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Income Tax - Case Laws
Showing 81 to 100 of 163830 Records
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2024 (5) TMI 218 - ITAT DELHI
Penalty u/s 271(1)(c) - addition on account of transfer pricing adjustment - HELD THAT:- As in the case of Chegg India (P) Ltd. [2020 (11) TMI 776 - ITAT DELHI] wherein the Tribunal has held that if AO did not apply his mind to satisfy as to which limb of section 271(1)(c) of the Act, penalty was being initiated then penalty levied by AO and confirmed by CIT(A) is not sustainable in eye of law and should be deleted.
Undisputedly, addition made by AO in the account of transfer pricing adjustment. The assessee has filed the appeal against the order and in appeal CIT(A) has confirmed the addition on account of Arm’s Length price and has deleted disallowances on account of foreign exchange fluctuation loss. Revenue has filed the appeal before ITAT against the order of CIT(A) and learned ITAT allowed the appeal against which assessee has filed an appeal before the Hon’ble Delhi High Court [2024 (1) TMI 1274 - DELHI HIGH COURT] in which substantial question of law has been framed.
In the present case, substantial question of law has been framed by the Hon’ble Court in the appeal filed by the assessee challenging the addition confirmed by the Tribunal. The issue become debatable, no penalty in such consideration can be levied against the assessee. Assessee appeal allowed.
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2024 (5) TMI 217 - ITAT MUMBAI
Reopening of assessment u/s 147 - Bogus LTCG of shares - reason to believe - general finding of Kolkata Investigation Directorate in 84 penny stock companies and modus operandi and second paragraph mentioned that assessee is one such person who has taken accommodation entry of bogus long term gain - HELD THAT:- As brought on record that assessee has earned short term capital loss as these shares were purchased on 16/03/2015 & 17/03/2015 and were sold on 18/03/2015 & 19/03/2015. The said short term capital loss has not been set off against any income or has been carried forward by the assessee. So there was no benefit to the assessee on this transaction which can lead to any inference that assessee must have engaged in some clandestine bogus entry for some benefit.
There is no co-relation between the reasons recorded and the addition which has been made by the ld. AO. If ld. AO had such a belief during the course of assessment proceedings, he could have recorded the reasons on investment made in the purchase of shares.
Thus, there is no link between the information and the reasons recorded and the assessment which has been made by the ld. AO. It is sine-qua-non that for reopening the assessment, AO should have reason to believe that income chargeable to tax has escaped assessment and such reason to belief should be based on material and information having live link nexus or direct nexus with the income escaping assessment, which here in this case is purely lacking. In fact the reasons have been recorded on a wrong premise and on a wrong information and ld. AO has not even applied his mind on such information or verified the records before issuing notice u/s. 148. Such reasons cannot be sustained or give jurisdiction to the ld. AO to reopen the case and accordingly, we hold that the entire reopening is bad in law and consequently entire assessment proceeding is quashed. Appeal of the assessee is allowed.
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2024 (5) TMI 216 - ITAT AHMEDABAD
Grant of approval u/s 80G(5) - Delay in filing From No. 10AB for approval - final approval to be filled within a period of six months from date of grant of provisional registration - distinction / different timeline for accepting application for grant of final approval in respect of grant of registration in Form No. 10AB for registration u/s 12AB - as per CIT(E) as applicant was required to file application in Form No. 10AB on or before 30.09.2022, which it failed to submit and as the date of commencement of activities in the case of the assessee should also be six months prior to the date of filing of From 10AB - HELD THAT:- As decided in Chennai ITAT in the case of Periyar Maniammai Academy of Higher Education and Research [2024 (5) TMI 184 - ITAT CHENNAI] while passing the order the Chennai Tribunal has held that where timeline for filing Form 10AB under section 12A was extended due to genuine hardship faced by charitable institutions that extension should apply to renewal form under section 80G(5)(iii) as well and application for renewal could not be rejected solely on basis of late filing.
Since in the instant facts, as it evident from the various dates mentioned above, the assessee / Applicant Trust had filed application for grant of final approval under Section 80G(5) of the Act within a period of six months from date of grant of provisional registration on 06.04.2023 (whereas date of grant of provisional approval u/s 80G(5) of the Act was 30.03.2023 and as noted by us in the preceding paragraph, the assessee could have filed application for grant of approval on or before 30.09.2023 which stands further extended to 30.06.2024 vide Circular No. 7/2024 dated 25.04.2024) i.e. within a period of six months from date of grant of provisional registration, further coupled with the fact that the Ld. CIT(E) on analysis from same set of facts had granted final approval to the assessee / Applicant Trust under Section 12AB of the Act vide order dated 04.11.2023, then, in our considered view, there is no substantive reason as to why the assessee should not be granted final registration under Section 80G(5) of the Act as well. Assessee appeal allowed.
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2024 (5) TMI 215 - ITAT DELHI
Refund of the excess DDT paid - assessee declared and paid dividend to its parent share-holders Genpact India Investment[a tax resident of Mauritius] - as per assessee DDT paid by it u/s 115-O of the Act is in excess of the rate of 5% provided under Article 10 of the Indo Mauritius DTAA - HELD THAT:- We find that the issue raised in the additional ground has been recently decided by the Special Bench of Mumbai Tribunal in the case of Total Oil India Pvt. Ltd. [2023 (4) TMI 988 - ITAT MUMBAI (SB)] wherein very same issue has been decided against the assessee stating where dividend is declared, distributed or paid by a domestic company to a non-resident shareholder(s), which attracts Additional Income Tax (Tax on Distributed Profits) referred to in Sec.115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in Section 115 O of the Act and not at the rate of tax applicable to the non-resident shareholder(s) as specified in the relevant DTAA with reference to such dividend income. Accordingly, the additional ground raised by the assessee is hereby dismissed.
