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Income Tax - Case Laws
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2024 (5) TMI 186
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 We note that assessee has deposited cash in the bank account out of agricultural income and out of earlier cash withdrawn from the bank, (that is, unused cash out of the cash withdrawn from bank).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
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
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
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
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
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
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
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
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
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
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
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
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
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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2024 (5) TMI 159
Deduction u/s 80P(2)(a)(i) - interest derived from deposits of SLR funds [Statutory Liquidity Ratio] - DR argued that this amount has been found as the excessive component in assessee’s deduction claim which hardly deserves to be accepted for the purpose of computing the impugned deduction - HELD THAT:- Assessee has all along been claiming the impugned sum to be representing it’s SLR i.e., Statutory Liquidity Ratio as mandatory compliance of the various banking norms applicable in case of a co-operative society.
It is in this factual backdrop that hon’ble apex court’s landmark decision CIT vs., Karnataka State Cooperative Apex Bank [2001 (8) TMI 9 - SUPREME COURT] and CIT vs. Nawanshahar Central Cooperative Bank Ltd.[2005 (8) TMI 28 - SC ORDER] have already settled the issue in assessee’s favour and against the department that such an interest derived from deposits of SLR funds duly qualifying for sec. 80P(2)(a)(i) deduction. Decided in favour of assessee.
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2024 (5) TMI 158
Disallowance of raw material consumption - scope of rejecting the books of account - adopting method of estimation to make an addition due to increase in raw material consumption - as per DR there is corelated increase in sales as compared to increase in raw material consumption and the onus to give reason was on assessee - HELD THAT:- When the AO is resorting to any ad hoc disallowance on the basis of some estimation, he is rejecting the books of accounts without recording the specific reasons. Mere deviation in percentage of consumption of raw materials cannot be a ground for rejecting the books of account and entering in the realm and guesswork of estimation without inquiring into the genuineness of the purchases.
The Hon'ble Gujarat High Court in the case of CIT Vs. Dhiraj R. Rungta [2014 (4) TMI 711 - GUJARAT HIGH COURT] held that once rejection of books of account is justified under section 145 of the Act, no other addition can be made referring the same set of books to the income of the assessee. In the present case, the AO used the same set of books of accounts to estimate the disallowance which is not justifiable. CIT (A) also adopted the same method of AO accepting the books of accounts on one hand and making ad hoc addition on other hand but at lower percentage of disallowance.
When the books of accounts are regularly maintained and are duly audited without any adverse opinion or comments of an auditor, they are to be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. Thus, the onus is upon Revenue to show that either the books of accounts maintained by assessee are incorrect or incomplete or that the method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom.
Neither AO nor Ld. CIT(A) has demonstrated specific defects in the books of accounts, therefore adopting method of estimation to make an addition due to increase in raw material consumption is not justifiable. Accordingly we delete the addition made by Ld. CIT(A) restricting the disallowance to 15% only. This ground of the assessee is allowed.
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2024 (5) TMI 157
Disallowance u/s 14A r.w.r. 8D - no proper recording of satisfaction by the AO for rejecting the suomoto disallowance - HELD THAT:- We find that the Tribunal in assessee’s own case [2024 (2) TMI 1043 - ITAT DELHI] held that there is no proper satisfaction recorded on the suo moto disallowance made by the assessee and, therefore, there cannot be any disallowance under Rule 8D r.w.s. 14A of the Act.
There is no proper recording of satisfaction by the AO for rejecting the suomoto disallowance made by the AO. Thus, respectfully following the order of the Tribunal, we allow the grounds raised by the assessee.
Disallowance under 14A of the Act while computing the provisions u/s 115JB - The issue is covered by the decision of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] as held that there cannot be any disallowance under Rule 8D read with 14A of the Act in terms of clause (f) of Explanation 1 to section 115JB of the Act. Thus, respectfully following the said decision, we hold that the disallowance made under Rule 8D read with section 14A of the Act while computing book profits cannot be sustained. In any case since the assessee itself made suo moto disallowance there cannot be any further disallowance u/s 14A read with Rule 8D of IT Rules while computing the book profits u/s 115JB of the Act. Ground raised by the Revenue is rejected.
