The case ITA 597/DEL/2021 involves an appeal by Cadence Designs Systems India Pvt. Ltd., Noida, against the order passed by the Deputy Commissioner of Income Tax (DCIT), Circle-4(2), New Delhi, for the assessment year 2016-17. The appeal addresses the jurisdiction and scope of the assessment proceedings under section 143(3) read with section 144C(13) of the Income Tax Act, 1961.
The details of the case are as follows:
The case was heard on 20.09.2021 before the Delhi Bench ‘I-1’ of the Income Tax Appellate Tribunal (ITAT), comprising Accountant Member Shri O.P. Kant and Judicial Member Shri K. Narasimha Chary. The appellant was represented by Sh. Sparsh Bhargava, Advocate, while the respondent was represented by Sh. Surender Pal, CIT/DR.
The appellant raised several grounds in the appeal, primarily challenging the final assessment order dated 31.03.2021 passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961. The key issues included the disallowance of bad debts, transfer pricing adjustments, and other deductions.
The first significant issue was the disallowance of bad debts written off. The Assessing Officer (AO) contended that the bad debts related to the amalgamating company, Cadence AMS Design India Pvt. Ltd., and the provision for doubtful debts was to be allowed only in respect of the assessee and not the amalgamating company.
The appellant relied on the Supreme Court’s decision in CIT vs. T. Veerabhadra Rao and the Gujarat High Court’s decision in CIT vs. Sambhav Media Ltd., arguing that the successor entity is entitled to claim deductions for bad debts relating to the predecessor entity before amalgamation.
The Tribunal directed the AO to verify the claim regarding the provision for doubtful debts in the amalgamating company in earlier years and allow the deduction in the hands of the amalgamated company if found proper. This ground was allowed for statistical purposes.
Another key issue was the transfer pricing adjustment related to marketing support services and interest on receivables. The DRP reduced the adjustments suggested by the TPO, and the AO followed these directions.
The appellant argued that the TPO’s adjustments were incorrect and not in line with the DRP’s directions. They requested that the issue be reconsidered in light of a Bilateral Advance Pricing Agreement (BAPA) and relevant High Court decisions.
The Tribunal set aside the assessment order and directed the AO to reconsider the issue following the DRP’s directions, the High Court’s decision in CIT vs. Kusum Healthcare Pvt. Ltd., and the BAPA.
The appellant also raised issues regarding the incorrect assessment of income, non-grant of MAT credit, short grant of advance tax and TDS, and deduction of education cess.
The appellant had filed rectification applications, which were not addressed by the AO. The Tribunal directed the AO to consider these applications and rectify the issues after due verification.
The appellant claimed deduction of education cess, citing High Court decisions. The Tribunal directed the AO to consider this claim after giving the appellant an opportunity to present their case.
Based on the arguments presented and the evidence provided, the Tribunal ruled in favor of the appellant on several grounds, directing the AO to reconsider and verify the claims. The appeal was allowed for statistical purposes.
Order pronounced in the open court on this the 20th day of September, 2021.
O.P. KANT
ACCOUNTANT MEMBER
K. NARASIMHA CHARY
JUDICIAL MEMBER
Dated: 20/09/2021
‘aks’
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR
Assistant Registrar, ITAT, New Delhi
ITA 597/DEL/2021: Cadence Designs Systems India Pvt. Ltd., Noida vs. DCIT, Circle-4(2), New Delhi
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