AFor Respondent: Shri S. Nambirajan, JCIT (D.R)
Section 143Section 147Section 148

justified in making the addition of the entire amount as undisclosed income instead business income and only to the extent of the profit element in the said sale. In support of his contention he has relied upon the decision of the coordinate bench of this Tribunal in case of Kushalraj ... Devi Chand Oswal Vs. ACIT (supra). Thus, the Learned AR has contended that only the profit element in the undisclosed sales can be assessed as income of the assessee and not the entire deposit in the bank account. On the other hand, the Learned DR has submitted that the addition

Pr. Commissioner of Income Tax-2 vs. M/s Trinity Advanced Software Labs Private Limited

ITTA/421/2015HC Telangana01 Jun 2016

Bench: RAMESH RANGANATHAN,M.SATYANARAYANA MURTHY

Deepa Manshani, Mumbai vs. Asst CIT 14(3), Mumbai

In the result, assessee’s appeal is partly allowed and Department’s appeal is dismissed

ITA 2792/MUM/2014[2009-10]Status: DisposedITAT Mumbai31 May 2016AY 2009-10

Bench: Shri Saktijit Dey & Shri Ramit Kochar

For Appellant: Shri N.H. GajriaFor Respondent: Shri Sunil KumarAgarwal
Section 131Section 133(6)

Vijay Proteins v/s ACIT, 55 TTJ (Ahd.) 76 (Ahd.), held the entire purchases cannot be added back as income of the assessee but profit element embedded into such purchases which according to the learned Commissioner (Appeals) can be estimated at 20% has to be added to the income ... profit of such purchases considering the fact that the entire purchases could not be treated as income of the assessee and only the profit element embedded can be assessed as income. This is due to the reason that the Assessing Officer has not disputed the sales turnover of the assessee

Hanjin Shipping Company Ltd, Mumbai vs. DDIT (It) 3(1)

In the result, the appeal of the assessee is hereby allowed

ITA 5277/MUM/2014[2010-11]Status: DisposedITAT Mumbai13 May 2016AY 2010-11

Bench: Shri Sanjay Garg & Shri Rajesh Kumarassessment Year: 2010-11 M/S. Hanjin Shipping Company Deputy Director Of Income Tax Ltd., (International Taxation) – 3(1), C/O. Hanjin Shipping India Pvt. Mumbai Ltd. (Agent Of Hanjin Shipping Co. Ltd.), 402, Vedanta, 779, Vs. Makwana Road, Off. Andheri Kurla Road, Marol Village, Andheri (East), Mumbai – 400 059 Pan: Aaach 3759G (Appellant) (Respondent) Present For: Assessee By : Shri Paras Savla, A.R. & Ms. Priyanka Gada, A.R. Revenue By : Shri Rahul Raman, D.R. Date Of Hearing : 23.03.2016 Date Of Pronouncement : 13.05.2016

For Appellant: Shri Paras Savla, A.R. & Ms. Priyanka Gada, A.RFor Respondent: Shri Rahul Raman, D.R
Section 44B

Mitchell Drilling International Pvt. Ltd.” (supra), we hold that service tax collected by the assessee and paid to the government account having no profit element, cannot be included in the gross receipts for computation of income under section 44B of the Act. This issue is accordingly decided in favour

Mosaic India Pvt. Ltd., New Delhi vs. ACIT, New Delhi

The appeal is partly allowed

ITA 5901/DEL/2010[2006-07]Status: DisposedITAT Delhi11 May 2016AY 2006-07

Bench: Shri I.C. Sudhir & Shri Prashant Maharishi Assessment Year: 2006-07 Mosaic India Pvt. Ltd., Vs. Acit, 111-Rectangle-I, Circle 5(1), Saket Dist. Centre New Delhi. New Delhi. (Pan: Aaccc4033C) (Appellant) (Respondent) Assessee By: Shri Gc Srivastava, Adv. Department By: Shri Amrendra Kumar, Cit(Dr) Date Of Hearing : 17 .02.2016 Date Of Pronouncement: 11 :05.2016 Order Per I.C. Sudhir:The Assessee Has Questioned Order Of The Authorities Below On The Following Grounds: 1. That On The Facts & In The Circumstances Of The Case & In Law, The Order Passed By The Learned Assessing Officer (“A.O.”) Is Bad In Law & Void Ab-Initio. 2. That On The Facts & In The Circumstances Of The Case & In Law, The Reference Made By The Learned A.O. Suffers From Jurisdictional Error As The Learned A.O. Did Not Record Any Reasons In The Draft Assessment Order Based On Which He Reached The Conclusion That It Was “Necessary Or Expedient” To Refer The Matter To The Learned Transfer Pricing Officer (“Tpo”) For Computation Of The Arm’S

