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2022 (12) TMI 1508
Addition u/s 56(2)(viib) - rejection of valuation report of the valuer - premium received on issue of equity share exceeds its ‘Fair Market Value’ (FMV) and consequently the excess premium received on issue of equity share is susceptible to tax in view of provisions of Section 56(2)(viib) as deemed income of the assessee - Substitution of value of shares - valuation as per DCF method - AO proceeded to determine value based on actual figures of profits for next two years, i.e., F.Ys. 2015-16 and 2016-17 in substitution of the projected profits before tax adopted in the valuation report
HELD THAT:- The assessee in the instant case has proceeded to issue equity share at a premium on the basis of independent valuer report wherein DCF method was adopted for the purposes of determination of fair market value. The Assessing Officer has not disputed the DCF method adopted for valuation per se. AO however, has compared the projected figures used by the valuer with the actual figures available at the time of assessment.
AO displaced the FMV determined as per DCF method based on projected figures by replacing the same by actual figures to discard the justification of share premium. We find that such action of the AO substitute the figures estimated at the time of valuation towards ensuing years by actual figures made available to AO at the later point of time is squarely in contrast to the judgment of Cinestaan Entertainment [2021 (3) TMI 239 - DELHI HIGH COURT] and decision of Intelligrape Software Pvt. Ltd [2020 (10) TMI 403 - ITAT DELHI]
In Cinestaan [2021 (3) TMI 239 - DELHI HIGH COURT] took cognizance of the identical situation, i.e., the AO had disregarded the valuation report of the assessee primarily on the ground that the projections of revenue considered for the purpose of valuation do not match with the actual revenue arose in the subsequent years - in the fact situation observed that the assessee company has adopted a recognized method of valuation and the revenue could not show that assessee has adopted demonstrably wrong approach. It was observed that valuation is not an exact science and therefore cannot be done with arithmetic precision.
It is a technical and complex issue which should best be appropriately left to the consideration and wisdom of experts in the field, having regard to the imponderables which enter the process of valuation of shares. The Hon’ble High Court thus upheld the action of the ITAT and consequently the additions made under the deeming provisions of Section 56(2)(viib) made by the AO were reversed.
Similar view has been taken in Intelligrape Pvt. Ltd [2020 (10) TMI 403 - ITAT DELHI] wherein it was observed that the valuation based on future projections at the time of issue of shares cannot be inferred as the actual figures may vary depending on the market conditions and host of other factors. Appeal of the assessee is allowed.
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2022 (12) TMI 1506
Validity of reopening of assessment - Bogus LTCG claimed - addition u/s 68 - penny stock transaction - HELD THAT:- From the reasons recorded by AO, it is vivid that there is merit in the arguments advanced by ld DR for the Revenue. We note that assessing officer had received the information from the DDIT (Investigation) unit3(2) Kolkata in respect of the BSE listed Penny stock companies. After getting such information, assessing officer has applied his mind and then framed the reasons for reopening the assessment, therefore it is not a borrowed satisfaction. The assessing officer has also mentioned in the reasons recorded the quantity of shares sold, name of the scrip, and amount received on sale of such shares etc. Thus, we note that reasons recorded by the assessing officer are in accordance with the provisions of law. Therefore, based on these facts and applicable precedents to these facts, we dismiss the additional grounds raised by the assessee.
Addition u/s 68 - We note that findings of the Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai (2023 (1) TMI 44 - GUJARAT HIGH COURT] is squarely applicable to the assessee`s facts under consideration. The genuineness of investment in the shares by the assessee was substantiated by him by producing contract note, Transaction was through recognised Broker, transaction was done through banking channel on which STT was paid. The shares were held by assessee, as an Investor for a period of seven/ eight years. The investment was made in the year 2003 and sold in 2010-11. The shares were retained for more than seven years and were sold after such long time. These circumstances suggest that the investment was not bogus. The shares were purchased in order to invest and not for the purpose of earning exempted income by frequent trading in short time.
