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Income Tax - Case Laws
Showing 1 to 20 of 934 Records
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2019 (3) TMI 2055 - ITAT MUMBAI
Revision u/s 263 - assessee was subjected to reassessment proceedings u/s 147 - estimation of income on bogus purchases - assessee was saddled with estimated addition of 12.5% by AO - Pr.CIT noted that the assessee was not maintaining any quantitative register and could not substantiate the delivery of the material and therefore, the full disallowance was to be made as against 12.5% estimated by AO keeping in view the decision Hon’ble Apex Court rendered in N.K.Proteins Ltd [2017 (1) TMI 1090 - SC ORDER] - HELD THAT:- We find that the co-ordinate bench of this Tribunal in the cited case of Rajal Enterprises [2018 (10) TMI 2028 - ITAT MUMBAI] when the assessee was able to link the purchases with corresponding sales, the logical conclusion which one can arrived at is, the assessee might not have purchased goods from the declared source but from some other parties. In that event, only the profit element embedded in the bogus purchases can be considered for addition. Therefore, the decision of the AO to restrict the addition to 10% of the bogus purchases is in tune with the consistent view of the tribunal and different high courts in similar nature of cases. That being the case, in our view, the exercise of power under section.263 of the Act in the facts of the present case is invalid. Accordingly, the impugned order passed by the leaned PCIT under section 263 of the Act deserves to be quashed. Decided in favour of assessee.
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2019 (3) TMI 2047 - ITAT RANCHI
Provision made and expenses not actually accrued - warranty expenses booked by the assessee under the head ‘provisions for warranty expenses’ disallowed - as per AO liability had not been ascertained or incurred - AO has held that these expenses were not ascertained and were adhoc in nature which could not be claimed as expenses for the year under consideration - HELD THAT:- The expenses had been claimed under the head’ warranty expenses’ and the assessee had been claiming this consistently on the same basis as a contractual liability.
We note that the provision was made as per Note 27(D) to the balance sheet. The assessee company had written back sum under the head ‘ Excess Provision Written back and shown as ‘ Other income’ for the impugned assessment year.
Coming to the judgment in the case of Bharat Earthmovers [2000 (8) TMI 4 - SUPREME COURT] allowability of a liability has to be judged as
1. a business liability has to definitely arise in the accounting year.
2. there should be certainly about the incurring of the liability.
3. it should also be capable of being estimated with reasonable certainty though the actual quantification may not be possible.
4. the liability has to be allowed although the liability may have to be quantified and discharged at a future date.
It would have to be seen whether the facts of the case of the assessee meets with the criteria settled by the Hon’ble Supreme Court.
On perusal of the facts of the case it is seen that the liability had definitely arisen in the accounting year and there was certainty about this. The appellant company had made a reasonable estimate of claiming at 0.5% of sales based on past expenses and technical estimates. The appellant company also stated that on the expiration of the warranty period the balance amount is offered for tax as income. Decided against revenue.
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2019 (3) TMI 2046 - ITAT MUMBAI
Validity of revision u/s 263 - Challenging the jurisdiction of Ld. PCIT in passing the impugned order questioning validity of assessment order passed by AO u/s 143(3) r.w.s. 144C(13) - non-disposal of aforesaid jurisdictional issue by learned Pr. CIT - HELD THAT:- We find that the identical ground has already been decided [2018 (7) TMI 2330 - ITAT MUMBAI] in view of non-disposal of aforesaid jurisdictional issue by learned Pr. CIT which is purely legal issue which goes to the root of the matter as to whether learned Principal CIT is competent and empowered to invoke its revisionary powers within provisions of Section 263 with respect to the assessment order of the AO which is passed u/s 143(3) r.w.s. 144C(13) of the 1961 Act in pursuance of direction issues by learned DRP .Several other contentions were also raised in grounds of appeal on merits but keeping in view the jurisdictional issue involved in this appeal which were raised before learned Principal CIT and which was not disposed of by learned Principal CIT in its revisionary order dated 28.03.2016 passed u/s. 263 of the 1961 Act , we consider it appropriate and deem fit to restore this matter back to the file of learned Principal CIT for disposal of this jurisdictional ground which is a legal ground as to competence of learned Pr. CIT to revise an assessment order passed by the AO u/s 143(3) r.w.s. 144C(13) in pursuance to directions given by learned DRP and which in our considered view goes to the root of the matter , along with all other grounds raised by the assessee to decide de-novo in proceedings u/s. 263 more so when both the parties have also agreed and conceded that this matter needs be restored to the file of learned Principal CIT for disposal of the jurisdictional ground and other grounds as the said jurisdictional issue despite being raised by the assessee before learned Pr. CIT in proceedings conducted u/s 263 was not decided by learned Pr. CIT vide its order dated 28.03.2016 passed u/s 263 of the 1961 Act.
Thus we apply the same findings in the present case which are applicable mutatis mutandis in the present case and restore the issues back to file of learned PCIT for deciding afresh with similar directions as were given above.
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2019 (3) TMI 2043 - ITAT AHMEDABAD
Time limit for set off of unabsorbed depreciation - AO observed that Sec. 32(2) does not permit depreciation to be carried forward for more than eight years - HELD THAT:- As carefully considered the order passed by the Coordinate Bench in [2018 (4) TMI 1422 - ITAT AHMEDABAD] as held restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y. 1997-98 up to the A.Y. 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever.
Thus carry forward of unabsorbed depreciation concerning impugned assessment years could be set off in subsequent years without any set time limit. See Gujarat Lease Finance Ltd [2017 (5) TMI 1555 - ITAT AHMEDABAD] Decided in favour of the assessee.