For Appellant: Shri GC Srivastava, AdvFor Respondent: Shri Amrendra Kumar, CIT(DR)
Section 271(1)(c)Section 92Section 92CSection 92C(1)Section 92C(2)

purchase price of the fertilizers is not in control of the government only the sale price is controlled by the government. He submitted that profit element has already been considered by the government while controlling the price keeping in view the subsidiary. He submitted that A.E. is manufacturer

J.R. Packages (P) Ltd., Hosur vs. DCIT, Coimbatore

In the result, appeal of the assessee is partly allowed

ITA 2323/CHNY/2013[2009-10]Status: DisposedITAT Chennai29 Apr 2016AY 2009-10

Bench: Shri N.R.S. Ganesan & Shri A. Mohan Alankamonyआयकर अपील सं./Ita No.2323/Mds/2013 "नधा"रण वष" / Assessment Year : 2009-10 M/S J.R. Packages (P) Ltd., The Deputy Commissioner Of 72-4 / B-5, 2Nd Cross, V. Income Tax, Behind Telephone Exchange, Central Circle – I, Anna Nagar, Hosur – 635 109. Coimbatore. Pan : Aabcj 0084 B (अपीलाथ"/Appellant) (""यथ"/Respondent)

For Appellant: Sh. N. Devanathan, AdvocateFor Respondent: Sh. M.S.V.M. Prasad, CIT

question arises for consideration is whether the entire deficit stock has to be taken as profit of the assessee or the profit element embedded in the deficit stock has to be taken as income of the assessee? The Assessing Officer himself has taken only 20% of gross profit ... deficit stock arrived by him. Therefore, it is obvious that the Revenue intended to take only the profit element embedded in the deficit stock. In other words, the presumption was that the deficit stock was sold by the assessee outside the books and the profit on such sale is liable

Tnt Express Worldwide (Uk) Limited, U.K vs. DDIT, Bangalore

In the result, the appeal by the assessee is dismissed

ITA 6/BANG/2011[2007-08]Status: DisposedITAT Bangalore29 Apr 2016AY 2007-08

Bench: Shri Abraham P. George & Shri Vijay Pal Rao

For Appellant: Shri Chavali S. Narayan, CAFor Respondent: Shri G.R. Reddy, CIT-I(DR)
Section 143(3)Section 9(1)(vi)

charges shall be made on the basis of the direct and indirect costws or budgeted costs of providing the services together with a reasonable profit element where appropriate. 2. Indirect Charges. Where a direct charge is not made for the Services then an indirect charge shall be made. The indirect ... Schedule-3 shall be made on the basis of direct and indirect costs or budgeted cost of providing services together with reasonable profit element where appropriate. In case where a direct charge is not made for services, then an indirect charge shall be made based on gross revenue. Thus

The Commissioner of Income-Tax vs. M/S. Ibc Knowledge Park Pvt. Ltd

In the result, the appeals filed by the Revenue

ITA/402/2009HC Karnataka28 Apr 2016

Bench: B.V.NAGARATHNA,JAYANT PATEL

Section 260

Assessing Authority therein thought it fit to transmit those documents, which according to him pertained to undisclosed income on account of investment element and profit element of the assessee-firm and required to be assessed under Section 158BC read with Section 158BD of the Act to another Assessing Authority

The Commissioner of Income-Tax vs. M/S. Ibc Knowledge Park Pvt. Ltd

In the result, the appeals filed by the Revenue

ITA/403/2009HC Karnataka28 Apr 2016

Bench: B.V.NAGARATHNA,JAYANT PATEL

Section 260

Assessing Authority therein thought it fit to transmit those documents, which according to him pertained to undisclosed income on account of investment element and profit element of the assessee-firm and required to be assessed under Section 158BC read with Section 158BD of the Act to another Assessing Authority

The Commisioner of Income-Tax vs. M/S Ibc Knowledge Park Pvt Ltd

In the result, the appeals filed by the Revenue

ITA/402/2014HC Karnataka28 Apr 2016

Bench: B.V.NAGARATHNA,JAYANT PATEL

Section 260

Assessing Authority therein thought it fit to transmit those documents, which according to him pertained to undisclosed income on account of investment element and profit element of the assessee-firm and required to be assessed under Section 158BC read with Section 158BD of the Act to another Assessing Authority

M/S Balmer Lawries & Co. Ltd., Kolkata vs. Income Tax Officer(It) WD-1(1), Kolkata