We note that Judgment of Hon`ble Calcutta High Court in the case of Swati Bajaj and others [2022 (6) TMI 670 - CALCUTTA HIGH COURT] should not be applicable to the assessee as it is outside the territorial jurisdiction of Gujarat. However, the Judgment of Hon`ble Jurisdictional High Court of Gujarat in the case of Jagat Pravinbhai Sarabhai(supra) should be applicable to the assessee`s case, as it is the judgment of Jurisdictional High Court.
Addition u/s 69C on account of commission paid @ 2% or 3% of bogus long term capital gain - Since, we have deleted the alleged addition of bogus LTCG, hence addition made by AO does not have leg to stand, therefore it is hereby deleted.
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2022 (12) TMI 1505
Addition u/s 69A in respect of cash deposited in bank accounts during demonetization period - Assessee argued that provisions of this section cannot be invoked in case where concerned money is already recorded in the books of account - HELD THAT:- On a perusal of the cash books for the year under consideration, it stands revealed beyond doubt that both the cash deposits each in mentioned bank accounts on 29.11.2016 were made from his books of accounts, thus no justification in dubbing of the cash deposits in question as unexplained money of the assessee u/s.69A of the Act by the lower authorities.
Also we cannot remain oblivion of the fact that as the aforesaid claim of the Ld. AR not only militates against the observations of the lower authorities, but also there is nothing discernible from the record which would reveal that the authenticity of the cash book of the assessee for the year under consideration had been looked into by the lower authorities, therefore, it would be unfair to summarily accept the same without subjecting the same to necessary verification - the matter in all fairness requires to be revisited by the A.O. A.O is herein directed to re-adjudicate the issue after duly taking cognizance of the explanation of the assessee as regards the source of the cash deposits in the bank accounts in question. Appeal of the assessee is allowed for statistical purposes.
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2022 (12) TMI 1501
Monetary limit to file appeal before High Court - Appeal dismissed on low tax effect - HELD THAT:- Central Board of Direct Taxes (CBDT) has issued Circular No. 17 of 2019, dated 08.08.2019, amending the previous Circular No. 3 of 2018, dated 11.07.2018, by further enhancing the monetary limits for filing appeals by the Income Tax Department before the Income Tax Appellate Tribunals, High Courts and Supreme Court as a measure for reducing litigation. In paragraph 2 of the said circular we find that the monetary limit fixed for filing an appeal before the High Court is Rs. 1.00 crore.
Therefore, the appeal filed by the Department is dismissed in terms of the aforesaid Circular No. 17 of 2019, dated 08.08.2019. However, if the appeal comes within the exception under paragraph 10 of Circular No. 3 of 2018, it would be open to the Income Tax Department to seek revival of the appeal.
Miscellaneous applications pending, if any, shall stand closed.
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2022 (12) TMI 1500
Monetary limit to file appeal before High Court - Appeal dismissed on low tax effect - HELD THAT:- Central Board of Direct Taxes (CBDT) has issued Circular No. 17 of 2019, dated 08.08.2019, amending the previous Circular No. 3 of 2018, dated 11.07.2018, by further enhancing the monetary limits for filing appeals by the Income Tax Department before the Income Tax Appellate Tribunals, High Courts and Supreme Court as a measure for reducing litigation. In paragraph 2 of the said circular we find that the monetary limit fixed for filing an appeal before the High Court is Rs. 1.00 crore.
Therefore, the appeal filed by the Department is dismissed in terms of the aforesaid Circular No. 17 of 2019, dated 08.08.2019. However, if the appeal comes within the exception under paragraph 10 of Circular No. 3 of 2018, it would be open to the Income Tax Department to seek revival of the appeal.
Miscellaneous applications pending, if any, shall stand closed.
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2022 (12) TMI 1498
Revision u/s 263 - sustainability of the disallowance of the assessee’s claim for deduction of “VAT” on sale of liquor - CIT holding a conviction that the “VAT” claimed by the assessee which was liable for disallowance u/s.40(a)(iib) was summarily allowed by the A.O, thus, vide his order passed u/s.263 had set-aside the order passed by the A.O u/s.143(3) - HELD THAT:- We find substance in the claim of the Ld. AR that the issue involved in the present appeal is squarely covered by the judgment of Kerala State Beverages Manufacturing & Marketing Corporation Ltd. [2022 (1) TMI 184 - SUPREME COURT]. As stated by the Ld. AR, and, rightly so, the Hon’ble Apex Court had approved the view taken by the Hon’ble High Court of Kerala that [2020 (5) TMI 176 - KERALA HIGH COURT] as “surcharge on sales tax” is a “tax”, and Section 40(a)(iib) does not contemplate “tax”, and surcharge on sales tax is not a “fee” or a “charge”, therefore, no disallowance under the said statutory provision was called for in the hands of the assessee.