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2019 (3) TMI 2041 - ITAT MUMBAI
MAT Computation - Addition of corporate tax paid at Saudi Arabia in the computation of Book Profit u/s 115JB - HELD THAT:- According to the provision us/ 115JB of the Act, the AO while computing the income u/s 115JB of the Act has only the power of the examining whether the books of account are certified by the authority under the companies Act and having the properly manufactured in accordance with Companies Act. AO has limited power of revenue increases and deduction and has no jurisdiction to go behind the profit and loss account accept to the profit of explanation to Section 115JB - Since the amount of AAD has been reduced and there is no debit in profit and loss account, therefore, the amount did not enter the stream of the income for the purpose of determining of net profit at all and, therefore, clause (b) of Explanation 1 is not applicable to the present case.
Since no addition can be raised except this according to special provision mentioned in the provision u/s 115JB of the Act, therefore, the finding of the CIT(A) is not justifiable, hence, by relying upon the law laid down in Apollo Tyres Ltd [2002 (5) TMI 5 - SUPREME COURT] and National Hydroelectric Power Corporation Ltd. [2010 (1) TMI 281 - SUPREME COURT] we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee.
Addition in computing book profit u/s 115JB of the Act in respect of expenditure on computer software - Since the claim of the assessee nowhere falls within the purview of the Explanation of 115JB of the Act, therefore, the addition is not liable to be sustainable in the eyes of law. Accordingly, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee.
Non-exclusion of profit on sale of investments in computation of book profit u/s 115JB - Since, this issue has been decided against the assessee while deciding the issue in question in the assessee’s own case for the A.Y. 2002-03 therefore, the present issue is hereby decided against the assessee and in favour of the revenue.
Disallowance of Railways/insurance claims written off - We set aside the finding of the CIT(A) on this issue and restored the matter before the AO to decide the matter of controversy afresh on similar lines which has been directed by Hon’ble ITAT in the assessee’s own case relevant to the A.Y. 2002-03.
Setting off of unabsorbed depreciation of the current previous year with long term capital gain of the current previous year instead of setting it off with long term capital loss brought forward from earlier years - The assessee wanted to set off in future but the Assessing Officer declined the claim of the assessee on account of this fact that the claim is against provision of income tax. The CIT(A) has also declined the claim of the assessee on the basis of this fact that Section 71 deals with inter head adjustment and have precedence over section 74 of the Act. Nothing seems to contrary to the law. No law in support of the claim of assessee has been produced before us, therefore, taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
Nature of income - treatment of interest on tax refund as income from other sources - HELD THAT:-It is not related to the business of the assessee. The law relied by the Ld. Representative of the assessee speaks some other facts. The income received as interest on income tax refund is liable to be treated as income from other sources, therefore, in the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the revenue against the assessee.
Addition of PF and Labour Welfare fund made u/s 43B - HELD THAT:- As we noticed that the assessee has paid all the relevant payment before due date for filing return of income. The CIT(A) has correctly allowed the claim of the assessee in view of the decision of Devidayal (Sales) Pvt. Ltd. [2003 (10) TMI 606 - ITAT MUMBAI] and A.P.L (India) P. Ltd. [2004 (10) TMI 261 - ITAT BOMBAY-E]
Nature of receipt - capital investment subsidy received from Government of West Bengal - HELD THAT:- CIT(A) has allowed the claim of the assessee on the basis of the decision in the case of CIT Vs. PJ Chemicals Ltd. [1994 (9) TMI 1 - SUPREME COURT] and DCIT Vs. Reliance Industries Ltd. [2003 (10) TMI 255 - ITAT BOMBAY-J]. At the time of argument, the Ld. Representative of the assessee has also placed reliance upon the decision of CIT Vs. Shree Balaji Alloys [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] in which such type of incentive held as capital receipt in the hands of industrial unit. No doubt, the issue has been remanded in the assessee’s own case for the A.Y. 2001-02 and A.Y 2002-03 [2015 (10) TMI 172 - ITAT MUMBAI], but, there is no need to remand the case being this issue has been settled.
Nature of expenses - expenditure on Jukehi Road at Kymore in computing total income under normal provision of the Act - As per CIT(A) impugned expenditure did not result in creation of any asset of enduring nature to the appellant since the ownership vests with the Government of Madhya Pradesh, thus deleted addition - HELD THAT:- Since the matter of controversy has duly been covered and decided in favour of the assessee in the assessee’s own case and L.H. Sugar Factory and oil Mills (P) Ltd. [1980 (8) TMI 1 - SUPREME COURT] therefore, in the said circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
Nature of receipts - Sales Tax Subsidy in computation of book profit u/s 115JB - as per CIT(A) sales tax subsidy availed by various units of the appellant constitutes capital receipt in the hands of the appellant - HELD THAT:- The objectives of all the scheme specifies economic developments, regional development, development of backward area etc., and hence it is capital receipt and is not chargeable to tax. Accordingly, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage also. It also covered the MAT provision.
Allowance of claim of Long Term Capital Gain in respect of sales of land at Kaza mines and Nimabur at Kaza South - FMV determination - HELD THAT:- As noticed that the CIT(A) has observed that the assessee has an option to consider fair market value as on 01.04.1981 as the cost of acquisition for the purpose of computing capital gains and in view of the provision of Section 55(2)(b) of the Act. The assessee was also entitled to reduce indexed cost of improvement as per provisions of second proviso to Section 48 of the Act. Accordingly, the CIT(A) has directed to assess the long term capital gain in accordance with law. No ambiguity seems apparent on record - CIT(A) has specifically directed to apply the provision mentioned in the Act. The facts are not distinguishable at this stage also. On appraisal of the above said finding, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage.
Addition in respect of provision for bad and doubtful debts in computing book profit u/s 115JB - HELD THAT:- As noticed that the CIT(A) has allowed the claim of the assessee on the basis of decision CIT Vs. Usha Martin Industries Ltd. [2006 (12) TMI 171 - ITAT CALCUTTA] and CIT Vs. Echjay Forgings P. Ltd. [2001 (2) TMI 56 - BOMBAY HIGH COURT]. The addition can only be raised in view of the provision u/s 115JB of the Act and in Explanation to sub section 2. The case of the assessee nowhere fall within the ambit of the said section, therefore, in the said circumstances, the CIT(A) has rightly deleted the said addition, hence, allowed the claim of the assessee. The facts are not distinguishable at this stage also. No contrary law to the law relied by the assessee has been produced before us.
