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Income Tax - Case Laws
Showing 81 to 100 of 782 Records
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2022 (11) TMI 1337 - ITAT CUTTACK
Disallowance u/s 40(a)(ia) - non-deduction of TDS - liable to be restricted to 30% as against 100 made by the AO and confirmed by the CIT(A) - Scope of amendment to Section 40(a)(ia) of the Act by the Finance Act (No.2) Act, 2014 - HELD THAT:- A perusal of the amendment by the Finance (No.2) Act, 2014 made to the provision of Section 40(a)(ia) of the Act clearly shows that the amendment has been brought to remove hardship caused to the assessee. As understood that the disallowance of 100%, by the said amendment was restricted to 30%, thus, clearly the amendment was brought in to remove the hardship caused to the assessee. The principle laid down in the case of Vatika Township (P.) Ltd. [2014 (9) TMI 576 - SUPREME COURT] the AO is directed to restrict the disallowance u/s.40(a)(ia) of the Act to 30%.
As argued by the ld. Sr. DR that at the time of hearing of miscellaneous application, the Bench was convinced that the said amendment was not retrospective and for that purpose only the earlier order of the Tribunal had been recalled. The said argument would not hold good insofar as when the miscellaneous application is heard, its prima facie case that is looked at. It is at the time of hearing of the appeal that a perusal of the various decisions and the amendments are looked into. In these circumstances, the appeal of the assessee is partly allowed.
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2022 (11) TMI 1336 - ITAT BANGALORE
TP Adjustment - Comparables - comparables to be excluded on functional dissimilarities - HELD THAT:- We direct the Ld.TPO/AO to exclude Persistent Systems Ltd., Thirdware Solution Ltd., Larsen & Toubro Infotech Ltd., Infosys Ltd., Nihilent Ltd. and Aspire Systems (India) Pvt Ltd. for not satisfying functional similarity under SWD segment.
Cybage Software Ltd. - The main contention of the Ld.AR is that this assessee is having super profit in immediate two financial years and also having huge turnover is more that 200 crores in the assessment year under consideration. In our opinion, these facts to be examined by the Ld.AO/TPO. Accordingly, the issue remitted to the Ld.AO/TPO. If the functionality of the Cybage Software Pvt. Ltd. is not similar to the assessee and/or if the turnover is more that Rs.200 crores for the assessment year under consideration, it deserves to be excluded on any one of the above reasons.
Comparables i.e. Tech Mahindra Business Services Ltd., Infosys BPM Ltd., SPI Technologies India Pvt. Ltd. and Eclerx Services Ltd. to exclude from the final list for failing the turnover filter under ITES segment.
R S Software (India) Ltd. - This comparable underwent a shift in the revenue generating segments. This comparable has made investments in developing tools and platforms and has also enhanced the sales and marketing activities. These are any ways not the functions performed by the assessee before us which is a captive service provider, only catering to its AE. Thus we hold that R.S. Software(India) Ltd., should be excluded from the list of comparables.
Microland Ltd. - As we have excluded various comparables that exceeded 200 crores turnover, this comparable also deserves to be excluded on the same principle - we direct the Ld.TPO to exclude the above comparables from the Final list of SWD segment for failing in functionality tests.
Interest on receivables - We direct the Ld.TPO that in the event the WCA subsumes the outstanding recievables, no separate characterisation is to be made. However for those recievables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must be LIBOR + 300 basis points which is in accordance with the principles laid down by Hon’ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt.Ltd.[2015 (3) TMI 1031 - DELHI HIGH COURT] by considering a credit of 90 days. Assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings.
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2022 (11) TMI 1334 - ITAT JAIPUR
Addition u/s 68 - cash sales of the assessee unexplained - assessee is an individual and deriving income from business of jewellery - CIT-A deleted the addition - HELD THAT:- The assessee is engaged in the business of Jewellery and gold. The higher cash sales on festival season Karva Chouth, Dhanteras and Diwali is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings.
It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regard to not providing the name, address and PAN of the customers to whom cash sales was made the assessee explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee.
We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstance of the case is not accepteda - Appeal of the revenue is dismissed.
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2022 (11) TMI 1333 - ITAT JAIPUR
Addition u/s 68 r.w.s. 115BBE - Unexplained cash deposited in demonetized currency as undisclosed income of Assessee - CIT-A deleted the addition - HELD THAT:- We found that all the points or allegation mentioned by the AO are duly considered and discussed by the CIT(A) while dealing with the appeal of the assessee. The revenue did not pin point which of the findings of the CIT(A) is incorrect or against the facts placed on record by the assessee.
As noticed that during the course of assessment proceedings, the AO examined the books of account and she has not rejected the books of account of the assessee and provisions of section 145(3) were not applied. During the year under consideration the assessee deposited in demonetized currency. The cash so deposited was accumulated cash which was received against/for sales made in the proprietorship concern of assessee M/s Mohan Lal Mahendra Kumar Jewellers. The assessee submitted the summary of cash book.
We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of nonfurnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits.
We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law.
AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. AO did not even reject the books of accounts of the appellant under the provision of section 145(3) - Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Appeal of the revenue stands dismissed.
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2022 (11) TMI 1332 - ITAT MUMBAI
Addition u/s 68 - Bogus LTCG - receipt of sale consideration of sale of listed shares unexplained - unexplained commission expenditure u/s 69C - HELD THAT:- In the instant case, a specific request was made for a copy of investigation report as well as copies of statements recorded of different persons. The assessee is noted to have rebutted whatever details were provided by the AO and had sought cross-examination as well. Hence, the facts involved in the present case are noted to be distinguishable from the above case. Further, in respect of the circumstantial evidences the Hon’ble Calcutta High Court in Swati Bajaj case [2022 (6) TMI 670 - CALCUTTA HIGH COURT] has not disturbed the settled position of law that circumstantial evidences can be looked into only when direct evidences are not available.