Considering the aforesaid judgment of the Hon’ble Apex Court[surpa], we are of the considered view that the same in fact supports the claim of the assessee that the provisions of Section 40(a)(iib) would not be applicable to the case of the assessee qua the “VAT” paid by the assessee company. We, thus, in terms of our aforesaid observations set18 aside the order passed by the Pr. CIT u/s.263 of the Act, dated 28.03.2021, and restore the order of the A.O passed u/s.143(3), to the extent he had allowed the assessee’s claim for deduction of “VAT”. Assessee appeal allowed.
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2022 (12) TMI 1495
Disallowance u/s 14A - claim of interest - HELD THAT:- Both the parties submitted that this issue is squarely covered in assessee’s own case by Co-ordinate Bench of this Tribunal in [2020 (10) TMI 1021 - ITAT AHMEDABAD] wherein the Hon’ble ITAT remanded the matter back to the Assessing Officer for fresh adjudication to examine the facts and figures of the case in the light of our observations made above in order to arrive at a final conclusion as to whether disallowance u/s 14A is to be made and if so, then the amount thereof which in no case should exceed the exempted income earned by assessee during the year under appeal.
Nature of expenses - Guarantee fees paid to Govt. of Gujarat related to capital work-in-progress which needs to be capitalized - assessee submitted that the certificate of utilization was already furnished before the Ld. CIT(A) stating that the loans on which guarantee fees was paid were utilized for construction of power plant and there was no capital work-in-progress in respect of such loans borrowed - HELD THAT:- As decided in own case in [2020 (10) TMI 1021 - ITAT AHMEDABAD] wherein CIT(A) directed to verify the certificate filed during the appellate proceedings that the loans on which guarantee fees was paid were utilized for construction of power plants at that time and there was no capital work-in-progress in respect of such loans during the Financial Year 2014-15. Both the assessee counsel as well as the Ld. D.R. could not place on record what is the giving effect order passed by the A.O. thereafter, pursuant to the direction of the Ld. CIT(A). Therefore this ground no. 2 is also set aside to the Assessing Officer for proper verification and adjudication.
Disallowance u/s 14A r.w.r. 8D while determining the income under the provisions of MAT - HELD THAT:- As this case is already remanded back to the Assessing Officer for verification for the earlier two issues under consideration for the Assessment Year 2015-16, this issue is also remanded back to the Assessing Officer for verification of the same and allow the submission of the assessee, if the same is found to be is in order
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2022 (12) TMI 1494
Revision u/s 263 - as per CIT AO erroneously allowed this taxpayer’s section 80P deduction claim representing interest derived from deposits made in cooperative banks - HELD THAT:- We find merit in assessee’s arguments in light of this tribunal’s recent order in Rena Sahakari Sakhar Karkhana Ltd. [2022 (1) TMI 419 - ITAT PUNE] though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d)
Thus as the A.O while framing the assessment had taken a possible view, and allowed the assessee’s claim for deduction under Sec. 80P(2)(d) on the interest income earned on its investments/deposits with co-operative banks, therefore, the Pr. CIT was in error in exercising his revisional jurisdiction u/s 263 of the Act for dislodging the same.
Accordingly, finding no justification on the part of the Pr. CIT, who in exercise of his powers under Sec. 263 of the Act, had dislodged the view that was taken by the A.O as regards the eligibility of the assessee towards claim of deduction under Sec. 80P(2)(d), we set-aside his order and restore the order passed by the A.O under Sec. 143(3).
Thus PCIT’s revision directions stand reversed. - Decided in favour of assessee.