Provision for Director’s Retirement Benefit in computing Book Profit U/s 115JB - HELD THAT:- As decided in assessee own case CIT(A) correctly concluded provision for director’s retirement benefit cannot be considered as unascertained liability since the same has been calculated on the basis of actuarial valuation and is squarely covered by the decision of Hon’ble Apex Court in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT]. Therefore, provision for director’s retirement is an allowable deduction in computing profits and gains of business or profession. Further, in my view additions made in computing book profit u/s 115JB on the ground that the same has been added back in the computing total income under normal provisions of the Act is not tenable.
Addition made in respect of VRS expenditure pertaining to earlier years, Capital expenditure, Deferred revenue expenditure, debited to P&L Account in computing Book Profit u/s 115JB is to be deleted as relying on Apollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT] in computing book profit u/s 115JB is to be deleted.
As computation of income under the normal provision of the Act has nothing to do with computation of book profit u/s 115JB of the Act in which specifically adjustment has been given in Explanation to Section 115JB(2) of the Act. No doubt, the addition which nowhere fall within the provision of Section 115JB of the Act and Explanation (2) of the Act is not required to be added to the income of Assessee, therefore, in the said circumstances, the same is not required to be added while computing the book profit u/s 115JB of the Act. Since the matter of controversy has been adjudicated by the CIT(A) judiciously and correctly, therefore, the finding of the CIT(A) is not liable to be interfere with at this appellate stage deciding in favour of the assessee.
Addition made in respect of revenue generated from trial run production in computing of book profit u/s 115JB is to be deleted as relying on Bipin Chandra Magan Lal case [1960 (11) TMI 13 - SUPREME COURT] wherein it has been held that there is a distinguishable relationship between the assessable income and the profits of business concern in a commercial sense.
Treatment in the accounts, in respect of revenue generated during construction period, is in accordance with the Guidance note on “Expenditure incurred during the construction period” which is issued by the Institute of Chartered Accountant of India, which is an authoritative body in the matter of laying down the accounting standard. That being so addition made by the AO on the ground that the same has been added back in computing income under normal provisions of the Act and the said amount should have been credited in the profit and loss account is neither justified nor tenable.
MAT computation u/s 115JB - Foreign exchange gain and capital subsidy received towards purchase of assets have been adjusted against the cost of the fixed assets in view of the provisions of Section 43A and Explanation 10 to Section 43(1) respectively. Therefore, the same cannot be added back in computing the book profit. Further, State Capital Investment Subsidy received from WBIDC constitute capital receipt in the hands of the appellant, hence, non taxable as discussed while deciding the issue above. Hence, the same is not added back in computing book profit u/s 115JB of the Act. So far as the refund of sales tax is concerned, the same has been added to the profit and loss account and accordingly, the deduction was given. The interest income in connection with deposit with ARV Society and in sum Deposited with MSEB has been disallowed being income of the assessee. The claim of the assessee was partly allowed.
Provision of Wealth Tax in computing book profit u/s 115JB is to be allowed in view of the decision of Echjay Forgings (P) Ltd. [2001 (2) TMI 56 - BOMBAY HIGH COURT] and JCIT Vs. Usha Martin Industries Ltd. [2006 (12) TMI 171 - ITAT CALCUTTA]
Provision for additional gratuity in computing book profit u/s 115JB is to be allowed.
Allowance of claim of exclusion of write back of excess provision made in earlier years in computing book profit u/s 115JB - Mineral Right Tax and Cess on Coal and Limestone written back in the assessment year was created prior to 01.04.1997, therefore, falls under the provision of clause (i) of Explanation to Section 115JB(2) of the Act. So far as the provision for employees incentive is concerned, the same is not required to be deducted in computing book profit u/s 115JB(2) of the Act. Accordingly, the deduction was partly allowed. The CIT(A) has also relied upon the case cited as Hitkari Fibres Ltd.in allowing claim [2003 (5) TMI 196 - ITAT BOMBAY-H]
Write back of share premium account is an allowable deduction in view of clause (i) of Explanation to Section 115JB(2).
Provision for contingencies in computation of book profit u/s 115JB issue is covered against the assessee due to insertion of clause (i) to Explanation 1 to Section 115JB vide Finance No. 2 Act, 2009 w..e.f 01.04.2001 and also in accordance with law settled in the assessee’s own case.
Allowance of claim additional gratuity on provisional basis under normal provisions confirmed.
Addition in respect of provision for Director’s Retirement Benefit - If a business liability had definitely arisen in the accounting year and was capable of being estimated with reasonable certainty, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. Following the principle laid down by the Apex court Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] and the decision of the Tribunal delivered for the AY.1990-91 we decide ground against the AO.
Appeal filed by the revenue and the appeal filed by the assessee is hereby ordered to be partly allowed.
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2019 (3) TMI 2039 - ITAT AHMEDABAD
TP Adjustment - Interest paid by the assessee towards loan - assessee has paid interest at the rate LIBOR + 3% p.a. as agreed with the AE - scope of rule of consistency - TPO has benchmarked the rate of interest for the assessee at the rate of LIBOR + 0.77 percent and accordingly the excess interest was disallowed - HELD THAT:- It is an undisputed fact that the assessee has paid interest on the money borrowed from its AE at the rate of LIBOR+300 basis points in the assessment year 2006-07 which was accepted by the TPO in the assessment framed u/s143(3) r.w.s. 92CA(3).
Thus, the order of the TPO for the assessment year 2006-07 has reached its finality. Therefore, in our considered view the TPO cannot take different view until and unless there is a change in the facts and circumstances.
There is also no ambiguity that the assessee has paid the interest in the year under consideration which was also there during the assessment proceedings for the assessment year 2006-07. As there was no change in the facts and circumstances, we are of the view that no disallowance on account of interest expenses for the year under consideration is warranted.
