In initial years the assessee had lesser requirement of these spools as the business was in the process of being established and stabilized. The system of collecting these spools also had to be put in place and stabilized to ensure its supply on a sustained basis. The system adopted by the TPO to allocate indirect expenses on the basis of turnover in initial assessment years was not justified. There was nothing on record to suggest any indirect expenses for determining the ALP of export of spools. Accordingly, the Commissioner (Appeals) was not justified in restricting the addition to Rs. 5,07,651 as there was no element of indirect cost involved.
As per the agreement, assessee was responsible for updation of patches of the software and provision of backup and recovery services in respect of data stored on the centralised server. The responsibility of the assessee is to maintain and upkeep of the centralised server owned by it. Assessee has not imparted any technical know-how, skill, process or technical plan or design and hence, in view of Art 12(3)(g), the amount received by the assessee cannot be taxed in India.
The allowance of any expenditure arising from an international transaction shall also be determined having regard to the ALP. However, in the instant case the assessee has not claimed the expenditure of Rs. 7,42,20,575/- during the impugned assessment year and has itself disallowed the same while computing its taxable income. Therefore, we agree with the submission of the learned counsel for the assessee that the provisions of section 92 are not applicable.
In our considered opinion, reliance placed by the Revenue on clause (d) to sec. 80-IB(10) of the Act to defeat the assessee’s claim for deduction in the present case is quite misplaced. Firstly, the Hon’ble Bombay High Court in the case of Brahma Associates (supra) has laid down that the said provision is prospective and not retrospective in nature and therefore, it cannot be applied retrospectively. Further, the plea of the Revenue that only a pure housing project is eligible for deduction is also completely misplaced having regard to the judgment of Hon’ble Bombay High court in the case of Brahma Associates (supra).
Assessee was engaged in the speculation transaction of sale and purchase of units without taking delivery and the account was settled by crediting the difference. The Tribunal after considering section 18 of the Sale of Goods Act, 1930 observed that no property in the said units passed on to the assessee inasmuch as the assessee never acquired the property in the units as the units contracted to be bought were future unascertained goods. Similarly, it could not pass on the property to the party to whom the units were contracted and therefore, there was no ‘sale’ or ‘turnover’ effected by the assessee in the legal sense for the purposes of getting the accounts audited under section 44AB.
First is the issue of entertainment expenditure. The stand of the assessee is that the provisions of FBT can be invoked in respect of expenses which are incurred on employees or their family members but in the present case, as mentioned on page No.5 of the paper book, the entertainment expenses have been incurred for guests of the company, which has not been disputed by the Revenue. So same are not liable to be subjected to provisions of section 115WB(2) of the Act.
We are not inclined to interfere with the finding of the CIT(A) because on account of violation of conditions prescribed under clause (ia) the implication u/s.40(a) would be that the said amount will not be deducted in computing income chargeable under the head ‘profits and gains of business or profession’. The same will form part of profits and gains of business or profession of the assessee which could be included along with income under all the other heads in the assessee’s gross total income.
Assessee was granted right of lifting water from said well which is independent right given by the State Government for the rent of Rs. one per year. There is also nothing to suggest that right of lifting of water was acquired by assessee by incurring any cost. Such right is not covered by the provisions of section 55(2). Therefore, no capital gain could be worked out, since provisions of section 45(1) read with section 48(1) are not applicable in respect of payment made to assessee in lieu of surrendering the right to lift the water from the well. Accordingly, capital gain as worked out by the Assessing Officer is not justified.
Assessee was held entitled for deduction u/s.80IB(10) in case there was enhanced income on account of statutory disallowance u/s.43B, 40(a)(ia) and 36(1)(va), etc. In the instant case nature of receipts on credit side of Profit and Loss Account for eligible housing projects u/s.80IB(10) was the same and disallowance of expenditure on the debit side would only result into enhancement of net profit. Accordingly, the assessee’s claim was liable to be allowed in view of the ratio of the decisions cited (supra). As stated above, assessee is not eligible for deduction u/s.80IB(10) pertaining to its Cosmos project. The Assessing Officer has held in assessment order that sum of claim u/s. 80IB(10) was allowable to assessee for its Heliconia project. Thus, if any disallowance u/s.43B, 40(a)(ia) or 36(10(va) etc., relate to Heliconia project that only can be considered for claim u/s. 80IB(10) and corresponding enhanced income.
The mandate of Sec. 194C is that the relationship of the person paying any sum to the person carrying out any work including the supply of labour should be in he nature of the principal to contractor. After anxiously examining the provisions of Maharashtra Mathadi Act and Scheme framed under it, we are of the opinion that there is no contractual relationship as a principal and contractor between these assessees and Mathadi Board,