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2022 (12) TMI 1493
Validity of reassessment order passed u/ss.143(3)/147 on the basis of notice u/s.148 issued by non jurisdictional A.O - validity of the jurisdiction that was assumed by the A.O i.e. ITO, Ward-2(1), Bhilai for framing of the impugned assessment u/ss. 143(3)/147 - whether or not the assessment framed by the ITO, Ward-2(1), Bhilai vide order passed u/ss.143(3)/147 on the basis of notice issued u/s.148 by the ITO, Ward1(1), Raipur i.e. a non jurisdictional A.O is sustainable in the eyes of law?
HELD THAT:- The assessment proceedings in the case of the assessee were initiated by the ITO, Ward-1(1), Raipur vide notice u/s.148 dated 23.03.2015. Subsequently, the ITO, Ward- 1(1), Raipur had transferred the case record of the assessee on 12.05.2015 to ITO, Ward-2(1), Bhilai. The ITO, Ward-2(1), Bhilai had, thereafter, on the basis of notice u/s.148 dated 23.03.2015 (supra) proceeded with and framed the assessment vide his order u/ss.143(3)/147 dated 25.03.2016. Ostensibly, the ITO, Ward-2(1), Bhilai, i.e., jurisdictional officer had not issued any notice u/s.148 of the Act but had acted upon that as was issued by the ITO, Ward1(1), Raipur i.e. a non-jurisdictional officer on 23.03.2015.
It is not the case of the department that the jurisdiction over the case of the assessee was transferred from ITO, Ward-1(1), Raipur to ITO, Ward-2(1), Bhilai vide an order passed by the appropriate authority u/s.127 of the Act. Also, no material had been placed before me by the Ld. DR which would reveal that as the ITO, Ward-1(1), Raipur at the time of issuance of notice u/s.148 dated 23.03.2015 was duly vested with the jurisdiction over the case of the assessee, which, thereafter, had validly been transferred to the ITO, Ward-2(1), Bhilai, therefore, as per Section 129 of the Act the assessment framed by the latter on the basis of notice u/s.148 dated 23.03.2015 issued by the ITO, Ward-1(1), Raipur could not be faulted with.
On the basis of the aforesaid facts, as stated by Mr. R.B Doshi, the Ld. AR, and, rightly so, the framing of the impugned assessment u/ss.143(3)/147 dated 25.03.2016 by the ITO, Ward-2(1), Bhilai on the basis of notice issued u/s. 148 dated 23.03.2015 by the ITO, Ward-1(1), Raipur i.e. an officer who at the relevant point of time was not vested with jurisdiction over the case of the assessee, was devoid and bereft of any force of law. Appeal of assessee allowed.
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2022 (12) TMI 1492
Validity of Re-assessment order framed by non-jurisdictional officer - scope of instruction No.1/2011, dated 31.01.2011 as revising the earlier existing monetary limit for assigning the cases to ITOs/ACs/DCs w.e.f. 01.04.2011 - HELD THAT:- As per the CBDT Instruction No.1/2011, dated 31.01.2011 the jurisdiction over the case of the assessee who is located in a mofussil area i.e. Raipur and had in compliance to the notice u/s. 148, dated 18.06.2013 filed a non-corporate return on 05.07.2013 for the year under consideration, i.e., A.Y.2010-11 declaring an income of Rs. 9,47,500/- was vested with the ITO, Ward 1(3), Raipur [which w.e.f. 15.11.2014 was transferred to ITO-1(2), Raipur].
Although notice u/s. 148, dated 18.06.2013 was issued within the stipulated time period, however, the same was issued by the DCIT-1(1), Raipur, i.e., an A.O who pursuant to the CBDT Instruction No.1 of 2011, dated 31.01.2011 was not vested with jurisdiction over the case of the assessee for the year under consideration. On the other hand as the ITO, Ward-1(3), Raipur [succeeded by ITO, Ward-1(2), Raipur w.e.f. 15.11.2014] who as per the aforesaid CBDT Instruction (supra) was at the relevant point of time vested with the exclusive pecuniary jurisdiction over the case of the assessee for the year under consideration had not issued any notice u/s. 148 of the Act, and had proceeded with on the basis of the notice u/s. 148 dated 18.06.2013 issued by the DCIT-1(1), Raipur i.e. a non-jurisdictional Officer, therefore, no valid jurisdiction could have been assumed by him for framing the impugned assessment vide order passed u/s. 143(3)(sic), dated 31.03.2015.