We are of the considered opinion that the rate of interest paid by torrent pharmaceutical Ltd cannot be compared with the rate of interest on the money borrowed with the assessee.
Thus we hold that the rate at which the interest paid by the assessee to AE is at arm's length and no adjustment is warranted. We also make clear that the finding should not be used /quoted as a precedent in other cases as we are allowing the appeal of the assessee on the basis of the rule of consistency. Hence, the ground of appeal of the assessee is allowed, and the ground of appeal of the Revenue is dismissed.
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2019 (3) TMI 2037 - ITAT CHANDIGARH
Reopening of assessment u/s 147 - change of opinion - assessee had claimed deduction u/s 35AD - HELD THAT:- As reasons recorded by the AO reveals that the AO had come into the knowledge of escapement of income of the assessee while conducting the assessment proceedings u/s 143(3) of the Act for the subsequent assessment year. Hence, it cannot be said that no information had come to the knowledge of the AO or that it was a case of change of opinion. Though before forming the opinion, the AO has also noted that the aforesaid issue escaped the attention of the AO for the year under consideration and the AO was of the view that the assessee was not entitled to the aforesaid claim of deduction u/s 35AD of the Act. In view of this, it cannot be said that it is a case of change of opinion or that no tangible information had come into the possession of the AO to form the belief of escapement of income for the year under consideration.
Sanction of the competent authority has been obtained by the AO for reopening under the provision of Section 151(1) of the Act whereas the sanction had to be obtained u/s 151(2) - Admittedly, the approval for re-opening of the assessment in this case has been given by the Joint Commissioner which is the Competent Authority as provided under the relevant provisions of Income Tax Act. Mere mentioning of the Section as 151(1) instead of 151(2), in our view, is nothing more than a clerical mistake and has not caused any prejudice to the assessee.
Joint Commissioner has sanctioned the reopening of the assessment in a mechanical manner without application of mind - As gone through the form of recording reasons and grant of approval u/s 148 of the Act and find that the AO has recorded reasons in detail for forming of belief that the income of the assessee has escaped assessment and where upon the Joint Commissioner, in his own hand-writing has written that he is satisfied that it was a case for issue of notice u/s 148 - we do not think that the Joint Commissioner has not read over the reasons or he had not applied his mind to the reasons recorded by the AO. Whether the approval has been granted in a mechanical manner or after application of mind is subjective and depends upon the facts of each case - we do not think that the Joint Commissioner has not applied his mind while granting approval.
Addition u/s 35AD - Deduction in respect of expenditure on specified business - HELD THAT:- A perusal of the above provisions of Section 35AD reveals that assessee is eligible to claim deduction in respect of capital expenditure if the same is incurred wholly and exclusively for the purpose of any specified business carried out by him during the previous year in which such expenditure is incurred. However, in cases where such expenditure is incurred prior to the commencement of its operations by the assessee and amount is capitalized in the books of account of the assessee on the date of commencement of operations, then such expenditure is allowable as deduction in the previous year in which the assessee commences operations of his specified business.
Lower authorities have wrongly interpreted the relevant provisions of the Act. There are two parts of the above said provisions. In the first part, it has been mentioned that an assessee is eligible to claim deduction of the capital expenditure if such an expenditure has been incurred wholly and exclusively in a specified business.
There is no condition of any date or year of commencement of specified business. However, in the second part, it has been provided that if such an expenditure has been incurred prior to the commencement of business and has been duly capitalized in the books of account, the claim will be allowed in the year in which the assessee commences operations of his specified business. There is neither any overlapping nor any contradiction in the aforesaid provision. The assessee is covered in the first part i.e. the assessee has incurred the expenditure on the specified business during the year in which operations of his business of warehousing were already going on.
No justification on the part of the lower authorities in denying the deduction to the assessee u/s 35AD - This ground is, accordingly, allowed in favour of the assessee.
Disallowance of Prior Period Expenses - HELD THAT:- As per the relevant part of the finding of the Tribunal [2016 (7) TMI 1687 - ITAT CHANDIGARH] it is the contention of the assessee that assessee is a public sector undertaking and is a vast organization. The expenses when not reported or identified up to the close of the year are subsequently booked under prior period expenses. This system of accounting of the assessee has been regularly accepted by the Department in the past. There is no change in the facts and circumstance of the case.
As submitted that necessary details were duly submitted before the AO that all of the expenses are supported by proper vouchers supporting evidence. It is not the case of the Assessing officer that any short coming has been noted in the vouchers. This is also not the case that any distortion in profit has been observed as compared to preceding year in view of the above said expenditure. Revenue has no cogent reason why the prior period expenses claimed by the assessee which have been consistently so claimed and allowed by the Department in earlier years should be disallowed in the current year.
Addition on account of work in progress - AO noted that the assessee in the balance sheet had shown Rs. 6,80,90,888/- on account of machinery work in progress while on other hand the assessee had incurred huge interest expenses of Rs. 2,11,65,306/- during the year on various loans, thus interest expenses should not be disallowed and capitalized as the machinery had not been put to use during the year - As submitted that the assessee is a Government organization and if a loan is taken, that is used for that specific purpose only for which it has been taken. The assessee being a government organization, cannot deviate the funds for other works - HELD THAT:- We restore this issue to the file of the AO to verify the aforesaid contentions raised by the assessee and if it is found that during the year the assessee has not taken any fresh loan and further that the own funds of the assessee were sufficient to meet the investment in capital work in progress, then no disallowance is to be made on this issue. In view of our finding given above, the appeal of the revenue is treated as partly allowed for statistical purposes.
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2019 (3) TMI 2029 - ITAT JAIPUR
On-money payment - addition u/s 69 - in search at business premises incriminating documents were found and seized which revealed that the assessee made payment towards boundary expenses through cheque as ‘on-money’ - HELD THAT:- Lower authorities have not placed any material on record to show that the assessee had paid alleged ‘on-money’ - Neither in the seized documents found from Shri Madan Mohan Gupta nor in the statement recorded u/s 132(4), he admitted that he received any amount from the assessee by way of ‘on- money’.