In the instant case, direct irrefutable evidences were made available to the AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even if one refers to the decision of Hon’ble Calcutta High Court. Moreover, as noted by us earlier, this issue at hand is squarely covered by the binding judgments of the Hon’ble jurisdictional High Court, in favour of the assessee, and, therefore following the judicial discipline, the order of the Ld. CIT(A) does not require any interference since we have the benefit of guidance on this subject by the Hon‟ble jurisdictional High Court, which is binding upon us.
As decided by Ripu Sudan Kundra [2021 (11) TMI 77 - ITAT MUMBAI] additions made by the AO was purely based only on suspicion, surmises and conjectures without there being any tangible evidence on record against the assessee and, therefore deleted the same.
No infirmity in the order of the Ld. CIT(A) deleting the additions made u/s 68 of the Act and the consequent addition of unexplained commission expenditure made u/s 69 of the Act and uphold to the same.
AO has noted that the primary sources of income of the assessee were salary, rental income, other sources and capital gains. The AO has however not been able to bring on record any material or evidence unearthed during search which would reveal as to from which income-earning activity did the assessee derive such unaccounted monies to support his theory that he had routed such unaccounted monies in the guise of bogus capital gains. Before us, the assessee has placed on record copies of the panchnamas, details of cash & valuables found, details of documents impounded etc. and the Revenue was unable to point to any specific item or evidence which would lend credence to their case. Although these aspects are not sufficient to draw definite conclusions but coupled with the facts and circumstances discussed in the foregoing, it does lend persuasive value to the case of the assessee.
For the above reasons therefore, we do not see any reason to interfere with the order of the Ld. CIT(A) deleting the additions made by the AO u/s 68 & 69C. Decided in favour of assessee.
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2022 (11) TMI 1331 - ITAT DELHI
CIT-A disposing-of the appeal Ex- Parte - CIT(A) dismissed the appeal just on the ground that in Form No.35, the section of assessment order mentioned is 144 instead of 143(3) - In his opinion of Ld. CIT(A) this is an incurable defect - HELD THAT:- CIT(A) has not specified under which law, it is an incurable defect. On query in this regard, DR has shown his inability to refer to any laws in this regard.
Be as it may in our considered opinion, when interest of substantial justice is pitted against technicalities, it is always justice that prevails. Accordingly, we remit this issue to the file of the CIT(A) to consider the issue and pass an order on the merits of this case after giving assessee the proper and requisite opportunity Assessee has also undertaken to cooperate with the CIT(A). Appeal stands allowed for statistical purposes.
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2022 (11) TMI 1328 - ITAT BANGALORE
Rectification u/s 254 - period of limitation - non-consideration of the decision of the jurisdictional high court/Supreme Court - Belated deposit of employees’ contribution towards the EPF and ESI - HELD THAT:- As the time limit to file a miscellaneous petition u/s 254(2) of the Act to rectify the order of the Tribunal passed u/s 254(1) of the Act is to be considered is within 6 months from the end of the month in which the order was communicated so as to rectify the mistake passed u/s 254(1) of the Act. Accordingly, we admit the miscellaneous petition filed by the revenue as the miscellaneous petition has been filed on 31.10.2022 as it was received only on 25.4.2022 by the revenue authorities and in our opinion, miscellaneous petition filed in this case is within time limit allowed u/s 254(2) of the Act and the same is admitted for adjudication.
Coming to the merit of the issues raised by the revenue in its miscellaneous petition, we not that Hon’ble Supreme Court in the case of CIT Vs. Saurashtra Kutch Stock Exchange[2008 (9) TMI 11 - SUPREME COURT] has held that non-consideration of the decision of the jurisdictional high court/Supreme Court constitutes mistake apparent from record and is rectifiable within the meaning of section 254(2).
Article 141 of the Constitution of India provides that the law declared by Hon’ble Supreme Court shall be binding on all courts within the territory of India. The law laid down by Supreme Court operates retrospectively and is deemed to the law as it has always been unless, the Supreme Court, says that its ruling will only operate prospectively.
There is a mistake apparent on record in view of the decision of the Hon’ble Supreme Court in the case of Checkmate Services Pvt.Ltd. [2022 (10) TMI 617 - SUPREME COURT] though rendered subsequent to the order passed by the Tribunal and has to be rectified by holding that the disallowance made by the revenue authorities u/s.36(1)(va) of the Act was justified. Consequently, the appeal by the Assessee will stand dismissed. The order of the Tribunal will stand modified /rectified accordingly.
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2022 (11) TMI 1327 - ITAT BANGALORE
Delayed payment of employee’s contribution to ESI and PF - Payment made by the assessee beyond the due date by invoking the provisions of section 36(1)(va) - Assessment u/s 143(1) - HELD THAT:- It is not disputed that as per the decision of CHECKMATE SERVICES PVT LTD [2022 (10) TMI 617 - SUPREME COURT] decided the issue on allowability/treatment of ‘delayed’ Employee PF Contribution payment in hands of assessee under provisions of Income Tax Act and held that Section 36(1)(va) and Section 43B(b) operate on totally different equilibriums and have different parameters for due dates, i.e., employee's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to payment before the due dates specified in the respective Acts and employer's contribution is linked to the payment before the prescribed due date for filing of return u/s. 139(1) - The result of any failure to pay within the prescribed dates also leads to different results. In the case of employee's contribution, any failure to pay within the prescribed due date under the respective PF Act or Scheme will result in negating employer's claim for deduction permanently forever u/s.36(1)(va). On the other hand, delay in payment of employer's contribution is visited with deferment of deduction on payment basis u/s.43B and is therefore not lost totally. Therefore as per the above decision, the disallowance made by the Revenue authorities were fully justified.