Thus the assessment framed in the case of the present assessee by the ITO-1(2), Raipur vide order u/s. 143(3)(sic) dated 31.03.2015 on the basis of notice u/s. 148 dated 18.06.2013 issued by the DCIT-1(1), Raipur i.e. a non-jurisdictional A.O, is devoid and bereft of any force of law, therefore, the same cannot be sustained and is liable to be struck down on the said count itself. Decided in favour of assessee.
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2022 (12) TMI 1491
TDS u/s 195 - Disallowance u/s 40(a)(i) - payment made to non residents - HELD THAT:- Disallowance made u/s 40(a)(i) of the Act, vide order [2015 (2) TMI 1400 - ITAT CHENNAI] the Tribunal has noted that neither the Assessing nor the ld. CIT(A) discussed the factual aspects of the issue and therefore, the issue has been remitted back to the file of the Assessing Officer to examine all the facts and decide the issue afresh in accordance with law. It appears according to the submissions made by both the parties that the AO has already passed the order for the assessment year 2009-10 and the appeal is pending before the ld. CIT(A).
We are of the considered opinion that similar issue raised in the appeals for the assessment year 2014-15 and 2011-12 should also go back to the ld. CIT(A) to a decision on facts and also on law. In view of the above, we set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh in accordance with law.
Disallowance u/s 14A - CIT(A) is directed to decide the issue afresh after obtaining remand report on the fresh evidences produced by the assessee during the course of appellate proceedings.
Both the grounds raised by the assessee are also remitted back to the file of the ld. CIT(A) for fresh adjudication.
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2022 (12) TMI 1487
Accrual of income in India - Alleged Permanent Establishment ('PE’) in India of the Appellant under the Article 5(1) and 5(2)(i) of the India - UAE Tax Treaty (‘Tax Treaty’) - HELD THAT:-. We have carefully considered the orders of the authorities below. We find force in the contention of the Counsel the coordinate Bench in A.Y. 2014-15 [2021 (3) TMI 1440 - ITAT DELHI] has followed the findings of the Tribunal given in earlier assessment years while dismissing the ground find that the assessee has met the twin criterion of existence of a fixed place of business and carrying out of business from such fixed place of business as enunciated of the judgment of Hon'ble Supreme Court in the case of Morgan Stanley & Co. [2007 (7) TMI 201 - SUPREME COURT] - The claim of the assessee that they did not have a place at their disposal cannot be accepted in view of the judgment of Hon'ble Supreme Court in the case of Formula One World Championships Ltd. [2017 (4) TMI 1109 - SUPREME COURT], in the case of Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] and also E-funds IT Solutions [2017 (10) TMI 1011 - SUPREME COURT] - The facts on record undisputedly prove that the premises AHL are at the disposal of the assessee for conduct of their business. While coming to the issue of "at the disposal" in the premises is available for the assessee for running of their business even for a limited time it constitutes a PE - Decided against the assessee.
Attribution of profits to alleged PE of the Appellant in India inspite of entity level operating losses - alternative taxation of India source income as ‘Royalty’ under Section 9(l)(vi) of the Income Tax Act, 1961 (‘the Act’) and Article 12 of the Tax Treaty - We find that the identical issue raised in the present appeal, has already been adjudicated in [2021 (7) TMI 1440 - ITAT DELHI] to hold that the revenue's earned by the assessee are taxable under Article 12 of the DTAA. Regarding the determination of the profit, taken up at ground No. 4 by the assessee, we hereby hold that the taxable profits may be computed in accordance with the provisions of Section 44DA of Indian Income Tax Act and Article 12 of Indo-UAE, DTAA.
During the arguments, it was also submitted that the assessee has incurred losses in the assessment year 2008-09. The assessee be given an opportunity of submitting the working of apportionment of revenue, losses etc. on financial year basis with respect to the work done in entirety by furnishing the global profits earned by the assesse, so that the profits attributable to the work done by the PE can be determined judiciously. The same may be considered while determining the taxable profits in India in accordance with the provisions of Section 90(2).