From the reading of the statement of Shri Madan Mohan Gupta and the papers found from him, it is evident that there is nothing to suggest that allottees of the plot have paid any ‘on-money’ on purchase of the plot. In fact, the assessee has not purchased any plot from Shri Madan Mohan Gupta rather he was allotted the plot by the Rajasthan Tehsildar Sewa Parishad and thus, there is no privity of contract between the assessee and Shri Madan Mohan Gupta. Therefore, no question of payment of alleged ‘on-money’ by the assessee to Shri Madan Mohan Gupta arises for consideration.
Annexure-A-3 referred by the AO in his order is a register where the details of the plot allotted to various persons is noted. This Annexure nowhere suggests that any ‘on-money’ has been received by Shri Madan Mohan Gupta from the allottees of plot. At the time of possession of the plot, the final receipt is issued for the entire amount received and that receipt no. is also mentioned in this register. Thus, in these papers there is no evidence that any ‘on-money’ has been paid by the assessee. Further, opportunity to cross examine Shri Madan Mohan Gupta was not provided even when specifically asked for on the ground that he is not a third party ignoring that assessee has not purchased any plot from him rather it is the Rajasthan Tehsildar Sewa Parishad who have allotted the plot to the assessee under the scheme framed by them.
No merit in the addition so made by the AO and confirmed by the ld. CIT(A), hence, the Assessing Officer is directed to delete the same. - Decided in favour of assessee.
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2019 (3) TMI 2028 - ITAT PUNE
TP Adjustment - Comparable selection - Universal Print System Ltd - HELD THAT:- There is no specific findings as to the analysis regarding the functioning of Universal Print Systems Ltd vis a vis the function of the assessee company before holding it to be a comparable company.
As M/s XL Health Corporation India Pvt. ltd [2018 (4) TMI 82 - ITAT BANGALORE] we direct the AO/TPO to exclude the Universal Print System Ltd from the list of comparables with regard to the assessee herein.
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2019 (3) TMI 2027 - CALCUTTA HIGH COURT
Prosecution of appeal in High Court - scope of Section 12AA after its amendment with effect from 1st June, 2010 - HELD THAT:- This sub-section has retrospective effect and covers activities of the trust right from the time of insertion of 12A of the said Act till the date of the said amendments and thereafter.
Circular No.1 of 2011 of the Central Board of Direct Taxes in paragraph 7.4 thereof states with regard to the said amendment as follows this amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years.
The subject assessment year is 2010-11. Revenue is bound by its circular, in our opinion, and cannot prosecute the appeal for this period.
This appeal under Section 260A of the Income Tax Act, 1961 and the connected application are dismissed.
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2019 (3) TMI 2024 - ITAT JAIPUR
Deduction u/s 80IB - Denial of claim as assessee has failed to file the audit report in Form No. 10CCB online as required in Rule 12(2) of the Income Tax Rules, 1962 - HELD THAT:- Since AO has out rightly declined the assessee’s claim of deduction U/s 80IB of the Act merely for non-filing of report electronically, there is no merit in the action of the AO to decline claim of deduction U/s 80IB, unless the assessee had failed to fulfill the conditions stipulated U/s 80IB in respect of housing project.
No where the AO has pointed out failure of the assessee to fulfill any of the conditions required to be fulfilled for claim of deduction u/s 80IB accordingly, there is no merit in the action of the AO in declining the claim of deduction U/s 80IB. In the substantial interest of justice, we restore the matter back to the file of the AO with a direction to allow the claim of deduction U/s 80IB of the Act if the conditions specified therein are fulfilled by the assessee like completion certificate etc. Appeal of the assessee is allowed for statistical purposes only.
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2019 (3) TMI 2016 - ITAT MUMBAI
Addition u/s. 68 - information received from the DGIT (Inv.) that the assessee is one of the beneficiaries of the accommodation entries provided by various entities being operated by Praveen Kumar Jain Group - burden of proving the identity, genuineness and creditworthiness of the creditors - HELD THAT:- In the case on hand also the assessee has discharged its initial burden by providing all the necessary details in respect of the loan transactions and thus the assessee has discharged identity, genuineness of the transactions and creditworthiness of the parties. Thus, hold that there is no valid reason for the AO to treat the loan transactions has not proved by the assessee. Hence, direct the AO to delete the addition made u/s. 68 in all these Assessment Years. Appeals of the assessee are allowed
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2019 (3) TMI 2014 - BOMBAY HIGH COURT
Benefit of deduction u/s 35(2AB) - approval for the R & D activities were given in the subsequent assessment years and not for assessment year under consideration - HELD THAT:- As decided in assessee own case [2019 (2) TMI 535 - BOMBAY HIGH COURT l High Courts have held that such research and development activity once approved by the competent authority, the approval would relate back to the date of application. Reference in this respect can be made to the decision of CIT Vs. Claris Lifesciences Ltd. [2008 (8) TMI 579 - GUJARAT HIGH COURT] and the decision of Sandan Vikas (India) Ltd. [2011 (2) TMI 66 - DELHI HIGH COURT] We are informed that the decision of Delhi High Court in case of Sandan Vikas (India) Ltd. (Supra) was carried in appeal before the Supreme Court and the SLP came to be dismissed by an order dated [2012 (1) TMI 408 - SC ORDER] 09th January, 2012. This question is therefore not entertained.
Disallowance u/s 36(1)(va) being employee's contribution to provident fund and ESI - same were not deposited in the respective fund within the stipulated time - We notice that similar questions came up for consideration before this Court in Income Tax Appeal [2013 (2) TMI 922 - BOMBAY HIGH COURT ](L) No. 2111 of 2012 in case of this very assessee where by order while dismissing the Revenue's Appeal, these questions came up for consideration. These questions in the present appeal, therefore are not entertained.