As clear from Intimation u/s 143(1) the disallowance has been made on the basis of audit report in Form 3CD wherein the fact that employees contribution was paid beyond the date of ESI and PF and hence not allowable as deduction under section 36(1)(va) of the Act has been clearly mentioned. The mere fact that the wordings “as there has been no response”, in the intimation referred to earlier has not been struck off, it cannot be presumed that the reply of the assessee dated 29.2.2020 has not been considered while issuing the intimation under section 143(1) of the Act.
We are of the view that the disallowance under section 143(1)(a) of the Act is valid in view of the decision made by Hon’ble Supreme Court in the case of Checkmate services (supra). - Decided against assessee.
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2022 (11) TMI 1324 - CALCUTTA HIGH COURT
Revision u/s 263 - second round of proceedings u/s 263 - HELD THAT:- Tribunal has carefully considered the factual position and noted that assessing officer has followed the direction issued in the earlier order passed by the Section 263 of the Act. The Assessing Officer has issued summons under Section 131 of the Act to the directors of the Shareholding Company M/s. Laxmi Timber Pvt. Ltd. in consonance with the direction issued by the Principal Commissioner of Income Tax under Section 263 of the Act. This finding would be seen from paragraphs 5 to 7 of the assessment order. Thus the learned Tribunal on re-verification of the facts found that this is not a case of non application of mind nor this is a case of failure to re-appreciate the facts and concluded that the view taken by the assessing officer was a plausible view. That apart we note that the assessing officer conducted thorough enquiry and has also examined the directors of the holding company.
Thus the learned Tribunal rightly dismissed the appeal filed by the revenue. No substantial question of law
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2022 (11) TMI 1323 - ITAT BANGALORE
TP adjustment - interest expenditure incurred on the CCD's issued by it to its non-resident AE - re-charactering and concluding that CCDs issued by the assessee are in the nature of equity investments - HELD THAT:- The new section 94B of the I.T.Act is applicable with effect from 01.04.2018, and hence is applicable for the impugned assessment year, namely, A.Y. 2018-2019. Section 94B of the I.T.Act is different from transfer pricing provisions contained in sections 92 to 92F of the I.T.Act. The transfer pricing provisions deal with the determining the arm's length rate of interest payable on a debt-claim from an AE.
In contrast, section 94B of the I.T.Act places a blanket threshold on the deductibility of interest paid, based on the profitability of the Assessee and not based on the debt-claim itself. Assessee did not comply with the provisions of section 94B of the I.T.Act to suo moto disallow the interest on CCD while computing the taxable income in the income tax return filed for the impugned AY (probably due to oversight).
The assessee failed to appreciate that the same definition of AE as per sub section (1) and sub section (2) of section 94A is referred in section 94B of the I.T.Act and hence interest on CCD paid to PIL, who being a deemed AE as per the provisions of section 94A(2)(C) of the I.T.ACt, also comes under the purview of section 94B - In the light of the aforesaid reasoning and the impugned TP adjustment with respect to payment of interest on CCD is deleted. However, the disallowance is liable to be made u/s 94B of the I.T.Act. Appeal filed by the assessee is partly allowed.
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2022 (11) TMI 1321 - ITAT BANGALORE
Adjustment on account of alleged excessive AMP expenditure - HELD THAT:- As relying in assessee’s own case in assessment year [2022 (12) TMI 238 - ITAT BANGALORE] we redirect the Ld.AO/TPO to delete the addition made towards AMP expenses.
Disallowance of Seminars, Conventions and sales promotion expenses - expenses incurred related to doctors in the form of seminars and conventions and sales promotion - HELD THAT:- Similar issue came for consideration before this Tribunal in the case of Astra Zeneca Pharma India Ltd[2023 (1) TMI 1114 - ITAT BANGALORE] A.O. had primarily made disallowance by referring the CBDT Circular No.5/2012 dated 01.08.2012. The A.O. has not critically examined the nature of expenditure incurred by the assessee. In the larger interest of justice, in view of the latest judgment of the Hon’ble Apex Court, which has examined the very same issue, it becomes necessary to examine the exact nature of expenses incurred by the assessee for Doctors from all angles. Therefore, for substantial question and cause, the additional evidence are taken on record. Since the additional evidence is taken on record, necessarily, the matter needs fresh verification by the A.O., especially in the light of the recent judgment of the Hon’ble Supreme Court in the case of M/s. Apex Laboratories Pvt. Ltd. [2022 (2) TMI 1114 - SUPREME COURT] For the aforesaid purpose, the issues raised are allowed for statistical purposes.
Adjustment in respect of IT support services - Companies functinally dissimilar with that of assessee need to be deselected - we direct the AO/TPO to exclude M/s. Infosys Ltd., M/s. L&T Infotech Ltd., M/s. Persistent Systems Ltd. and M/s. Thirdware Solutions Ltd. from the lists of comparables and to recompute the ALP of international transactions with A.E. Ordered accordingly.
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2022 (11) TMI 1320 - ITAT BANGALORE
TP Adjustment - comparable selection - Software Development Services - Application of upper turnover filter - HELD THAT:- The assessee’s turnover for the year under consideration in software development segment is Rs.198 crores. Therefore, respectfully following the decision AUTODESK INDIA PRIVATE LTD [2018 (7) TMI 1862 - ITAT BANGALORE] we hold that the companies whose turnover in the current year is more than Rs.200 Crores should be excluded from the list of comparable companies. Accordingly Larsen & Toubro Infotech Ltd., Nihilent Ltd., Persistent Systems Ltd., Thirdware Solution Ltd., Infosys Ltd., Aspire Systems (India) Pvt Ltd., and Cybage Software Pvt Ltd., are excluded from the list of comparables.