Computation of deduction u/s 10A and 10AA - Reduction of freight & Telecommunication charges and recovery of expenses in respect of migration/ on-the-job training services from ‘total turnover’ while computing deduction - HELD THAT:- This issue is no longer resintegra in view of the decision of HCL Technologies Ltd reported [2018 (5) TMI 357 - SUPREME COURT] wherein it was held that the items that are subject matter of reduction from export turnover in the numerator need to be reduced in the denominator from the ambit of total turnover also as admittedly total turnover is nothing but the sum total of export turnover and domestic turnover. Hence, the export turnover reflected in the numerator cannot be different from the export turnover figure reflected in the denominator. Hence, for the purpose of computing the deduction u/s 10A/10AA/10B/80HHC/80HHE etc. all items that were sought to be excluded from export turnover need to be excluded from total turnover also in order to bring parity. Decided in favour of assessee.
Eligibility for claiming benefit of deduction u/s 10A - 95% of cost recovered of shared costs to be set off against the expenses of 5% of recovery to be taken as non-eligible profit - CIT(A) as argued that assessee ought to have deducted tax at source of expenses incurred by it which were subject matter of reimbursement and, therefore, disallowance u/s 40(a)(ia) would also come into operation in the instant case - HELD THAT:- AO had not disputed the basic fact that recovery of expenses is nothing but reimbursement of expenses on actual cost to cost. Non deduction of tax at source on the expenses incurred was never the case of the ld. AO. Hence the ld. CIT DR cannot make out a fresh case before this Tribunal. This matter is very well settled by the decision of Mahindra & Mahindra Ltd. reported in [2020 (6) TMI 564 - ITAT MUMBAI] wherein it was categorically held that ld. DR while arguing the case before Tribunal can only support the order of ld. AO and cannot make out a new case by pointing out flaws, if any, in the order of ld. AO. Hence, the argument advanced by the ld. CIT(DR) on the aspect of applicability of provisions of section 40(a)(ia) of the Act stands dismissed.
For workings of recovery of expenses the details of cost recoveries were indeed filed before the ld. AO itself for the year under consideration together with the accounting practice followed by the assessee thereon. Hence, fairly the order of ld. CIT(A) for A.Y. 2002-03 needed to be followed even for the year under consideration i.e. to say where details are filed by the assessee estimate of 5% of cost recovery is to be construed as not eligible for deduction u/s 10A of the Act. When this was put to ld. AR, the ld. AR fairly agreed for the same.
Thus, we hold that order of ld. CIT(A), in holding 5% of cost recoveries as not eligible for deduction u/s 10A of the Act, is to be sustained.
Eligibility of interest income from fixed deposits, inter-corporate deposits and the employees loans for claim of deduction u/s 10A and 10AA - HELD THAT:- Entire argument of the ld. CIT(DR) need not be gone into at all in view of the fact that the ld. AO himself had treated the said mentioned receipts as only ‘business income’ and not ‘income from other sources’, which is evident from the computation of total income, enclosed in page 20 of the assessment order. Once it is treated as ‘business income’, the assessee would be automatically eligible for deduction u/s 10A & 10AA.
Also the provisions of Section 10A(4) are very clear to state that the entire ‘profits of the business of the undertaking’ in proportion of export turnover to total turnover would be eligible for deduction u/s 10A of the Act. Hence, subject mentioned receipts constitute business receipts would fall within the ambit of Section 10A(4) of the Act, thereby making the assessee eligible for deduction thereon. Similar is the provision in Section 10AA(7) of the Act with the same words. Hence, in view of the explicit provisions of Section 10A(4) and 10AA(7) of the Act, the arguments advanced by the ld. CIT(DR) deserve to be dismissed and we do not find any infirmity in the order of the ld. CIT(A) in this regard. Accordingly, ground nos. 1 to 3 raised by the Revenue are dismissed.
Deduction u/s 10A & 10AA - foreign exchange gain and forward contract gain earned by the assessee - HELD THAT:- The gain / loss arises because of the fact that at the time of booking the sales in the accounts, the exchange rate on the date of raising the invoice is taken into account. Whereas when the actual payment is received from the customer, directly or through bank under a forward contract, the exchange rate may be different. Thus the impact of the difference of the two rates is recorded in the books separately as an exchange gain/ (loss).
Hence the nature of receipt has been completely explained by the assessee. The ld. AR submitted that forward contract outstanding at the end of the year exceeding export receivables at the end of the year is of no consequence or relevance as to that extent, the sales would happen in next year. We find that in the case of Pentasoft Technologies Ltd. [2010 (7) TMI 75 - MADRAS HIGH COURT] had categorically held that gains arising out of foreign exchange fluctuations are having direct nexus over the export sales of the assessee and would be eligible for deduction u/s 10A of the Act. Decided against revenue.
Disallowance of customer discount - AO disallowed the said provision made for discount stating that the assessee has not provided any details to the effect that the said discounts get crystallized in the current year whereas these discounts are passed on to the customers in subsequent years by adjustments from future collections - CIT(A) deleted addition - HELD THAT:- CBDT Circular no. 12 of 2022 dated 16.06.2022 had replied that discounts allowed to customers would only represent lesser realization of sale price. Though the Circular has been issued in the context of applicability of deduction of TDS u/s 194R of the Act pursuant to the amendment brought in by the Finance Act, 2022 w.e.f. 01.07.2022, the analogy that discount is only a lesser realization of sale price has been accepted and agreed by the CBDT.
Drawing support from this Circular and considering the fact that the export sale price declared by the assessee has been accepted to be at arm’s length price (ALP) by the ld. TPO in the order passed by him u/s 92CA(3) of the Act dated 27.01.2015 and also considering the fact that the provision of discount has been made on a rational basis as detailed supra, we do not find any infirmity in the order of ld. CIT(A) deleting the disallowance made thereof by the ld. AO.
Disallowance of Excess depreciation on computer peripherals - HELD THAT:- The assets like printers, routers along with other accessories/ peripherals form one integrated system and would be of no use independently of each other. Therefore, all such facilities from part of computers and hence eligible for depreciation at the rate applicable for computers. This issue is duly covered by the decision of BSES Yamuna Powers [2010 (8) TMI 58 - DELHI HIGH COURT] and in the case of Orient Ceramics [2011 (1) TMI 26 - DELHI HIGH COURT] - ground raised by the Revenue is dismissed.