In the result, assessee’s appeal stands allowed

ITA 2079/KOL/2014[2012-2013]Status: DisposedITAT Kolkata27 Apr 2016AY 2012-2013

Bench: Shri Mahavir Singh & Shri Waseem Ahmedassessment Year :2012-13 M/S Balmer Lawrie & Co. V/S. Income Tax Officer Ltd., 21, N.S.Road, (International Taxation), Kolkata-700 001 Ward-1(1), Aayakar [Pan No. Aabcb 0984 E] Bhawan (Poorva), 2Nd Floor, R. No.215, 110, Shanti Pally, Kolkata- 700 107 .. अपीलाथ" /Appellant ""यथ"/Respondent Shri M.K.Poddar, Sr-Advocate अपीलाथ" क" ओर से/By Appellant Shri C.P.Bhatia, Jcit-Dr ""यथ" क" ओर से/By Respondent 18-02-2016 सुनवाई क" तार"ख/Date Of Hearing 27-04-2016 घोषणा क" तार"ख/Date Of Pronouncement

Section 195Section 201(1)Section 5(2)(b)

customer which comprises the actual cost of the services and profit margin. The assessee after deducting the actual expenses shares the 50% of the profit element with the overseas agent. The similar procedure is followed when the overseas agent needs the logistic services for any part of India. The assessee ... reimbursed by the overseas agent. Accordingly the overseas agent raises the invoice to its client which comprises the cost of the services and profit element. This profit is again shared between the overseas agent and the assessee in the ratio of 50 : 50. 2.1 The assessee has the overseas agent

ITO 17(1)(4), Mumbai vs. Anagha P. Sawant, Mumbai

In the result, appeal of the revenue is allowed for statistical purposes

ITA 3241/MUM/2012[2008-09]Status: DisposedITAT Mumbai27 Apr 2016AY 2008-09
For Appellant: Shri Hari S. RahejaFor Respondent: Shri Yogesh Kamat
Section 143(3)

adverse finding on this aspect. 4. trading account showing contra entries and re-conciliation statement were submitted before the AO 5. The profit element on the services rendered have been admitted. 2.15 Assessing Officer has never doubted the genuineness of the labour payments. As per the concept of real income

Dimexon Diamonds Ltd, Mumbai vs. DCIT RG 3(3), Mumbai

In the result, both the cross appeals for the AY 2004-05 are allowed for statistical purposes and the CO raised by the assessee is dismissed as academic

ITA 2966/MUM/2010[2004-05]Status: DisposedITAT Mumbai27 Apr 2016AY 2004-05

Bench: Shri D. Karunakara Rao & Shri Ram Lal Negii.T.A. No.2966/M/2010 (Assessment Year: 2004-2005)

For Appellant: Dr. Shivaram & Ajay SinghFor Respondent: Shri Shishir Dhamija, CIT-DR
Section 143(3)Section 153A

figures relating to unaccounted sales on merits. Further, he argued that the addition, if any, on this account should be restricted to the profit element only and the addition of entire unaccounted sales, if any, is unsustainable in law. In this regard, Ld Counsel for the assessee relied on various

DCIT, New Delhi vs. M/S. Rayban Sun Optics India Ltd, Gurgaon

In the result, the appeal is allowed for statistical purposes

ITA 4203/DEL/2010[2004-05]Status: DisposedITAT Delhi19 Apr 2016AY 2004-05

Bench: Shri R.S. Syal, Am & Shri C.M. Garg, Jm Assessment Year : 2004-05

For Appellant: Shri Deepak Chopra, Ms Rashi KhannaFor Respondent: Shri Hemant Gupta, Sr. DR

pricing adjustment for the difference, if required. It does not say that the international transaction must be on cost to cost basis and no profit element can be charged. In our considered opinion, profit margin, if any charged by the AE from the assessee cannot be considered for determining

M/S. Mc Donald'S India (P) Ltd., New Delhi vs. DCIT, New Delhi

In the result ground no. 7 of the appeal is allowed with above direction

ITA 961/DEL/2010[2003-04]Status: DisposedITAT Delhi12 Apr 2016AY 2003-04

Bench: Shri A. T. Varkey & Shri Prashant Maharishimc Donald’S India (P) Ltd, Dcit, 10, Basant Lok, Circle-6(1), Vs. Vasant Kunj, R.No.413, C.R.Building, New Delhi New Delhi Pan:Aaacm2007J (Appellant) (Respondent) Assessee By Sh. Rohit Tiwari, Ca Ms. Sonal Arora, Ca Revenue By Shri Amendra Kumar, Cit Dr Date Of Hearing 23.02.2016 Date Of Pronouncement 12.04.2016

Section 143(3)Section 92A(2)(g)Section 92C

extent it is acceptable at Arm’s length to treat a significant portion of taxpayer’s cost as pass-though costs to which no profit element is attributed (i.e. as costs which are potentially excludable from the denominator of the net profit indicator). This depends on the extent to which ... acceptable at arm's length to treat a significant portion of the taxpayer's costs as pass-through costs to which no profit element is attributed (i.e. as costs which are potentially excludable from the denominator of the net profit margin indicator). This depends on the extent to which