Inteq Software Pvt. Ltd. is not a suitable comparable vis-a-vis the taxpayer which is a routine software development service provider working on costplus mark up model, hence ordered to be excluded from the final set of comparables.
Minvesta Infotech Ltd. - We are not in agreement with the decision of the lower authorities to exclude Minvesta Infotech Ltd only on the basis that the company fails different financial year filter. We therefore remit the issue back to the AO/TPO to examine the relevant financial data from which the details can be extrapolated for the purpose of comparison and accordingly decide the inclusion of the company after giving a reasonable opportunity of being heard to the assessee.
Sagar Soft (India) Ltd. and Evoke Technologies Pvt. Ltd. - We are of the view that the comparability of this company has to be remanded to the TPO for fresh consideration as relying on Infor India P. Ltd. Vs. DCIT [2016 (1) TMI 410 - ITAT BANGALORE] wherein it was held that availability unaudited accounts cannot be the reason to reject the comparability of the company which satisfies all filters. Also case of Zynga Game Network India Pvt. Ltd. [2021 (4) TMI 208 - ITAT BANGALORE] in which the comparability of this company was remanded to the TPO for fresh consideration.
Inclusion of Sagarsoft (India) Ltd. - Given that the basis on which the TPO came to the conclusion that the company fails the SWD service revenue filter is not clear. Further the assessee has made the submission before the TPO bringing the above fact to his notice - We notice that the TPO has not examined this. The DRP has rejected stating that the assessee has not brought any documentary evidences - As relying on M/S. RED HAT INDIA PRIVATE LIMITED case [2022 (2) TMI 1283 - ITAT MUMBAI] comparability of the company requires to be examined afresh. Considering all we remit the issue back to the TPO with a direction to examine the facts properly.
Selection of comparables for IT Enable Services - HELD THAT:- Where data for current year is not available at the time of furnishing the return of income, data of 2 preceding years out of 3 years would be used. Therefore we see merit in the argument that the company cannot be rejected merely for the reason that the current year data is not available. In the given case the company is excluded also for the reason that the financial year end is different.
Interest on delayed receivables - whether the interest on receivable is a separate international transaction and the rate of interest to be considered? - realizations in respect of certain invoices were made after the period of 30 days - TPO equated the outstanding receivables from AEs to loans and accordingly proposed a notional interest on the outstanding balances (exceeding 30 days) taking Prime Lending Rate of SBI at 5.39% as arm’s length interest rate - HELD THAT:- Treatment of interest on deferred receivables is an independent international transaction and the interest rate to be adopted is LIBOR rate and it would be appropriate to take the LIBOR rate + 2. It is ordered accordingly,
Disallowance of deduction claimed u/s 80G - donations made in pursuance of CSR policy - HELD THAT:- As relying on FIRST AMERICAN (INDIA) PVT. LTD. [2020 (5) TMI 187 - ITAT BANGALORE] remit the issue to the AO with a direction to verify the details and allow the deduction to the extent of eligibility. The assessee is directed to furnish the relevant details to substantiate the claim and cooperate with the proceedings. It is ordered accordingly.
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2022 (11) TMI 1318 - ITAT BANGALORE
Condonation of delay - delay of about 582 days in filing the appeal by the assessee - assessee entrusted the filing of appeal before CIT(A) against the Order of Assessment to Chartered Accountant (CA) with instructions to file the appeal - assessee did not contact the CA till the AO contacted the assessee in January 2022 for recovery of outstanding demand and when he informed that the Assessee that the Assessee’s appeal before CIT(A) has been dismissed - HELD THAT:- Assessment Order was passed on 22.12.2017 and the papers must have been handed over to the CA for filing appeal before the CIT(A) in January 2018. It is hard to believe that till January 2022 assessee did not make any enquiry with the CA about the fate of his appeal. It is even more surprising, when it is said that even the CA did not know that the appeal was listed before CIT(A) and was dismissed for non-prosecution.
From the affidavit, it appears that it is only the AO who informed the assessee in January, 2022, that the assessee’s appeal before CIT(A) was dismissed. It is thus clear that there has been clear lack of diligence on the part of the assessee and therefore the delay in filing the appeal cannot be accepted as owing to reasonable cause. Hence,refuse to condone the delay in filing the appeal and dismiss the appeal as unadmitted.
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2022 (11) TMI 1317 - ITAT BANGALORE
Deduction claimed u/s 10AA in respect of 4 SEZ units - satisfaction of conditions mentioned in clause (ii) to sub-section (4) to Section 10AA - denial of exemption related to assessment year 2007-08 on the ground of ‘splitting up and reconstruction’ - HELD THAT:- We have referred to the observations by the Ld.CIT(A) for assessment years 2007-08 to 2009-10 wherein there is a categorical finding that these units have not been formed by splitting up or restructuring. This observation has not been challenged by the revenue in appeals filed in [2022 (11) TMI 1316 - ITAT BANGALORE] and thus this issue has attained finality. For sake of convenience, we reproduce the relevant observation by the L.dCIT(A) has been tabulated by the Ld.AR.
We therefore direct the Ld.AO to grant the deduction claimed by the assessee in respect of the Chennai SEZ Unit I, Chandigarh nit, Mangalore Unit I and Pune Unit I.
TP Adjsutment Interest receivables from Infosys China and Infosys Brazil - Rate of interest charged by the assessee for both the loans was at 6% p.a. - TPO determined the arm's length interest rate @ 11.17% stating the same as yield from BBB+ grade corporate bond (investment grade bonds) for a 1 to 2 years period during the FY 2011-12 - HELD THAT:- We note that, the assessee admittedly charged 6% interest rate on the loans advanced to Infosys China and Infosys Brazil. The revenue authorities have accepted the rate charged by the assessee in the subsequent as well as preceding assessment years. We therefore do not see any reason to deviate from the same. We also note that 11.17% computed by the Ld.TPO which was subsequently rectified to 8.53%, do not have any basis, as it is based on fixed deposit interest rate by different banks. We note that principles laid down in case of CIT vs. Cotton Naturals India Pvt. Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] has not been followed by the Ld.TPO, We also note that the LIBOR rate of 12 month USD is much less than the rate computed by the assessee. We therefore uphold the interest rate computed at 6%.