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2024 (5) TMI 214 - ITAT MUMBAI
Addition on protective basis - commission income on issuing the bogus accommodation entry bills - AO treated the assessee as engaged in issuing accommodation entry bills and accordingly assessed the commission income on bogus unsecured loans/bogus purchase/sales etc - along with the commission income, the Assessing Officer also assessed not only assessed the trading results appearing in the books of account but also enhanced the profit from such trading activity - HELD THAT:- Since, the issue in dispute in present case being identical, following the finding of the Tribunal in the case of Rare Diamonds Pvt. Ltd.(2022 (6) TMI 1472 - ITAT MUMBAI] as held CIT(A) cannot confirm an addition on protective basis. He is required to decided the issue either way and cannot proceed with keeping an addition on substantive in one case and protective in other case that too even after a finding of the higher appellate forum i.e. ITAT - thus the addition made on protective by the AO and sustained by the Ld. CIT(A) is deleted. The ground No. 2 of the appeal of the assessee is accordingly allowed.
Addition being 8.05% of turnover - assessee was engaged in issuing bogus accommodation entry bills and therefore, claim of the assessee that it is a trader and quantity tally of the goods submitted in the tax audit report had no meaning and those were devoid of truth and genuineness and not reliable - HELD THAT:- We find that the Ld. CIT(A) on one hand as held that the entity has been utilized by Shri Bhanwarlal Jain for issuing bogus accommodation entry bills however on other side he has upheld the profit from said business activity in addition to commission income sustained on bogus accommodation entries. The Tribunal in the case of Rare Diamond Pvt. Ltd. (supra) in similar circumstances has deleted the addition made in respect of trading activity.
Addition for the trading payables - difference of preceding years trade payables and the current year trade payables - HELD THAT:- We are of the opinion that once the Assessing Officer is of the view that the assessee has been used or misused for providing accommodation entry bills of unsecured loans and bogus purchase and sale entries and addition of commission income for same has already been made, then separate addition for the trade payables in terms of section 68 is not justified as held by us while adjudicating the ground No. 3 of the appeal. Accordingly the ground No. 4 of the appeal of the assessee is allowed.
Enhancement of the commission income by CIT(A) u/s 251(2) - HELD THAT:- As decided in RARE DIAMONDS PVT LTD,[2022 (6) TMI 1472 - ITAT MUMBAI] there is no mention of any opportunity provided to the assessee by way of issue show cause notice, before making the addition and therefore this addition is unsustainable on the ground of violation provision of section 251(2).
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2024 (5) TMI 213 - ITAT AHMEDABAD
Deduction u/s.80IA(4)(i) - assessee business is in the nature of work contract - as per AO assessee has entered into contract agreements as a ‘Contractor’ and earned income as ‘Contract receipts’ which income is not entitled for deduction - determination of role and responsibilities of the assessee in execution of the projects - CIT(A) deleted the disallowance of deduction - HELD THAT:- Assessee is claiming that it is a developer who has built roads, flyovers, Road over bridges(ROB), railway systems, water intake well etc. wherein a claim is made by the assessee that the new infrastructure facility was created, and we have also observed that the assessee total receipts are to the tune of Rs. 26.60 crores which is not substantial keeping in view the claim of the assessee having been involved in execution of new infrastructure facilities by way of bridges, roads, Road over bridges , flyovers , water intake well, etc.
Thus, it is all the more necessary to analyse as to the role and responsibilities of the assessee in execution of these projects and other parameters as culled out above, in order to arrive at conclusive finding whether the assessee has created a new infrastructure facility as a Developer or have undertaken a contract work to execute work order as a Contractor.
We could have decided the issue ourselves as these appeals are old appeal pending for almost 7-10 years, but the material filed before us vide paper books are not sufficient for us to decide the issue . Even evidences such as tender documents, agreements with the Government for executing the work, details of the work executed vis-à-vis creation of new infrastructure facility created, PERT chart, financial statements, Men, material and machines deployed by the assessee , the roles and responsibilities performed by the assessee, details of deployment of funds, details of statutory clearances obtained , penal provisions in the agreements etc. were all not provided in the paper book filed by the assessee.
The brief summary of the project is submitted which is not sufficient to adjudicate this issue. Each and every project requires detailed and indepth analysis on several parameters as culled out above, before holding whether the assessee is a developer or contractor. Thus, it would be fit and appropriate in the interest of justice and fair play that the matter be restored back to the file of ld. CIT(A) for fresh adjudication of this issue after making detailed analysis of all the specific work executed by the assessee in which the assessee has claimed that it acted as developer and claimed to be eligible for deduction u/s 80IA(4). The appeal of the Revenue on this issue is allowed for statistical purposes
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2024 (5) TMI 186 - ITAT SURAT
Addition of agriculture income treated as income from other sources u/s 56 - assessee had not maintained any Books of Account, bills/vouchers for incurring expenditure on agricultural production during the year - HELD THAT:- We note that it is not expected from a small and poor farmer to maintain full accounts department and to maintain books of accounts. In India, by and large, most of the farmers are illiterate and poor and in some cases their land holding is also small, hence it is not feasible to maintain books of accounts. However, this situation will not be applicable in case of a big farmer where the farmer is holding large land and earning a good sizable agricultural income, for such farmers it is feasible and easy to maintain books of accounts as they have necessary infrastructure to maintain the accounts department and books of accounts.
The assessee under consideration is a small farmer, and he submitted before the assessing officer the statement of Bardoli Sugar, submitted bill of Shree Khedut Sahkari khand Udyog Mandli and bank statement showing withdrawal and deposit of cash in the bank account. We note that assessee has deposited cash in the bank account out of agricultural income and out of earlier cash withdrawn from the bank, (that is, unused cash out of the cash withdrawn from bank). Therefore, assessee has proved the source of the cash deposit in the bank account and hence the addition should not have been made in the hands of the assessee. Decided in favour of assessee.