Thus the issue of attribution of profit to the Permanent Established (PE) is accordingly restored to the file of Assessing officer for deciding in the light of the direction of the Tribunal in AY 2013-14, as reproduced above. Appeal of the assessee is allowed partly for statistical purposes.
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2022 (12) TMI 1485
Income taxable in India - Investment made in Mutual Fund as assessable to tax in India - HELD THAT:- It is clear the source of the fund is from outside India and not taxable in India. The assessee could not produce these documents during time barring period of reassessment, when the same were more than six years old documents to be obtained from the bankers.
CIT(A) directed the AO to obtain from the assessee, the certified True Copies of the above documents from Standard Chartered Bank and the assessee shall bound to furnish the same, before the AO while giving effect to the appellate order. The ld. CIT(A) further directed the A.O. having satisfied himself that the source of such investment is from outside India shall delete the addition made by him. We do not find any infirmity in the direction issued by the CIT(A)
CIT(A) having satisfied with the copies of the documents submitted by the assessee, has taken a conscious decision to delete the additions, since the funds are NRI Repatriation funds came outside India and is not taxable in India. Assessee also produced before us a copy of giving effect order dated 04.11.2020 passed by the AO deleting the addition made by him. Grounds raised by the Revenue does not have any merits and the same are hereby rejected.
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2022 (12) TMI 1484
Disallowance of expenses u/s 14A - addition to the book profits of the assessee u/s115JB of the Act the amount of total disallowance computed u/s 14A - HELD THAT:- We hold that the disallowance u/s 14A of the Act of expenses incurred for the purposes of earning exempt income be restricted to the extent of exempt income earned by the assessee during the year in accordance with the decision of the Hon’ble jurisdictional High Court in the case of the assessee itself as cited before us. [2019 (7) TMI 541 - GUJARAT HIGH COURT]
Further, we direct that no adjustment be made to the book profits of the assessee under Section 115JB of the Act of the expenses disallowed under Section 14A of the Act again following the decision of the jurisdictional High Court in the case of the assessee itself and the Special Bench of the ITAT in the case of Vireet Investment Private Limited [2017 (6) TMI 1124 - ITAT DELHI]
Deduction u/s 80IA - Captive Power Generation Plants - Hon’ble jurisdictional High Court in own case in Tax Appeal Nos. 11 & 28 of 2019 vide order dated 17.06.2019.[2019 (7) TMI 541 - GUJARAT HIGH COURT] held that it was the selling price of electricity which was to be considered for determining the Revenue generated from sale to CPP for the purposes of computing profits eligible to deduction u/s 80-IA(4) of the Act, applying the ratio laid down by it in the case of Gujarat Alkalies [2016 (10) TMI 1111 - GUJARAT HIGH COURT]
DR was unable to point out any distinguishing facts nor was any contrary decision of the Hon’ble jurisdictional High Court or the Hon’ble Apex Court brought to our notice. Thus since the issue already stands decided in favour of the assessee in its own case by the Hon’ble jurisdictional High Court, the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) of deduction claimed under Section 80IA of the Act.
Characterization of receipt - revenue from Carbon credit - revenue or capital receipt - HELD THAT:- The issue being covered by the decision of the Hon’ble jurisdictional High Court in favour of the assessee in its own case, we hold that the profit earned by the assessee for Carbon Credits is capital in nature; and, the addition made by the Revenue by treating them as revenue in nature is directed to be deleted.
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2022 (12) TMI 1483
Denial of exemption u/s 11 - non-submission of audit report in Form 10B alongwith or before filing the ITR - non-compliance with communication u/s 143(1)(a) of the Act due to IT Website technical glitches - HELD THAT:- We note that, the ITR for the impugned AY was filed on 13/07/2018 and notice calling the audit report u/s 143(1)(a) was served on 28/02/2019 according thereby 30 days to remove deficiency by filing audit report in Form No 10B, however in the absence of any such compliance from the appellant, ITR was finally processed on 26/06/2019 denying the exemption, which the Ld. FAA upheld quoting equi-reasons.