Disallowance u/s. 14A r.w.Rule 8D(2)(iii) - dividend income from mutual funds which was exempt - HELD THAT:- Admittedly, the assessee suo moto disallowed u/s.14A. We note that the Ld.AO while computing disallowance under Rule 8D(2)(iii), included the investments made in Infosys BPO Ltd., that did not yield any exempt income for year under consideration. Going by the submissions of the Ld.AR, ratio laid down in Vireet Investment [2017 (6) TMI 1124 - ITAT DELHI] disallowance then computed would be less that the disallowance voluntarily offered to tax by the assessee which is not the right course to be adopted. We therefore uphold the disallowance voluntarily made by the assessee that has been offered to tax by the assessee. We direct the Ld.AO to compute the disallowance as voluntarily offered by the assessee. Needless to say that proper opportunity of being heard mist be granted to the assessee.
Disallowance u/s. 40(a)(i) in respect of subscription fee paid - Disallowance u/s. 40(a)(ia) / 40(a)(i) in respect of software expenses - HELD THAT:- We remand these issues back to the Ld.AO/TPO to verify these claims in accordance with the principles laid down by Hon’ble Supreme Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT]. In the event after verifying the relevant agreements / invoices and applying the ratio laid down by the Hon’ble Supreme Court, no TDS is liable to the deducted, the disallowance u/s. 40(a)(i) / 40(a)(ia) deserves to be deleted. The Ld.AO is directed to carry out necessary verifications in accordance with law by granting proper opportunity of being heard to assessee.
Disallowance of software expenses as capital expenditure - Alternatively, assessee has prayed for depreciation to be granted at 60% as against 25% - HELD THAT:- We note that the Ld.AO has not examined the documentary evidences in respect of this claim. We therefore set aside this issue to the Ld.AO with a direction to consider the claim of the assessee in the light of evidences / documents filed. The Ld.AO shall also verify this issue based on the principles laid down by Hon’ble Supreme Court in case of Engineering Analysis [2021 (3) TMI 138 - SUPREME COURT].
Nature of expenses - Disallowance of brand building expenditure - Brand building expenses are included and shown under 'Selling and Marketing expenses' in the financial statements and claimed as revenue expenditure - HELD THAT:- We note that Coordinate Bench in case of the sister concerns of assessee Infosys BPO Ltd v DCIT [2020 (1) TMI 1011 - ITAT BANGALORE] considered identical issue on similar facts. Nothing has been brought on record by the revenue to the expenses incurred by the assessee is towards any capital asset. Respectfully following the same, we direct the disallowance to be deleted.
TDS u/s 195 - Disallowance of Commission paid to non residents - non deduction of TDS - Addition u/s 40(a)(ia) - HELD THAT:- There is no quarrel that the benefit available to assessee as per DTAA must be granted as per the ratio of Hon’ble Supreme Court in case of Engineering Analysis [2021 (3) TMI 138 - SUPREME COURT]. The Ld.AO shall verify and consider the claim in accordance with law. Needless to say that proper opportunity of being heard mist be granted to the assessee.
Non reduction of communication expenses and expenses incurred in foreign currency from total turnover while computing deduction under section 10AA - HELD THAT:- This issue is no longer resintegra. Hon’ble Supreme Court in the case of CIT v HCL Technologies Ltd [2018 (5) TMI 357 - SUPREME COURT] held that, freight, telecommunication charges, insurance charges and expenses incurred in foreign currency reduced from export turnover should also be reduced from total turnover while computing deduction under section 10A. Ratio of the said decision is squarely applicable for the purposes of section 10AA/10A and both these sections are in pari material with each other. The CBDT vide Circular No. 4 of 2018 dated 14/08/ 2018 cited the decision of the Hon’ble Supreme Court in the case of HCL Technologies Ltd.,(supra), and clarified that, all charges/expenses specified in Explanation 2(iv) to section 10A are liable to be excluded from total turnover also for the purpose of computation of deduction under section 10A.
We thus hold that the communication expenses and expenses incurred in foreign currency reduced from the export turnover should also be reduced from the total turnover while computing deduction under section 10AA.
Computing deduction u/s. 10AA - reduction of following items from profits of SEZ units i.e. interest income from GLES deposit, interest income from loans given to employees, receipts from sale of scrap and incentive receipts from Airlines - HELD THAT:- Amount of income that that qualifies for the deduction under section 10AA is the profits that arises out of the business undertaking, and not from any other income earned by the assessee de horse the business of the undertaking. If the income earned by the assessee is held to be falling under the head, Income from other sources, the same will not qualify for the deduction section 10 AA of the Act.
From the above sources that have yielded income to the assessee for the year under consideration, except for income from sale of scrap, no other income could be said to have arisen out of the business undertaking. Further in respect of cessation of trading liability, we direct the Ld.AO to verify if the trade receivables were offered to tax by the assessee in any of the preceding assessment years. If the amount has been offered to tax in any of the preceding assessment years, as a sequitur, would obviously for part of the qualifying amount for the purposes of deduction under section 10AA of the Act.
In respect of interest income from GLES deposit, interest income from loans given to employees and incentive receipts from Airlines, in our opinion cannot be held to be profits that arises out of the business undertaking and therefore we hold the same not eligible for purposes of deduction under section 10AA of the Act.