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2024 (5) TMI 185 - ITAT AHMEDABAD
Approval Application made u/s 80G (5) - rejection of application as belatedly filled - HELD THAT:- As decided in M/S. CIT-1982 CHARITABLE TRUST [2024 (3) TMI 1201 - ITAT CHENNAI] ITAT correctly observed that there is no reason to provide for a distinction within the same provision, so as to have a different timeline for accepting application for grant of final approval in respect for grant of registration in Form No. 10AB for registration u/s 12A of the Act and for grant of final registration u/s 80G(5). ITAT, in our view has correctly observed that there cannot be a distinction within the same provision for having different time-lines, without bringing out any exception and further, even the provisions of Section 80G are for the benefit of the donors, who are donating money to the charitable trust for claiming exemption in their returns of income.
We observe that the assessee had filed Form 10AB for grant of final registration u/s 80G of the Act on 04.02.2023 i.e. within the extended time-line provide vide CBDT Circular with respect for final registration of Trust u/s 12A of the Act in Form 10AB i.e. 30.09.2023. Accordingly, in light of the aforesaid Ruling, the order of CIT(Exemptions) on this issue is set aside, and matter is remanded to the file of CIT(Exemption) for re-deciding the issue of grant of final registration u/s 80G(5), on merits, as per law. Appeal of the assessee is allowed for statistical purposes.
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2024 (5) TMI 184 - ITAT CHENNAI
Application for approval u/s. 80G(5)(iii) - application filed in Form No. 10AB rejected - time limit to convert provisional approval to regular registration - HELD THAT:- The assessee has commenced its activities on 27.05.2021 and applied for provisional approval u/s. 80G on 30.08.2021 and this provisional approval needs to be regularized within six months of commencement of activities u/s. 80G(5)(iii) of the Act. Considering genuine hardship, the CBDT extended this date further by 30.09.2022 and assessee trust was having sufficient time to convert provisional approval to regular registration and there was no necessity for this trust to apply both provisional and regular approval simultaneously. Even this amendment of 2023 by the Finance Act, 2023 is not retrospective, it is prospective.
This issue is fully covered now, as the Tribunal in the case of M/s. Shri Ramajayam Charitable Trust [2024 (3) TMI 1201 - ITAT CHENNAI] timeline prescribed under clause (iii) of first proviso to section 80G(5) of the Act should be treated as directory and not mandatory especially considering the transitional nature of the amendment as brought out by the taxation of other laws (relaxation and amendment of certain provisions) act 2020 for bringing new regime. Hence, in our view, the CIT(Exemptions) should not have rejected the assessee’s application in Form No. 10AB only for this technical reason.
We are of the view that the intention of CBDT in its circular clearly reflects their mind that once the timeline prescribed for filing Form No. 10AB for recognition u/s. 12A of the Act has been extended up to 30.09.2023, the same may be treated as extended for forms namely Form No. 10AB for renewal of approval/recognition/registration under clause (iii) of first proviso to section 80G of the Act also. Hence, we accept the plea of assessee and agree with the arguments of assessee and remand the matter back to the file of the CIT(Exemption) to decide the issue on merits. The order of CIT(Exemption) on this issue is set aside and matter is remanded back to the file of the CIT(Exemption) for re-deciding the issue on merits as per law. Appeal of the assessee is allowed for statistical purposes.
We set aside the order of CIT(Exemption) dated 30.08.2023 and direct him to re-consider the assessee’s application for approval u/s. 80G(5)(iii) of the Act, on merits. Hence, this appeal of the assessee is allowed for statistical purposes
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2024 (5) TMI 170 - DELHI HIGH COURT
Validity of reopening of assessment u/s 147 - scope of new regime of reopening of assessment after introduction of provisions of section 148/148A - whether the respondents, under the facts of the present case, are legally justified in reinitiating assessment proceedings for the same AY, which had already been subjected to reassessment? - HELD THAT:- Undisputedly, the respondents have proceeded to pass an order under Section 148(A)(d) of the Act premised on an identical ground of escapement of income as alleged in the original notice for reassessment issued on 31 March 2021. It is also not the case of the respondents that they had sought to recommence the concluded reassessment proceedings based on certain new information or additional grounds of escapement of income. Rather, they have only relied upon the decision of Ashish Agarwal (2022 (5) TMI 240 - SUPREME COURT] to wield power to proceed with the reassessment. Thus, the only question which needs to be examined is whether the decision in Ashish Agarwal (supra) commands an authority to reopen even concluded assessment proceedings.
Recently, we had an occasion to extensively deal with a similar challenge as has been laid in the instant writ petition in the case titled as Anindita Sengupta [2024 (4) TMI 96 - DELHI HIGH COURT] whereby, it was held that the procedure envisaged in Ashish Agarwal (supra) unambiguously stood confined to matters where although notices may have been issued, proceedings were yet to have attained finality.
The facts that assessment under Section 147 of the Act was already concluded, said proceedings were completely ignored and no new material was unearthed, closely resemble the factual scenario in the case of Anindita Sengupta (supra). Thus, the controversy in hand is squarely covered by our decision in Anindita Sengupta (supra). We, therefore, find it appropriate to allow the instant writ petition.
Accordingly, the impugned notices issued under Section 148(A)(b) and Section 148, respectively and the impugned order passed under Section 148(A)(d) of the Act are, hereby, quashed. Decided in favour of assessee.
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2024 (5) TMI 169 - DELHI HIGH COURT
Reopening of assessment - reason to believe - meaning of the phrase ‘true and full disclosure’ - cash transactions unexplained - petitioner contends that the said transactions are a part of the loan transactions between the petitioner including amalgamated companies and Mr. Manoj Sethi, which have been done via cheque/RTGS method of banking - whether the AO has correctly assumed jurisdiction under Section 147 of the Act on the ground of lack of full and true disclosure on the part of the assessee during the original proceedings? - HELD THAT:- In the instant case, the petitioner has not been able to allude to any enquiry either expressly or indirectly conducted by the respondent in the earlier assessment proceedings qua the issue under consideration, which could suggest that the present proceedings are merely based upon a change of opinion. Thus, the AO cannot be said to have traversed beyond its mandate to assume jurisdiction under Section 147 of the Act.