We also note that, the assessee could not attend the communication due to IT-Website technical glitches, however has eventually filed the audit report in Form No 10B on 29/02/2020 and complied with the condition laid in section 12A(1)(b) so as to entitle for a claim of exemption envisaged u/s 11 & 12 of the Act.
In the evince of details filed at clause M2 of ITR filed on 13/07/2018, it undisputedly establishes that the appellant got its books audited u/s 12A(1)(b) of the Act from M/s S. D. Pednekar & Co which issued & furnished the said audit report on 05/07/2017 i.e. prior to filing of ITR for the impugned AY, however the copy thereof remained to be filed alongwith ITR as well in response to communication u/s 143(1)(a) of the Act on account of technical glitches beyond the control of the assessee and the deficiency came to light only upon service of demand u/s 156 of the Act.
Thus, the non-compliance with communication u/s 143(1)(a) of the Act due to IT Website technical glitches was unintentional and beyond the control of the appellant is sufficient to form a reasonable cause for non-compliance and since the procedural compliance has been duly made good by fling the audit report on record, we see no reason to deny the exemption in the present facts and circumstance, ergo we set-aside the order of both the tax authorities below and direct the Ld. AO to grant the claim of exemption in the evince of Form No 10B. Decided in favour of assessee.
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2022 (12) TMI 1481
Carry forward accumulated business losses of the earlier years - correct year for consideration of the issue of eligibility of set off brought forward business loss against business income - HELD THAT:- The undisputed fact is that while concluding assessment the AO declared that the loss computed is not allowed to be carried forward. In our considered opinion all that the AO is required is to notify the assessee the amount of loss as computed by him. Whether the loss in any year may be carried forward to the following year and set off against the profits has to be determined by the AO who deals with the assessment of the subsequent year. It is for the ITO dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year.
As relying on the case of Manmohan Das [1965 (11) TMI 33 - SUPREME COURT] no hesitation in directing the AO to expunge the concluding remark “brought forward loss is not allowed to be carry forward”. Appeal of the assessee is allowed.
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2022 (12) TMI 1480
Set off of excess application of income for the subsequent years - Carry forward of the deficit/loss for trust - assessment of trust - HELD THAT:- As during the year under consideration the assessee had applied income more than 85% of its total income however, it claimed accumulation of income u/s 11(1)(a) to the extent of 15% of total income that came to a sum of Rs. 38,05,443/- however, the AO restricted the accumulation to the extent of surplus available of Rs. 20,34,215/-.
A bare reading of the section 11(1)(a) of the Act goes to prove that any income accumulated or set apart should not exceed 15% of total income. In the present case, the assessee had applied more than 85% of the income that does not mean that in excess of 85% of income, the assessee has accumulated or set apart for charitable purpose.
Reliance is placed upon the judgment of Matriseva Trust [1999 (3) TMI 34 - MADRAS HIGH COURT] wherein as followed the judgment in the case of CIT vs Maharana of Mewar Charitable Foundation[1986 (7) TMI 56 - RAJASTHAN HIGH COURT] and in the case of CIT vs Shri Plot Swetamber Murti Pujak Jain Mandal (1993 (11) TMI 17 - GUJARAT HIGH COURT] wherein as answered the questions in favour of the assessee and against the Revenue.
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2022 (12) TMI 1477
Revision u/s 263 - claim of deduction of the impugned interest on Perpetual Non-Convertible Debentures (PNCDs) - HELD THAT:- We find that the assessee during the course of assessment proceedings itself had submitted the entire facts of the case by placing reliance on various provisions of the Companies Act and SEBI Regulations and had also taken efforts to explain the meaning of the term “debentures”, “debts”, “bonds”, “shares” etc., under provisions of various Acts.
The main case of the Revenue is only that the perpetual debentures issued are akin to equity and hence, it does not fall under the ambit of borrowing and accordingly, no interest would become allowable on the said alleged borrowing. In this regard, we find that assessee had already explained the very same query before the AO at the time of assessment proceedings itself which is evident from the reply filed by the assessee which is reproduced hereinabove at the beginning of the order. Moreover, we also find that these bonds were indeed repaid by the assessee on 18/03/2021 with interest and on 11/05/2021 with interest. The evidences in this regard are enclosed and the fact of repayment of these borrowings with interest had also been duly notified by the assessee to BSE Ltd. and NSE Ltd as per the requirement of SEBI regulations.