Disallowance u/s 36(1)(iii) - interest on loans borrowed for advancing to its subsidiary companies in India and Overseas - HELD THAT:- We notice that the Tribunal has held that the assessee had sufficient own interest free funds and therefore, the disallowance was not justified.
Deduction u/s 80HHC - whether the additional proceeds of export sales due to foreign exchange rate fluctuation would also qualify for deduction under Section 80HHC? - The Assessing Officer was of the opinion that the said amount cannot be said to have arisen out of the assessee's export business. The CIT(A) and the Tribunal, however, reversed the decision of the Assessing Officer holding that the amount in question was part of the assessee's export sales proceeds. This issue is considered by this Court on earlier occasions in cases of CIT Vs. Amber Exports (India) [2009 (2) TMI 427 - BOMBAY HIGH COURT] and CIT Vs. Gem Plus Jewellery India Ltd [2010 (6) TMI 65 - BOMBAY HIGH COURT].
Income Tax Appeal is dismissed.
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2019 (3) TMI 2012 - BOMBAY HIGH COURT
TP Adjustment - comparable selection - Tribunal excluding one M/s. Bodhtree Consulting Limited - HELD THAT:- This issue had come up before this Court earlier in case of Tata Power Solar Systems Ltd. [2016 (12) TMI 1600 - BOMBAY HIGH COURT] a party is not barred in law from withdrawing from its list of comparables, a company, if the same is found to have been included on account of mistake as on facts, it is not comparable.
Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and uncontrolled transactions. This comparison has to be done between like companies and requires carrying out of FAR analysis to find the same. Assessee's submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are, in fact comparable. Appeal is dismissed.
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2019 (3) TMI 2011 - ITAT AMRITSAR
Disallowing of loss claimed on account of trading in commodity derivative - transactions were carried on NCDEX - treating the transactions carried on by the assessee between the period 21.05.2013 to 22.08.2013 as speculative transaction - as transactions on which the assessee suffered a loss to be speculative transactions and hence impugned loss was not allowed to be set off with normal business income - HELD THAT:- A perusal of notification dated 27.11.2013 notifying NCDEX as recognized association, the language employed therein was similar to the language employed in notification dated 25.01.2006 whereby National Stock Exchange of India Ltd., Bombay and Bombay Stock Exchange Ltd., Bombay where notified as recognized stock exchange for the purpose of clause (d). Therefore, respectfully following the above decision of NASA Finelease Pvt. Ltd [2013 (9) TMI 733 - DELHI HIGH COURT], we hold that the notification will take effect during the entire previous year 2013-14 relating to assessment year 2014-15.
No Commodity Transaction Tax (CTT) paid in respect of trading transaction of the assessee under consideration and therefore, the same does not quantify for being treated as non-speculative - The Second proviso which has been inserted by the Finance Act 2018 is curative and therefore is to be treated as came into force from the date from which clause (5) itself was inserted in the statute i.e. with effect from 01.04.2014. Our above view finds support from the decision of the Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. [1997 (3) TMI 9 - SUPREME COURT] wherein it was held that a proviso which is designed to eliminate unintended consequence which may cause undue hardship to the assessee and unjust in a specific situation is to be read as retrospective with effect from which the main section was inserted.
To the same effect is the decision of Ansal Land Mark Township Pvt. Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] wherein decision of the Agra Bench of the Tribunal in the case of Rajeev Kumar Agarwal [2014 (6) TMI 79 - ITAT AGRA] was confirmed wherein it was held that a curative amendment to avoid unintended consequences is to be treated as retrospective in nature even though it may not state so specifically by the statue. It was held that Second proviso to Section 40(a)(ia) of the Act must be given retrospective effect of the point of time when the related legal provision was introduced. Thus, in view of the above discussion as in the instant case, it is not in dispute that the assessee’s transactions in agricultural commodity derivative were otherwise eligible transaction within the meaning of Section 43(5)(e) of the Act, we set aside the orders of the lower authorities on this issue and direct the AO to treat the loss in said transaction as nonspeculative business loss and accordingly allow set off of the same from other business income as per law. Thus, this ground of appeal of the assessee is allowed.
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2019 (3) TMI 2010 - ITAT COCHIN
Loss as incurred by the company because of fire - Loss of raw materials in fire which was rejected - HELD THAT:- As allowed by the AO. The balance amount of R.4,24,29,060/- was not allowed. It is brought on record that the assessee had received insurance claim to the extent of that amount and offered to tax during A.Y. 2008-09. The claim of the balance loss of Rs.4,24,29,060/- for the assessment year 2006-07 was not allowed by the AO on the reason that the assessee had not claimed it in the revised return. The same was allowed by the CIT(A) as the assessee had offered the receipt of insurance claim during the subsequent year, i.e., 2008-09. Being so, it is revenue neutral. We find no infirmity in the order of the CIT(A) in allowing the claim of loss of the assessee, though there was no revised return of income filed by the assessee. Thus, this ground of appeal of the Revenue is dismissed.
Disallowance of claim of deduction made on the profits of gas turbine boiler - HELD THAT:- We find that this issue is covered in favour of the assessee by the decision in the case of West Coast Paper Mills Ltd. [2014 (7) TMI 554 - ITAT MUMBAI] wherein it was held that deduction u/s. 80IA is allowable in respect of captive power consumption units and generation of steam amounts to generation of power for the purpose of deduction u/s. 80IA. We do not find any infirmity in the order of the CIT(A) and confirm the same. Accordingly, this ground of appeal of the Revenue is dismissed.
Disallowance of amount being club expenses - HELD THAT:- The observation made by the CIT(A) is justified. AO had given only two days to produce the requisite vouchers and bills. The assessee has also not produced any documents. More so, there was no disallowance in the subsequent year on this count. Considering the totality of the facts and circumstances of the case, the CIT(A) disallowed Rs. 20 lakhs and balance Rs.30,09,299/- was deleted. Hence, we do not find any infirmity in the order of the CIT(A) and confirm the same. This ground of appeal of the Revenue is dismissed.