Thus we do not find any merit in the arguments put forth by the petitioner and consequently, the petition stands dismissed. These observations have been made only for the purpose of deciding the challenge which stands raised before us; they should not be construed to be an expression on the merits of the case or otherwise.
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2024 (5) TMI 168 - MADHYA PRADESH HIGH COURT
Addition u/s 14A - disallowance in cases where no exempt income has been claimed by the assessee during the year under consideration - ITAT deleted addition - as submitted ITAT ignoring the CBDT Circular No. 05 of 2014 dated 11.02.2014 and amendment to Section 14 of the Act inserted by the Finance Act, 2022
HELD THAT:- From the perusal of the order of the assessing authority, it appears that the assessing authority did not consider the documents submitted by the assessee during the course of the assessment proceeding and this fact came to light from the observation made by the appellate authority that despite availability of documents, additions were made by the assessing authority.
Amendment brought in Section 14 (A) of the Act inserted by the Finance Act, 2022, inserting explanation which is clarificatory in nature hence have retrospective effect - It is clear that the contention of appellant in respect of question no.3 (a) is not relevant in this case as the assessment is for the year 2013-14, therefore, the amendment proposed in Section 14 (A) of the Act as discussed hereinabove would not be applicable in the present case and the submission of the appellant in respect of Section 14 (A) of the Act is not relevant in light of the amendment, therefore, the contention of the appellant to this effect that order of CIT appeal as well as an order of ITAT may be quashed is hereby rejected.
The judgment rendered in the case of Chivenwest [2015 (9) TMI 238 - DELHI HIGH COURT] is worthy of reference, where it has been categorically held that Section 14 (A) of the Act will not apply, if no exempt income is received or receivable during the relevant previous year by the assessee and this finding is just and proper and further contention of the appellant in respect of the pendency of the case in the Apex Court i.e. PCIT vs. Adani Wilmart Ltd. [2021 (8) TMI 1390 - SC ORDER] against the order of the [2021 (1) TMI 1260 - GUJARAT HIGH COURT] and in the PCIT Vs. Karnataka State Financial Corporation [2021 (4) TMI 652 - KARNATAKA HIGH COURT] against the judgment of the Karnataka High Court are concerned, in the cases of the High Court, relief has been granted to the assessee by holding that no disallowance of the expenditure under Section 14 (A) of the Act can be made more than exact annual income earned by the assessee and it is the view of this Court that until and unless the issue travelled uptil Apex Court modifying or setting aside judgment of the High Court.
Disallowance of operating expenses, cost of material consumed, employee benefits and other expenses debited in P&L account of the company - assessee failed to produce any details, documents and evidences to substantiate these expenses - ITAT upholding CIT(A) order of deleting addition - So far as other questions are concerned, since the same are based upon fact finding and we have already discussed the order of the CIT(A) and ITAT and find that the order of the CIT (A) is well reasoned order and disallowance made by the AO is contrary to the settled norms and in this case we approve the findings that according to the demand of the AO, assessee submitted all the relevant documents but before disallowing, no findings have been recorded by the AO and the order of the CIT (A) has been upheld by the ITAT and the addition made by the AO in the case of assessee for an amount has rightly been deleted.
This Court is of the considered opinion that to maintain the parity in light of the view taken by the different High Courts, we are inclined to hold that deletion has rightly been made by the CIT (A) which was further affirmed by the ITAT and, therefore, no interference is warranted in the facts and circumstances of the case.
Revenue appeal dismissed.
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2024 (5) TMI 167 - BOMBAY HIGH COURT
Reopening of assessment - reasons for re-opening within or beyond 4 years - reasons to believe - basic contentions of the revenue for re-opening the assessment is that firstly under-invoicing of export and failure on the part of assessee to disclose fully and truly all material and commission paid to the foreign agents - HELD THAT:- As already dealt with the reasons for re-opening of the assessment on the basis of material borrowed from DRI authorities and how it cannot be considered as tangible material having a live link for the purpose of forming independent opinion of the AO, which is infact not formed in all the matters. Thus, as far as the re-opening on the basis of borrowed material from DRI is concerned, we are firm on our opinion that such material without application of mind of the Assessing Officer could not have been directly borrowed and used.
As far as the report of Justice M.B. Shah Commission is concerned, the Co-ordinate Bench of this Court [2019 (8) TMI 16 - BOMBAY HIGH COURT] (S.C. Gupte & N.D. Sardessai, JJ.) clearly observed that the third report of Justice M.B. Shah Commission contains merely the expression of its opinion and it lacks finality as well as authoritativeness. Only on the basis of expression of such opinion by the commission, there cannot be any prima facie belief which could be recorded by the Assessing Officer, without any independent material for the purpose of re-opening.
In the present matters, the reasons for re-opening clearly goes to show that Assessing Officer, except borrowing the information from the third report of Justice M.B. Shah Commission, failed to record independently to his own satisfaction any reason so as to direct re-opening of assessment. We do not see any reason independently forming opinion by the Assessing Officer, apart from what was borrowed from the Justice M.B. Shah Commission report. Thus, such reasons which are not having any application of mind as well as any independent material and reason to believe, cannot be construed as legal reasons for re-opening of the assessment.
Finally, in some matters it is claimed that the assessee failed to disclose fully and truly the material findings that beyond 22.11.2007, the mining activities were illegally continued. In all these matters, the returns were filed somewhere in the year 2009-10, even though, there was no such decision passed by the Apex Court holding that mining leases beyond 2007 were illegal.
It is a fact that for making disclosure truly and fully the assessee must have the knowledge of it. It is necessary to note here that the case of Goa Foundation Vs. Union of India [2015 (8) TMI 723 - SUPREME COURT]. While deciding the said petition, the Supreme Court observed that the mining leases in Goa expired in the year 1997 and thereafter, renewal could have been granted only for 20 years upto 2007.