This categorically goes to prove that it is not a case of equity and the issue of perpetual bonds is only borrowing made by the assessee. Since the said borrowing has been used for business purposes of the assessee, the interest paid thereon would be squarely allowable as deduction u/s. 36(1)(iii) of the Act. Hence, even on merits, the action of the ld. PCIT would have no legs to stand.
Thus we have no hesitation in quashing the revision order passed by the ld. PCIT u/s. 263 of the Act. Accordingly, the grounds raised by the assessee are allowed
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2022 (12) TMI 1474
Revision u/s 263 - taxability of undisclosed expenses as declared in survey action - case of assessee was selected for limited scrutiny - As per CIT income declared during the survey was also charged to tax at normal rate instead of charging at special rate at 60% as per the provisions of Section 115BBE of the Act which is in violation of Section 68 to 69C r.w.s. 115BBE - HELD THAT:- We find that the case of assessee was selected for limited scrutiny and for limited scrutiny, AO issued necessary questionnaire about seeking details of bank accounts and other related information and evidences. The assessee in its reply, furnished such details of bank statement and other information. AO after taking such reply, completed the assessment on 18/12/2019 without any variation.
CIT in its show cause notice, identified the issue which was not the subject matter of limited scrutiny. In the show cause notice, the ld. Pr. CIT raised the issue that survey action was conducted on the assessee firm in relevant financial year and that the assessee made declaration of Rs. 1.24 crore on account of undisclosed expenses. We find that such issue was not the subject matter of scrutiny, hence, the Assessing Officer was not entitled to raise such question.
We find that in Balvinder Kumar [2021 (3) TMI 649 - ITAT DELHI] has held that “in case of limited scrutiny, AO could not go beyond reason for which matter was selected for limited scrutiny thus, it would not be open to Principal Commissioner to pass revisionary order u/s 263 on other aspects and remit matter to AO for fresh assessment.”
The Supreme Court in celebrated/ leading case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] held that the prerequisite for the exercise of jurisdiction by the Commissioner suo-motu is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act.
Thus the twin condition as required to revise the assessment order is not meet out in the present case, therefore, the order passed by the ld. Pr. CIT is set aside and the grounds of appeal raised by the assessee are allowed.
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2022 (12) TMI 1472
Suppression of professional receipts from the patients under OPD category - assessee has shown some “Zero Receipt Patients” in IPD” indoor patient department - On analysis of disc of computer during the search action, it was noted that many patients were operated but payments made by them, are not accounted in the books of account and such patients were referred as “Zero Receipt Patients-IPD” - CIT(A) restricted the addition to the extent of 30% of alleged suppressed receipt by taking view that only profit element of reasonable basis should be taxed - HELD THAT:- AO has granted concession of two patients in respect of other hospitals for treatment of free patients, however, no such concession was allowed in case of assessee-hospital. It is a common factor that a privately managed hospital has to treat second category of patients as free-of-cost, which may include relatives of doctors, para-medical staffs, close relatives or family friends etc., During the hearing, we also find that certain patients which were closely related with the partners of assessee-hospital.
Thus, we find that the Assessing Officer has made addition without being confronting information collected by her at the back of assessee-hospital. No show cause notice before making such addition on account of suppressed addition, therefore the addition is not justified.
We further find that allegation of suppressed income for A.Y 2008-09 is of Rs. 148,000, however, the assessee-hospital had paid the tax of Rs. 33,17,496/-and the partners had paid tax of Rs. 28,22,084/-thus total tax of Rs. 61,39,580/-was paid. Thus, we find merit in the submission made by Ld. AR for the assessee that allegation of suppress receipt of IPD patients of is not tenable. Hence, we direct the Assessing Officer to delete the entire addition of suppressed receipt on account of IPD patients. In the result, the grounds of appeal raised by assessee are allowed.
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