Disallowance of claim of reduction u/s. 35(2AB) - As found that the DSIR approval was not there for 2006-07 - HELD THAT:- As rightly observed by the CIT(A), the assessee was not granted DSIR approval for the assessment year 2006-07. Hence, there is no question of granting reduction u/s. 35(2AB) - Hence, this ground of appeal of the assessee is dismissed.
Disallowance u/s. 35(2AB) - expenditure incurred by it for its in-house R&D facility - HELD THAT:- Allowability of expenditure u/s. 37(1), we are of the opinion that this issue was already settled in the case of Brooke Bond India Ltd [1997 (2) TMI 11 - SUPREME COURT] wherein it was held that expenditure incurred by a company in connection with issue of shares, with a view to increase its share capital, is directly related to the expansion of the capital base of the company, and is capital expenditure, even though it may incidentally help in the business of the company and in the profit making. Being so, we are inclined to reverse the finding of the CIT(A) on this issue. Accordingly, we allow the ground taken by the Revenue.
Allowability of expenditure u/s. 35D - assessee claimed expenditure on issue of shares and incurred on ROC fees and submitted that it should be allowed u/s. 35D - HELD THAT:- This issue was raised for the first time before us. The Assessing Officer had no occasion to examine the same. Hence, we remit this issue to the file of the AO for fresh consideration and decide the issue in accordance with law after giving reasonable opportunity of hearing to the assessee. The additional ground raised by the assessee is allowed for statistical purposes.
Disallowance of claim of deduction made on the profits of gas turbine boiler - HELD THAT:- As discussed earlier the assessee is entitled to deduction u/s. 80IA on captive power consumption units and generation of steam amounts to generation of power for the purpose of deduction u/s. 80IA. We do not find any infirmity in the order of the CIT(A) and confirm the same. Accordingly, this ground of appeal of the Revenue is dismissed.
Final order without passing the draft assessment order u/s. 144C - HELD THAT:- As when the final assessment order is passed without passing the draft assessment order, it is illegal and without jurisdiction. Accordingly, we quash the assessment orders for both the assessment years.
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2019 (3) TMI 2009 - ITAT DELHI
Disallowance of depreciation on the assets purchased by the assessee by application of funds - CIT(A) deleted the same by following the decision of Vishwa Jagriti Mission[2013 (1) TMI 157 - DELHI HIGH COURT] - HELD THAT:- - In assessee’s own case also, Hon’ble jurisdictional High Court in DIT vs Indraprastha Cancer Society,[2014 (11) TMI 733 - DELHI HIGH COURT] considered the question whether after claiming deduction in respect of the cost of the assets u/s 35(1) of the Act, assessee again claimed deduction on account of depreciation in respect of the same asset. Hon’ble jurisdictional High Court held the issue in favour of the assessee. No nreasonableness in the order of the ld. CIT(A). We, therefore, confirm the order of the ld. CIT(A) and dismiss Ground Nos. 1 & 2.
Disallowing the loss on sale of assets - Plea of the assessee is that the assets were sold at a price lesser than the WDV of the assets and when the depreciation is allowed following the commercial principle, there is no bar to consider the loss and the learned AO committed error in taking the sale proceeds as income and ignoring the loss - CIT(A) considered the plea of the assessee and satisfied that the assessee could demonstrate that the income u/s 11 had to be determined on commercial principles - HELD THAT:- We are also of the considered opinion that the income u/s 11 has to be determined on commercial principles and to determine the same, the losses arising on sale of assets of the society shall be considered. Therefore, the capital loss of Rs.2,14,310/- has to be considered while calculating the income of the assessee. With this view of the matter, we uphold the finding of the ld. CIT(A) on this ground and dismiss Ground No.3.
Disallowing the provisions relating to the gratuity, leave encashment and cancer care scheme - HELD THAT:- We are satisfied that such a provision was made on scientific basis inasmuch as the explanation of the assessee is that the employees accrue a right of gratuity on their continuous service for five years and the society has to pay them the gratuity as and when they retire, so also the leave encashment, which are ascertain amounts but the time of payment is unknown and, therefore, as a prudent employer, the assessee has to make provision for payment of such ascertained amounts but at an unascertained time.
CIT(A) drew strength from the judgment of DIT(E) vs NASSCOM [2012 (5) TMI 204 - DELHI HIGH COURT] wherein it was held that the income available for charitable purpose to be computed in accordance with commercial principles, provision for bad and doubtful debts could be created, and observed that the ratio of this judgment applies to this case also as the provisions has been made to meet the ascertained liability likely to be incurred during the course of carrying out its object. This reasoning given by the learned CIT(A) does not appear to be suffering from any illegality or irregularity - ground no.4 has to be dismissed.
Disallowing the advance amount paid by the assessee for purchase of assets like machinery - HELD THAT:- . It is the submission of the learned AR that it is the practice of the assessee that whenever the advances are paid to the vendors, in the year when the machinery is supplied and the expenditure is booked, only the balance amount is taken cognizance and not the entire amount. This is an aspect which requires verification at the end of the learned AO as to whether the expenditure is booked for the entire expenditure or only for the balance amount of the cost of the machinery. We, therefore, set aside this issue to the file of the learned AO to verify whether the advance amount is excluded from the cost of the machinery or the capital assets in the year in which the expenditure is taken cognizance of and if the advance amount is excluded while booking the expenditure to allow this advance amount for this year. Ground No.5 is, therefore, allowed for statistical purposes.
Addition made on account of the earmarked funds received by the assessee - AR submitted that in respect of the receipt or spending of the alleged earmarked funds, there is evidence available with the assessee in the shape of resolutions or correspondence creating such obligation to spend the amount in a specific way - HELD THAT:- We are, therefore, of the considered opinion that in the interest of justice, this issue has to be set aside to the file of the learned AO and it is for the assessee to prove their claim with reference to any material available in their custody. Learned AO will cause the factual verification in respect of any such material to be produced by the assessee and to take a fresh view at the matter. This is more particularly in view of the fact that according to the assessee, learned AO allowed these funds quite for a long term both priorand alsosubsequent years. We direct the assessee to produce the material before the AO and to substantiate their claim. We, therefore, allow this ground for statistical purposes.