Thus, the Apex Court observed that from November 2007 all mining leases in Goa are required to be considered as illegal for the simple reason that there was no power to renew such leases beyond 20 years. The fact remains that these observations of the Apex Court are in connection with mining leases, however, the Apex Court no where expressed that till the date of such decision i.e. 21.04.2014, the mining activities carried on by the lease-holders were considered to be illegal. The illegality of the lease is one thing and carrying out business activities on assuming that such leases exists is another thing. Similarly, business activities were carried out and Iron Ore was extracted, sold, exported till all the activities came to a grinding hold. The lease-holders paid royalty, customs duty, other charges to the Government till such activities were stopped. Extraction of Iron Ore including export and payment of remaining charges to the concerned department till 2014 were not declared as illegal. Even this fact, that the mining leases beyond 2007 were not legal, was even not known to the Assessing Officer himself, till such declaration came from the Apex Court in the year 2014.
Thus, claiming that the assessee failed to disclose truly and fully that such activities were illegally carried out and that too while filing returns for the assessment year 2009-10 would not arise. In this regard the observation in the case of Calcutta Credit Corporation [1969 (12) TMI 30 - CALCUTTA HIGH COURT] would clearly attract.
Thus, we are of the considered opinion that notices issued for re-opening and assessment in all these matters failed to satisfy twin conditions. The Assessing Officer, therefore, could not have exercised jurisdiction for re-opening of assessment which were concluded way back.
The additional affidavit filed in two petitions cannot be looked into for the above reason as Revenue or the AO is not entitled to supplement material beyond the reasons recorded at the time of issuance of notice under section 147/148 of Income Tax Act.
We hold that the impugned re-opening notices and the orders passed rejecting the objection needs interference and are required to be quashed and set aside. Decided in favour of assessee.
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2024 (5) TMI 166 - BOMBAY HIGH COURT
Validity of Re-assessment proceedings u/s 147 - Earlier the notice for Assessment u/s 153A/C was issued - denying deduction u/s 80IB - petitioner’s case that it was not subjected to search and seizure action - HELD THAT:- Section 147 provides for a clear bar that where an income, which is subject matter of any appeal, reassessment of such income is not permissible. The reason to believe escapement of income provides “Notice u/s. 153A/C of the IT Act, 1961 was issued. During the year under consideration the assessee has shown that the project is completed and in its P&L A/c. credited to the total sale consideration and entire profit was claimed as deduction u/s. 80IB (10). AO has made addition on account of deduction in WIP and denied the deduction u/s. 80IB (10) as project is not as approved project in the hands of the assessee because the commencement certificate is not issued to Mr. Harshad Doshi nor his AOP Poonam Builders. Secondly the first approved plan is dated 27.11.1997 which is before 1.10.1998. Thus by no means, the assessee is eligible to claim the benefit of deduction u/s. 80IB (10)"
Thus Escapement of income due to claim of deduction under Section 80IB (10) was certainly a subject matter of appeal and admittedly so and, therefore, in our view, on this income reassessment is not permissible. As held by the Hon’ble Apex Court in Abhisar Buildwell (P.) Ltd. [2023 (4) TMI 1056 - SUPREME COURT] Revenue could initiate reassessment proceedings subject to fulfilment of the conditions mentioned in Sections 147/148 of the Act, i.e., so long as it is not hit by the third proviso to Section 147 of the Act. Reopening notice set aside - Decided in favour of assessee.
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2024 (5) TMI 165 - TELANGANA HIGH COURT
Rectification of mistake u/s 154 - tax relating to ‘retention money’ - tax paid on more than one occasion, and claims its refund under Section 154 - HELD THAT:- As the authority has perused the record and on the basis of record, he gave a finding that assessee has offered tax on ‘excess’ retention money. Thus, no elaborate arguments are needed to establish the error as respondent No.2 himself found the same from the record about the payment of tax in excess on the ‘retention money’.
As decided in Nirmala L. Mehta vs. A. Balasubramaniam, CIT [2004 (4) TMI 43 - BOMBAY HIGH COURT] Bombay High Court emphasized that no ‘estoppel’ can arise against the statute. Article 265 of the Constitution of India expressly lays down that taxes can only be levied or collected through the authority of law. Hence, ‘acquiescence’ cannot deprive a party of rightful relief when taxes are levied or collected without legal authority.
Also in Smt. Sneh Lata Jain [2004 (4) TMI 579 - JAMMU & KASHMIR HIGH COURT] once it is found that the petitioner has no tax liability, the respondents cannot be permitted to levy the tax and collect the same in contravention to Article 265 of the Constitution of India, which provides a constitutional safeguard on levy and collection of tax. It is true that this Court is not to act as Court of appeal while exercising the writ jurisdiction, but at the same time where the admitted facts disclosed non- exercise of jurisdiction by an adjudicatory authority and a citizen is subjected to tax not payable by him, interference by this Court is warranted.
As in our judgment, respondent No.2 has erred in holding that the error shown above does not fall within the ambit of ‘error apparent on the face of record’ and consequently, cannot be corrected under Section 154 of the Act. The view taken by the learned respondent No.2 is hyper technical in nature and runs contrary to the scheme flowing from Article 265 of the Constitution of India.
So far the judgment of Division Bench of this Court in the case of MS Educational and Welfare Trust [2022 (3) TMI 901 - TELANGANA HIGH COURT] is concerned, it is noteworthy that this Court opined that the power of rectification of an order of assessment under Section 154 of the Act lies within a very narrow compass. As clearly held that the order to be rectified must be an order which reflects ‘error apparent on the face of record’. Since we have held that the error in the instant case is indeed of that character, the said judgment will not improve the case of the respondents.
Consequently, the Writ Petition stands allowed and the impugned order is set aside. Respondent No.2 is directed to undertake exercise of return of excess tax on ‘retention money’ and pass appropriate order and return the requisite tax money to the petitioner within a period of 60 days from the date of production of copy of this order.
