The plea of the assessee based on Minda Investments Ltd that the disallowance should be deleted cannot be accepted as in the later decisions similar matters have been restored to the file of the AO and according to rule of precedence, later decision passed by similar strength of the Bench has to be followed in preference to the earlier decision.
The AO can not apply Rule 8D without pointing out any inaccuracy in the method of apportionment or allocation of expenses as adopted by the assessee. Rule 8D r.w.s. 14A(2) can be invoked only if the AO “having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred” in relation to tax-free income.
At the outset, it was submitted by the learned AR that the first common ground raised by the assessees in the present appeals relating to exemption u/s 10(10CC) is covered by the decision of the Special Bench of the Tribunal in the case of RBF Rig Corpn. LLC (RBFRC) Vs. Asstt. Commissioner of Income Tax – 109 ITD 141 wherein it was concluded that payment of taxes by the employer, on behalf of the employee, is a perquisite within the meaning of clause (2) of section 17 of the Income
ITAT Delhi held that a captive service provider assuming minimal risks, cannot be compared to a large company like Infosys Technologies Limited which assumes all risks leading to greater rewards.
The ITAT Delhi held where a taxpayer engaged in rendering advertising and related services to its Associated Enterprises (AEs) is also acting as an intermediary between the AEs and the third party vendor to rent advertisement space from the vendor, costs recovered by the taxpayer from the AEs for such renting and then passed on to the vendors (pass-through costs) would not be value adding costs for the taxpayer and would, therefore, not be taken into account for computing net profit margin (Operating Profit / Total Cost) of the taxpayer for applying the Transactional Net Margin Method (TNMM).
We have considered the rival contentions in the light of material placed on record vis-à-vis amendment brought in provisions of section 115JAB by the Finance Act, 2009 by insertion of new clause (i). According to the amended provisio
The ITAT ruled that waiver of unpaid interest, which was not allowed as deduction in the past, is not liable to tax under the specific provisions of Indian Tax Laws (ITL) which provide for taxation of remission of trading liability. The ITAT also ruled that waiver of term loans used for acquiring capital assets is not liable to tax under the specific provisions of the ITL which provide for taxation of benefit or perquisite arising from business. The ITAT further held that waiver of cash credit facility used for trading operations is liable to tax since the benefit bears revenue character and, therefore, in the nature of benefit or perquisite arising from business.
Payment of royalty and knowhow fee under an agreement can not be ignored by the Revenue while doing the Transfer Pricing analysis, the transfer pricing adjustment can be made only to the international transactions and not transactions at the enterprise level which include domestic transactions, and internal comparability is most efficient when it involves the transactions of the tested party itself.
Income Tax – Section 10(33), 14A, Rule 8D – Whether disallowance of expenses incurred to earn an exempt income under section 14A, in effect from April 2007, could be applied to assessee for assessment year 2006-07 without an established nexus between exempt income and expenses – Assessee’s appeal allowed: DELHI ITAT In CIT vs. Hero Cycles 323 ITR 518 (P&H) it was held that disallowance u/s 14A required finding of incurring of expenditure and where it was found that for earning exempted income no expenditure had been incurred, disallowance u/s 14A could not stand. On the other hand, in Godrej Boyce Mfg. Co 328 ITR 81 (Bom) it was held that the AO could adopt a reasonable basis to identify the expenses in relation to the earning of exempt income; Rule 8D does not apply to AY 2006-07. The assessee has urged that no expenditure has been identified to have been incurred to exempt income. Neither the AO nor the CIT (A) has rebutted this submission. The AO has made an adhoc estimate which is not sustainable in the light of Hero Cycles. Accordingly, in view of Vegetable Products 88 ITR 192 where it was held that if two constructions are possible, one favouring the assessee should be adopted, the precedent laid down in Hero Cycles should be followed. Referred: M/s Vegetable Products Ltd. 088 ITR 0192 (SC) , that in the taxing provision if two constructions are possible, one favouring assessee should be adopted. Followed: CIT vs Hero Cycles Ltd (2010) 323 ITR 0518 (P&H) and Godrej & Boyce Mfg.Co.Ltd vs Dy. CIT (2010) 004 TaxCorp (DT) 46941 (BOMBAY)
The disallowance of claim under section 35D made by the AO by excluding the share premium from the capital employed in the business of the company is justified.