Reduction of deduction under section 10AA in respect of pure onsite revenue - HELD THAT:- We note that the denial of the exemptions claimed is purely due to the reason that the Ld.AO did not verify the details furnished by assessee. There is no doubt expressed by the Ld.AO regarding the nexus or any shortfall of evidence or materials in support of the assessee’s claim as argued by the Ld.AR, the disallowance made on adhoc basis, without any justification and the reasoning for such disallowance is absolutely uncalled for. However in the interest of justice, the Ld.AR suggested the issue may be remanded to the Ld.AO for due verification. We direct the Ld.AO to verify the details filed and to consider the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard is to be granted to the assessee.
Deduction under section 80JJAA being disallowed - DRP held that the assessee is not engaged in manufacture or production of article or thing and therefore not eligible for deduction under section 80JJAA. It was held that manufacture or production of article or thing cannot be equated with software development - HELD THAT:- As relying on case of SAP Labs India Pvt. Ltd. [2016 (6) TMI 1333 - ITAT BANGALORE] wherein held there is no case for the Revenue that assessee had failed to file details of software engineers employed by it. In our opinion software engineers newly employed by it fell within the meaning of the word 'workmen' - we direct the Ld.AO to consider the claim in accordance with the observations and principles laid down by this Tribunal in herein above. Needless to say that proper opportunity of being heard is to be granted to the assessee.
TDS u/s 195 - Disallowance of Sub Contracting charges paid to Infosys Technologies China Co Ltd under section 40(a)(i) for not deducting tax at source - HELD THAT:- AR though have submitted various arguments, does not have any merit. Accordingly we dismiss this ground raised by the assessee.
Deduction under section 10AA in respect of disallowance under section 40(a)(i) and Deduction in the year of payment of TDS demand - HELD THAT:- We note that the submissions of assessee deserves to be considered and the claim has to be considered in accordance with law. In our opinion there is no statutory provision to that effect having been made, as a consequence of the disallowance, claim of deduction of such disallowance under section 10A/AA must follow. Needless to say that proper opportunity of being heard is to be granted to the assessee.
Allowability of deduction u/s 35(2AB) in respect of scientific research expenditure incurred from 1.4.2011 to 22.11.2011 - HELD THAT:- As this claim deserves to be verified by the Ld.AO based on various evidences and documents filed by assessee having regards to the decisions relied upon by assessee hereinabove. Needless to say that proper opportunity of being heard is to be granted to the assessee.
TDS credit not allowed - HELD THAT:- As AR submitted that TDS credit was not allowed to the extent of Rs.1,06,50,855/- was not allowed by the Ld.AO. He has filed the evidences in support of this claim. In lieu of the above, we direct the Ld.AO to verify the above claim of assessee in accordance with law. Needless to say that proper opportunity of being heard is to be granted to the assessee.
TDS credit and advance tax relating to ICIL not allowed even though it was allowed in the Draft assessment order - HELD THAT:- Action of the Ld.AO in denying the aforesaid TDS credit and advance tax in the final assessment order is contrary to the scheme of section 144C, invalid, bad in law and liable to be quashed. The Ld.AO be therefore directed to allow TDS credit and advance tax relating to Infosys Consulting India Ltd which was merged with the assessee. We direct the Ld.AO to verify the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard is to be granted to the assessee.
Allowability of incremental foreign tax credit which was allowed in the draft assessment order - HELD THAT:- As relying on case of Goetz India Ltd. [2006 (3) TMI 75 - SUPREME COURT] we direct the Ld.AO to consider the assessee’s claim and grant credit of foreign taxes paid for the year under consideration that has been verified during the draft assessment proceedings. Needless to say that proper opportunity of being heard must ne granted to the assessee.
Interest on IT Refund granted under section 143(1) but subsequently recovered on completion of assessment proceedings is allowable as deduction - HELD THAT:- This issue needs to be verified by the Ld.AO. The Ld.AO is directed to verify based on the necessary evidences filed by assessee. The issue then is to be considered in accordance with law. Needless to say that proper opportunity of being heard must be granted to assessee.
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2022 (11) TMI 1316 - ITAT BANGALORE
Nature of expenses - Disallowance of Building repair expenses - adhoc disallowance of 10% by the Ld.AO - HELD THAT:- Hon’ble Supreme Court in the case of CIT vs. Kalyanji Mavji and Co [1980 (1) TMI 1 - SUPREME COURT] has held that, cost on repairs which are not current repairs can be allowed under section 37 (1). Section 30 and 31 are not a bar in this regard.
AO has not identified any expenditure that has resulted in creation of a new asset. There is no basis for the to disallow adhoc 10% of the total expenditure incurred by the assessee of the building repairs.
From the above case law it is apparent that expenditure on repairs although prolonging the life and increasing durability of the asset is not necessarily of capital nature. Hence, in our considered opinion expenditure incurred by the assessee with regard to repairing/ renovating of existing make-up rooms have to be allowed as deduction as revenue expenditure, as they cannot be treated as capital expenditure meant for bringing into existence a new asset or a new advantage, and they are laid out wholly and exclusively for the purpose of business of the assessee. - Decided in favour of assessee.
Taxability of Inducement fees - ‘inducement fees’ was received for cancellation / lapse of proposed scheme of acquisition - Excess of inducement fees received over expenditure incurred and the same was treated as ‘capital receipt’ by the assessee and consequently the said sum was not offered to tax - HELD THAT:- As the proposed acquisition failed, the assessee was in recipient of certain amount in connection to the cancellation/lapse of the proposed scheme of acquisition. It is submitted that the assessee had spent certain amount towards due diligence in the form of legal charges, advisory etc., of the proposed acquisition. The said expenditure was reduced from the total amount received by the assessee, and the balance was treated by the assessee as capital receipt that was not offered to tax.