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2024 (5) TMI 164 - BOMBAY HIGH COURT
Validity of Assessment Order u/s 143(3) once the Resolution Plan is approved under the Code - CIRP proceedings under IBC - Effect of Resolution Plan approved by the NCLT - HELD THAT:- Since the Resolution Plan expressively provides that no person shall be entitled to initiate any proceedings or inquiry, assessment, enforce any claim or continue any proceedings in relation to claims so long such result to a period prior to the Effective Date of the Resolution Plan, i.e., 10th November 2022 impugned notices are bad in law.
Further, the impugned notices are bad in law also because respondents failed to take into account that after approval of the Resolution Plan by the NCLT, a creditor including the Central Government, State Government or local authority is not entitled to initiate proceedings on the Resolution Applicant, in relation to claims which are not part of the Resolution Plan approved by the NCLT.
Pertinently, respondents had not submitted any claims to the IRP, as required under the Code, despite the public announcement being issued by the IRP, as prescribed under the Code.
The impugned notice issued u/s 143(2) of the Act by Respondent No. 1 and the consequential impugned notices issued u/s 142(1) of the Act by Respondent No. 2 and all subsequent communications issued by Respondent No. 2 pursuant to the aforementioned impugned notices are bad in law since assessment and inquiry under the Act is sought to be initiated in gross violation of provisions of the Code in as much as it relates to a period prior to the Effective Date.
The impugned notice issued under Section 143(2) of the Act and the impugned notices issued under Section 142(1) of the Act and all subsequent actions undertaken pursuant to the impugned notices issued under Section 142(1) of the Act are bad in law as no proceedings can be initiated against petitioner for a period prior to the Effective Date. Pertinently, the Resolution Plan provides that new claims, disputes, litigations or other judicial or administrative proceedings (including assessments) etc., will be deemed to be barred and shall not be initiated or admitted against Petitioner in relation to any period prior to the Effective Date.
The approved Resolution Plan clearly provides that any claim and/or liability pertaining to the period prior to the Effective Date (i.e., 10th November 2022) stood extinguished and/or settled in terms of the Resolution Plan. The NCLT approved the Resolution Plan on 14th October 2022, which is binding on all stakeholders of petitioner including respondents. Reassessment proceedings set aside.
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2024 (5) TMI 163 - BOMBAY HIGH COURT
TDS u/s 194I - deduction of TDS on the amount payable as “Transit Rent”, by the developer/builder - HELD THAT:- The ordinary meaning of Rent would be an amount which the Tenant / Licensee pays to the Landlord / Licensor. In the present proceedings the term used is “Transit Rent”, which is commonly referred as Hardship Allowance / Rehabilitation Allowance / Displacement Allowance, which is paid by the Developer / Landlord to the tenant who suffers hardship due to dispossession. Hence, ‘Transit Rent’ is not to be considered as revenue receipt and is not liable to be tax, as a result there will be no question of deduction of T.D.S. from the amount payable by the Developer to the tenant. Assessee appeal allowed.
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2024 (5) TMI 162 - ITAT DELHI
TP Adjustment - adjustment made by the AO u/s 92BA r.w. Section 92CA r.w. Section 80IA(10) is in question which has the effect of reduction of quantum of deduction u/s 80IC/80IE - existence of arrangement between the eligible units and AEs merely on the basis of higher operating profits of the eligible units - HELD THAT:- The assessee in the instant case has attempted to demonstrate that the transaction between eligible unit and AEs were carried out on market price by producing the bills and tabulations in the shape of additional evidences. As noted in the preceding paragraphs, the primary onus was on the AO to call for such documents as may be considered necessary to scrutinize whether higher profits in eligible units are on account of any arrangement per se.
AO has not discharged such onus but has made bald allegation on the grounds of relatively higher profits earned by the eligible units vis-à-vis non eligible units.
As greatly assisted on behalf of the assessee to gather understanding that the transaction with connected entities are at market price. When seen in totality, we are inclined to agree with the plea of the assessee on first principles that rigours of Section 80IA(10) are not applicable in a case where neither the AO has discharged its onus to establish existence of arrangement nor such arrangement is demonstrable on factual analysis.
The findings of the TPO/AO holding existence of arrangement between the eligible units and AEs merely on the basis of higher operating profits of the eligible units cannot be upheld on first principles in the instant case. The assessee has placed additional evidences to rebut the unsupported finding of the TPO/AO to dislodge existence of arrangement and transactions between the eligible units and AEs to be at market price.
Hence, to the limited extent of verification of additional evidences, we deem it appropriate to remit the matter back to the file of the AO. AO shall be at liberty to verify the correctness of the claim of the assessee that transactions of purchase undertaken by the eligible units with its AEs are at ordinary and comparable market price to justify ALP.
The assessee shall also be entitled to benchmark transaction of the eligible unit by applying CUP method as most appropriate method to justify lack of any arrangement contemplated under Section 80IA(10) of the Act. To this limited extent, the matter is set aside to the file of the AO. The assessee shall be entitled to adduce such evidences as may be considered expedient to support its plea on comparability of purchase transactions carried out by eligible units with its AE viz. uncontrolled transactions.
As regards sale transactions by eligible units with its AEs, we do not consider it necessary to beset with further burden of proof on assessee towards aspects of ALP having regard to nominal percentage of sale transactions carried out with AEs owing to miniscule effect, if any, on the overall profitability when seen in the context.
AO shall pass a reasoned order towards presence of ‘arrangement’ contemplated u/s 80IA(10), if any while determining the issue. AO may make reference to TPO for determination of ALP of the controlled transactions as per CUP method in the event the prima facie existence of ‘arrangement’ is discovered by him in the factual matrix.
Disallowance of deduction u/s 80G - deduction on CSR expenses - deductibility of donations and contributions to Funds/bodies registered u/s 12A of the Act on the counters of s. 80G where CSR contributions are not eligible for deduction under s. 37 of the Act - HELD THAT:- The exclusions provided in 80G (2)(a)(iiihk) & (iiihl) qua certain specific contributions such as ‘Swachh Bharat Kosh’ and ‘Clean Ganga Fund’ rather exhibits the legislative intent loud and clear. Thus on a plain reading, it is evident that the assessee would be ordinarily entitled to deduction on contributions made to funds and bodies registered u/s 12A of the Act regardless of stipulations made in s. 37(1) of the Act barring the exclusion codified in s. 80G(2)(a)(iiihk) & (iiihl). As a corollary to delineations made in the preceeding paragraphs, s. 37 and S. 80G, appear mutually exclusive subject to exceptions provided in sub-clause (2)(a)(iiihk) & (iiihl) of S. 80G of the Act.