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2024 (5) TMI 156
Validity of reopening of assessment - Valid approval granted by PCIT u/s 151 or not? - HELD THAT:- We observed from the record that AO has received the approval from the PCIT-7 for reopening of the assessment and Ld. PCIT in point No.13 mentioned that it is a fit case for issue of notice u/s 148 by observing that “Yes I am satisfied”.
As in the case of Safonia Tradelinks (P.) Ltd. 2021 (3) TMI 1177 - DELHI HIGH COURT wherein the approval u/s 151 was granted simply and endorsing as approved. Even in this case the issue was decided in favour of the assessee. Further, it is brought to our notice in the case of VCR Township Pvt. Ltd. 2020 (10) TMI 1223 - ITAT DELHI wherein similar approval was granted for reopening of the assessment by approving authority as “Yes, I am satisfied” and the Co-ordinate Bench has decided the similar issue in favor of the assessee.
Respectfully following the above decision, the facts in the present case are also exactly similar to the above facts on record. Accordingly, ground No.3 raised by the assessee is allowed.
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2024 (5) TMI 155
Validity of assessment proceedings initiated u/s 153A - unabated assessment - purchase of agri-land by the assessee - Addition u/s 69 - HELD THAT:- As held in the case of Abhisar Buildwell P Ltd (2023 (4) TMI 1056 - SUPREME COURT] no addition can be made in the case of unabated assessment which are not part of incriminating materials found during the search. In the present case, it is clearly established that assessee has made several payments to the farmers which lead to the finding that the assessee has purchased several immovable properties. Therefore, we are not inclined to accept the submissions of the assessee on the issue of purchase of agri-land by the assessee that there is no incriminating material found during the search. Accordingly, the ground nos.1 and 2 are are partly allowed because in the other additions, there are no incriminating material, the same was discussed somewhere in this order.
Addition u/s 69 - Payment to farmers and purchase of agriland - We observed from the record that AO acknowledged that assessee has paid cash payment to the farmers to the extent of money withdrawn from the bank. These findings clearly shows that there is a direct link with the information collected from the assessee and substantiates that the assessee has capacity to make payments to farmers. We also observed from the record that the AO has made addition based on the presumption that the assessee has no source and also the difference between the investment made as per registered documents and circle rates as per the respective lands.
The assessee has demonstrated that she has sources to make the investment and she is eligible to get the investment made in the agricultural land to the extent of declared sources. It is fact on record that the assessee has withdrawn the cash and made the payment to the farmers, to the extent of cash withdrawn by her from the bank for which she has sufficient fund available in the bank. Therefore, we are directing the AO to adjust the payments made from withdrawing from the bank account. The other part of the addition after making the addition may be sustained. In this regard, we are inclined to partly allow the ground no 3 raised by the assessee.
Coming to the other additions made by the Assessing Officer, we observed that all these information collected in post search proceedings and there is no evidence to show that the additions made by the assessing officer has bearing from the material found during the search - we are inclined to direct the Assessing Officer to delete above mentioned additions made by him in the assessment order. Accordingly, ground Nos 4 to 7 raised by the assessee are allowed.
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2024 (5) TMI 154
Denial of TDS credit - employer of the assessee has not deposited TDS after deducting the same from the salary paid to the assessee - Liability to deduct TDS - in the absence of TDS getting reflected in form 26AS, the CPC denied granting TDS credit - HELD THAT:- We find that the issue in this appeal is similar to the issue decided by the Hon'ble Delhi High Court in the case of Harshdip Singh Dhillon vs. Union of India [2024 (1) TMI 275 - DELHI HIGH COURT] since the petitioner accepted the salary after deduction of Income-tax at source, it is his employer who is liable to deposit the same with the Revenue authorities and on this count, the petitioner cannot be burdened. We find no substantial question of law to be considered by us in this appeal. Therefore, the petition is allowed and consequently the impugned demand notice is set aside and the respondent-Revenue is directed to allow credit of tax at source deducted by his employer - Appeal of the assessee is allowed.
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