We have considered the above receipt by the assessee, based on various provisions of the Act. The expenditure incurred by the assessee towards the due diligence, legal advices and payments for other professional services are to considered as business loss for the reason that the same did not culminate into a completed transaction.
In sofar as the excess amount received by the assessee over and above the expenditure is concerned, the same cannot be held to be exempt since this excess amount was received by the assessee for failure of the proposal for acquisition. The said amount is taxable in the hands of the assessee as revenue receipt. Therefore, in our considered opinion, section 28(ii)(e) of the Act, would come into play and the income received by the assessee would have to be certainly treated as profits and gain.
Whether the amount will qualify for deduction under section 10AA ? - The answer to this is in negative and against assessee. In our opinion, the money received by assessee does not arise out of the profits of the undertaking. We therefore do not find any infirmity in the view taken by the Ld.CIT(A) and the same is upheld.
Disallowance of foreign exchange fluctuation loss - HELD THAT:- The foreign exchange loss is due to the reinstatement of the accounts at the end of the financial year as well as loss incurred on account of exchange fluctuation on repayment of borrowings is similar to the interest expenditure and it is to be allowed as revenue expenditure u/s 37 of the I.T.Act, as per the accounting standard approved by the Institute of Chartered Accountants of India.
This issue is no longer res integra. Hon’ble Supreme Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. [2009 (4) TMI 4 - SUPREME COURT] has held that, the actual payment was not a condition precedent for making adjustment in respect of foreign currency transactions at the end of the closing year.
We direct the Ld.AO to carry out necessary verification in respect of the loss /gain incurred by the assessee for the years under consideration whether on account of Capital asset based on the principles laid down by Hon’ble Mumbai Special Bench in case of Bank of Bahrain and Kuwait [2010 (8) TMI 578 - ITAT, MUMBAI] - In the event the loss/gain is out of trading liability, no disallowance can be made. However, we make it clear that there cannot be double claim by the assessee; once in the year under consideration and on actual settlement of the bill in any subsequent year.
Reduction of export turnover u/s. 10A on account of later realization of export turnover into India - .AO denied the claim and held that the late realised export turnover cannot be reduced from the formula for computation of section 10A - HELD THAT:- We note that the assessee has furnished the details wherein the authorised dealers under FEMA have not taken any adverse action for late realisation of export turnover and neither declined nor rejected the application for late realisation of such export turnover.
We note that the authorities below have not verified any documents /evidences filed by the assessee. The question is, whether the extension of time for realisation of the export proceeds by the Competent Authority under FEMA can be said to be the approval granted by the Competent Authority under section 10A(3) of the Income-tax Act, 1961. In the event there is an approval granted by the competent authority under FEMA, the claim of assessee deserves to be allowed. We therefore, direct the Ld.AO to verify the evidences and the documents in respect of the RBI approval and to consider the claim of the assessee in accordance with law in the light of the above ratio by Hon’ble Bombay High Court in in case of Mogan Stanley [2011 (8) TMI 279 - BOMBAY HIGH COURT]
Reduction of rental income from profits of 10A units - assessee had received rental income from its subsidiary companies that constituted income from incidental and ancillary activities that was subservient to carrying on the business of the assessee - The said rental income was claimed by the assessee as deduction u/s. 10A which was denied by the Ld.AO, based on the turnover of the SEZ units - HELD THAT:- As relying on this Tribunal for A.Y. 2005-06 in assessee’s own case [2017 (11) TMI 2016 - ITAT BANGALORE] we direct the Ld.AO to include the rental income received from the SEZ units for the purposes of computing profits u/s. 10A.
MAT computation - disallowance u/s. 14A if any could be added for computing book profits - Addition of SEZ book profits u/s. 115JB - HELD THAT:- This issue is no longer resintegra and the same stands settled by the decision of Hon’ble Special Bench of Delhi Tribunal in case of ACIT vs. Vireet Investment (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI] We accordingly direct the Ld.AO to delete the disallowance added while computing book profits.
Enhancement of income by CIT(A) in respect of new source which was not at all dealt by the learned AO in the assessment order is bad in law - Reduction of 50% of overseas revenues from licensing of Finacle software from export turnover of 10A units - HELD THAT:- As in a software development segment, once a software developed cannot be used in perpetually, the product has to undergo various changes in accordance with the demands of time and the business model. Product that gets outdated due to rapid change in the commercial requirement, deserves to be replaced with a new model. In the present facts of the case, the only dispute with the assessing officer is in respect of Finacle being a remodel of BANCS2000. It is not disputed that the said license fee generated out of licensing of Finacle software is eligible for deduction u/s. 10A. Whether there is a change in the product and whether there are new features that could categorise this Finacle software to be a new product has not been verified by the Ld.AO. Such technical analysis is definitely very difficult at the revenue’s end due to the lack of expertise.
We therefore direct the Ld.AO to verify with the assistance of the assessee on a technical level to understand the difference in both these softwares. In the event, there is a difference in the products, assessee deserves 100% deduction on the license fee received from the overseas in respect of licensing the product. We direct the assessee to provide sufficient assistance to the Ld.AO in order to understand the product model to come to a just conclusion.
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2022 (11) TMI 1315 - ITAT DELHI
Income deemed to accrue or arise in India - taxability of amount received from broadcasting companies towards leasing/rental of transponders located in satellites of the assessee - HELD THAT:- A reading of the impugned assessment order and the directions of DRP would clearly reveal that by relying upon the approach adopted by them in assessee’s case in preceding assessment years beginning from assessment year 2006-07 onwards, they have concluded that the receipts of the assessee from Satellite Transmission Services are in the nature of royalty. However, it is a fact on record that disputing the decision of the departmental authorities’ assessee carried appeals to the Tribunal in preceding assessment years.