Hence, the exception carved out by way of Explanation 2 to s. 37 (1) prohibiting claim of CSR expenses as business expenditure, by itself, will not serve as any kind of impediment for the purposes of claim of deduction under s. 80G of the Act.
The contribution made in question are not shown to be falling in exclusions provided in (iiihk) or (iiihl) of sub-section 2 clause (a) of S. S. 80G of the Act. The action of the Revenue Authorities is thus not sustainable in law. The claim of deduction on CSR expenses on the touchstone of Section 80G is thus allowed.
Eligibility towards weighted deductions u/s 35(2AB) - amount of weighted deduction to the extent of approval by prescribed authority - HELD THAT:- The quantification of eligible expense for weighted deduction is procedural or a machinery exercise. Hence, there is no warrant to negate the effect of the substituted Rule which seeks to limit the amount of weighted deduction to the extent of approval by prescribed authority supposedly carrying domain expertise in the field.
The observations made by the Co-ordinate Bench in Natural Remedies [2020 (1) TMI 1361 - ITAT BANGALORE] are merely in the nature of obiter while adjudication of the case relating to A.Y. 2016-17 where the substituted Rule had not come into force. The observations made thus do not carry any precedent value per se. Similarly, the coordinate bench in USV P. Ltd.[2023 (10) TMI 1128 - ITAT MUMBAI] has applied the decision rendered in assessee’s own case in earlier year without any discussion on effect of amendment in Rule 6(7A) of I.T. Rules. Hence, the view expressed in USV P. Ltd. is not entitled to great weight.
We thus see little merit in the plea raised on behalf of the assessee to ignore the substituted law expressly provided in Rule 6(7A) of the Act and to ignore the quantification carried out by the prescribed authority for the purposes of deduction under Section 35(2AB) of the Act. The contention of the assessee to avail weighted deduction on unapproved amount is thus devoid of any merit. The aspect is thus adjudicated against the assessee and in favour of the Revenue.
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2024 (5) TMI 161 - ITAT DELHI
Validity of assessment made u/s 147 instead of u/s. 153C - Addition as unexplained cash credit u/s. 68 - assessee has received accommodation entry in the form of bogus LTCG/STCG from one entry operator - HELD THAT:- Upon careful consideration, we find that assessment in this case was framed pursuant to the reopening of the case u/s. 147 of the I.T Act, 1961. CIT(A) has given findings which has been duly elaborated as above, ld. CIT(A) has held that the provision 153C of the Act, were applicable in the present case for framing the assessment, which excludes the application of section 147 of the Act. Hence, notice issued u/s. 148 of the Act and the assessment framed further thereto u/s. 147 r.w.s 143(3) of the Act are void ab initio. Therefore the ld. CIT(A) held that the reassessment u/s. 147/148 of the Act for AY 2017-18 is quashed and this ground of appeal is allowed. Appeal of the Revenue is dismissed.
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2024 (5) TMI 160 - ITAT DELHI
Income deemed to accrue or arise in India - FTS/FIS - receipts pertaining to supply of software (including AMC services) - DR held software licence fee will not constitute royalty income but business income under Article 7 of India- USA DTAA which is not taxable in India in the absence of PE of the assessee.
HELD THAT:- Assessee is a tax resident of USA and has opted to be governed by the provisions of India-USA DTAA. Also, the assessee does not have a PE in India. The assessee had entered into a Software Licensing Agreement for supply and license certain Software and Service Level Agreement (forming part of Software Licence Agreement) to provide AMC services to Reliance/Jio/ RJIL.
What the assessee has supplied in the form of a Software to Reliance/ Jio is a copyrighted article not a copyright in the Software. Fact on record demonstrates that the Software is supplied by the assessee on a non-transferable, non-exclusive basis to various customers all over India. The assessee has only granted a right to use its Software to Jio in connection with its telecommunication business. The consideration received towards licensing of software is for use of a copyrighted article and therefore not taxable as royalty income under the provisions of Article 12 of the India-USA DTAA.
In our considered view, the case of the assessee is squarely covered by the decision of the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence P. Ltd. (2021 (3) TMI 138 - SUPREME COURT]) which has already been upheld by the DRP and the Hon’ble Delhi High Court in light of the factual matrix of the present case. We, therefore have no reason to interfere with the findings of the Ld. DRP on the impugned issue. Consequently, consideration received by the assessee from supply of software licence is not taxable in India in terms of Article 7 of the India-USA DTAA. Accordingly, ground Nos. 1 to 4 is allowed with a direction to the Ld. AO to give effect to the Ld. DRP’s findings in its directions/ order.
Remaining receipts on account of support and maintenance services rendered by the assessee - Nothing has been brought on record by the Revenue to establish that any technical knowledge has been provided to the employees of Reliance / JIO and / or human intervention is required in provision of AMC services. The observations and findings of the AO/ DRP on these aspects are based on surmises and conjectures. Imparting training or educating a person with respect to functionality and attributes of a software or application would clearly not amount to the rendering of technical service under the DTAA which view has been upheld by the Hon’ble Delhi High Court’s decision in the case SFDC Ireland vs. CIT [2024 (3) TMI 620 - DELHI HIGH COURT].
We hold that the receipts are not taxable in India as FTS/ FIS under Article 12(4) of the India-USA DTAA. It is business profits of the assessee not taxable in India in the absence of a PE of the assessee in India in terms of Article 7 of the India-USA DTAA. Accordingly, ground decided in favour of the assessee. In the nutshell, the entire receipts from the supply of software licence and maintenance and support services (AMC services) rendered by the assessee are held to be non-taxable in India.
Appeal of the assessee is allowed.
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