Case Law Details
Abacus International Pte Ltd. Vs DDIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT) Mumbai rendered a significant decision in the case of Abacus International Pte Ltd. vs. Deputy Director of Income Tax (DDIT). The focal point of the case revolved around the assessment of notional interest income on interest-free loans extended by the assessee to its Associated Enterprise (AE). The ITAT’s ruling has broader implications, particularly concerning the imposition of penalties under Section 271(1)(c) of the Income Tax Act.
Detailed Analysis:
The tribunal, in its order dated 16/10/2019, concluded that the notional interest income arising from the interest-free loan should be considered as part of the assessee’s income. This income, attributed to the assessee, was deemed assessable due to its business connection and Permanent Establishment (PE) in India. Intriguingly, the ITAT allowed the adjustment of this notional interest income against the expenditure incurred by the assessee in the form of marketing services fees paid to Abacus Distribution System (India) Ltd. (ADSIL), its Indian subsidiary.
However, the matter was remanded back to the Assessing Officer (AO) for quantification verification purposes. The appellant, contending that this direction resulted in a net loss, argued against the imposition of a penalty. The assessee clarified that there were no declared losses in the return of income, and the losses were not converted into income during the assessment. Furthermore, no claim for carry forward of losses was made.
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