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2019 (3) TMI 2008 - ITAT JAIPUR
Penalty u/s 271(1)(c) - income so surrendered and offered for taxation - return of income filed in response to notice U/s 153A wherein assessee declared the total income and agricultural income including the surrendered income as admitted in the statement U/s 132(4) - in statement recorded U/s 132(4) of the Act, the assessee declared and surrendered the said long term capital gain on sale of shares as undisclosed income and offered the same for taxation - HELD THAT:- As in the case of the assessee, the income was assessed only because the assessee surrendered the same but it would not have otherwise sustained the test of the legal requirement of the assessment of the income without any incriminating material. There are binding precedents on the issue that in the proceedings U/s 153A AO cannot reassess the income in absence of any incriminating material found and seized during the course of search or post search enquiry.
In the case in hand, we find that the entire basis of the additional income assessed to tax in the proceedings U/s 153A of the Act is the statement of the assessee U/s 132(4) of the Act and subsequent surrender of the said income to tax without any incriminating material found or seized. Since the income and transaction relating to the income are already part of the books of account not only for the year under consideration but also for the preceding years and therefore, except surrender made by the assessee, the addition if any made by the Assessing officer of this income based on the statement would not have survived or sustained.
In the case of Jai Steel (India)[2013 (6) TMI 161 - RAJASTHAN HIGH COURT] has laid down the proposition that the addition made in absence of incriminating material in the proceedings U/s 153A where the assessment was not pending on the date of search is not sustainable.
Once the assessee has raised all these contentions and explained during the penalty proceedings that the transactions of purchase and sale of shares and consequential long term capital gain are genuine based on the documentary evidence and further all these were part of the books of account and disclosed in the return of income filed U/s 139 consequently the addition itself would not have survived had the assessee not surrendered the income then this explanation of the assessee would certainly lead to the conclusion that the penalty is not leviable U/s 271(1)(c) - Appeal of the revenue is dismissed.
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2019 (3) TMI 2007 - ITAT AHMEDABAD
Addition as income from business or house property u/s. 23 - income derived was stock - alternatively ALV is to be computed by taking 6% as the average rate of investment as against 8% of average rate of investment adopted by the AO - HELD THAT:- CIT(A) has sustained the addition made by the AO after placing reliance on the decision of Ansal Housing Properties [2012 (11) TMI 323 - DELHI HIGH COURT] wherein as decided that the assessee engaged in business of construction and house property would be liable to pay of ALV of flats laying unsold during the year as income from house property.
Also noticed that an amendment has been made by the Finance Act in sub-section (5) of section 23 of the act w.e.f. 01-04-2018. This amendment is not applicable for the year under consideration. With the assistance of ld. representatives, we have gone through the decision CIT vs. Neha Builder Pvt. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] wherein it is held that if property is used as stock in trade, then, such property would become or partake character of stock and any income derived from stock would be income from business and not income from property. We have also gone through the judgment in the case of ACIT vs. Haware Construction Pvt. Ltd. [2018 (10) TMI 1523 - ITAT MUMBAI]
As in the case of Neha Builder Pvt. Ltd [2006 (8) TMI 105 - GUJARAT HIGH COURT] and after considering the decision of ITAT Mumbai Bench as cited above, we set aside the order of the CIT(A) and consider that in the case of the assessee any income derived was stock would be income from business and not income from property.
Thus we set aside the order of the CIT(A) and consider that in the case of the assessee any income derived was stock would be income from business and not income from property, therefore, allow the appeal of the assessee. Accordingly the appeal of the assessee is allowed.
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2019 (3) TMI 2006 - ITAT AHMEDABAD
TP Adjustment - upward adjustment made on international transactions - threshold limit of Rs 15 crores - HELD THAT:- No document was cited before us showing a threshold limit of Rs 15 crores being in force at the relevant point of time. As far the Calance Software case [2018 (3) TMI 1310 - ITAT DELHI] that was a case in which the value of transactions was less than Rs 5 crores and the CBDT circular holding the threshold limit, for reference to the TPO, was placed on record.
There is nothing before us to suggest the threshold limit of Rs 15 crore in such cases being in force at the relevant point of time. In any case, the plea of the assessee is not disposed of by way of a speaking order. In this view of the matter, as also bearing in mind entirety of the case, we deem it fit and proper to remit the matter to the file of the CIT(A) for adjudication on this short point by way of a speaking order, in accordance with the law and by way of a speaking order. As the matter is being remitted to the file of the CIT(A) on this technical plea, it will be premature to deal with grievances raised by the AO.
Disallowance on account of interest expenses u/s 36(1)(iii) - once the funds are put into business they lose their identity - CIT-A deleted the addition - HELD THAT:- We see no reasons to interfere in the matter as learned CIT(A)’s order for the assessment year 2009-10, based on which impugned relief was given, has since been confirmed by a coordinate bench vide order [2016 (9) TMI 1500 - ITAT AHMEDABAD] and the learned Departmental Representative has not been able to point out any material difference in the facts of the case of the said assessment year vis-à-vis the facts of the case of this year. As a matter of fact, there is no dispute that material facts of the case are same. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
Addition on account of royalty payment - payment was made for the use of landmark - Capital expenditure - CIT-A deleted the addition - HELD THAT:- We see no reasons to interfere in the matter as learned CIT(A)’s order for the assessment year 2009-10, based on which impugned relief was given, has since been confirmed by a coordinate bench [2016 (9) TMI 1500 - ITAT AHMEDABAD] and the learned Departmental Representative has not been able to point out any material difference in the facts of the case of the said assessment year vis-à-vis the facts of the case of this year. As a matter of fact, there is no dispute that material facts of the case are same. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
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