While deciding identical issue arising in assessee’s own case in the immediately preceding assessment year, [2022 (5) TMI 1504 - ITAT DELHI] the Tribunal has followed its earlier decision and held that the amount received from Satellite Transmission Services is not taxable in India as royalty. Thus, respectfully following the consistent view of the Tribunal and the Hon’ble Jurisdictional High Court in assessee’s own case, as discussed above, we hold that the amount received by the assessee from Satellite Transmission Services is not taxable in India as royalty. Grounds are allowed.
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2022 (11) TMI 1313 - ITAT PUNE
Income accrued or arose in India - Income taxable in India - assessee provided fee for technical services “FTS” - India-USA DTAA - scope of “ make available” clause - whether AO had rightly invoked deeming fiction of income u/s. 9(1)(vii) read with Sec. 9(2) Explanation that mere absence of payee/assessee’s permanent establishment “PE” in India would not be fatal to the Revenue’s cause? - HELD THAT:- Assessee herein a USA based entity had entered into a service agreement with the payer M/s. Wipro Ltd.(Indian Company) providing the impugned services through the latter’s group company in USA to M/s. McDonald’s Corporation(USA) in USA only regarding the four folded services i.e. Cloud Infrastructure Managed Private Cloud, Colocation, Mainframe and Data Recovery services.
Revenue could hardly dispute that the even if we agree to Revenue’s arguments under section 9(1)(vii) r.w.s. 9 (2) Explanation that the above services give rise to application of Sec.9’s applicability the assessee is found very well entitled for the benefit of India USA double taxation avoidance agreement “DTAA” u/s 90(2) of the act wherein Article 12 (4) (b) stipulates taxability of the income arising therefrom only if the services concerned “make available technical knowledge” to the recipient/payer
Revenue could not refer to any material in the case file satisfying the forgoing “make available” condition in assessee’s services.
This tribunals recently in M/s. Faurecia Automotive Holding [2019 (7) TMI 402 - ITAT PUNE] holds in light of CIT V/s. De Beers India Minerals Pvt. Ltd.[2012 (5) TMI 191 - KARNATAKA HIGH COURT] that such “ make available” condition stipulates that the payer concerned is independently able to make use of the technical know-how etc. coming from the service provider’s side . We thus affirm the CIT(A)’s findings reversing the Assessing Officer’s action holding the amount in issue as taxable in India. The Revenue’s instant sole substantive grievance fails accordingly.
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2022 (11) TMI 1312 - ITAT BENGALURU
Revision u/s 263 - unaccounted cash credit under Section 68 - Assessee applied for the Direct Tax Vivad Se Viswas (DTVSV) scheme and has filed a letter before the CIT(A) for withdrawal of his appeal filed against the order passed under Section 143(3) - whether revision proceedings can be initiated when the assessee has opted for DTVSV? - HELD THAT:- We notice that in assessee’s case the issue of cash deposits during the demonetisation period have been considered by the AO in original assessment proceedings under Section 143(3) of the Act and the assessee has opted for DTVSV scheme for the additions made in this regard. Section 8 of DTVSV Act as quoted by the PCIT, clearly mentions that the immunity is not available for any proceedings other than those in relation to which the declaration has been made.
In the given case however the PCIT has initiated the revision proceedings u/s.263 on the same issue for which the assessee has already opted for DTVSV. It is also noticed the assessee has filed the necessary forms under the DTVSV scheme which have been accepted and therefore in our considered view the decision of the Hon'ble Madras High Court is clearly applicable to the assessee’s case.
Accordingly we hold that the PCIT is not justified in initiating the impugned proceedings under Section 263 of the Act when the assessee has opted to settle the dispute under DTVSV scheme. We therefore quash the order of PCIT and allow the appeal in favour of the assessee.
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2022 (11) TMI 1309 - ITAT MUMBAI
MAT computation - Exclusion of profit on sale of investment being capital profits in computing Book Profit us 115JB - HELD THAT:- There is no dispute that the amount in question was in the capital field, and that it does not, therefore, is not required to be routed through the profit and loss account. On such facts, and in the case of Shivalik Ventures Pvt Ltd. [2015 (8) TMI 979 - ITAT MUMBAI] a coordinate bench of thisb Tribunal has, inter-alia, held that “In view of the above said legal provisions, the assessee has contended that the profits and gains arising on transfer of a capital asset by a company to its subsidiary company does not fall under the definition of "Income" as given in sec. 2(24) of the Act and hence it does not enter into the computation provisions of the Income tax Act.
As contended that, an item of receipt which is not considered as "income" at all and which does not enter into the computation provisions of the Income tax Act, cannot be subjected to tax u/s 115JB of the also”. Learned Departmental Representative has not been able to show anything contrary to this decision of the coordinate bench. In this view of the matter, and respectfully following the views of the coordinate bench, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB.
Addition of provision for interest on income-tax in computing Book Profit u/s 115JB - HELD THAT:- The law is clear and unambiguous, as Explanation 1 to Section 115JB categorically provides that “income tax paid or payable, and the provision in respect thereof” is to be added back to the book profits under section 115JB. We thus see no merits in the assessee's plea and reject the same.
Notionally allocated expenditure which is alleged to be incurred to earn dividend income in computing Book Profit u/s 115JB - HELD THAT:- We are of the considered view that the assessee deserves to succeed in this plea for the reason that, eventually, there is no disallowance under section 14A on the facts of this case, and, in any event, the issue is covered, as regards the question of adjustment of book profits under section 15JB for the 14A disallowance, in favour of the assessee, by a special bench decision in the case of ACIT Vs Vireet Investments Pvt Ltd. [2017 (6) TMI 1124 - ITAT DELHI] The assessee gets relief on this point as well.
Sales tax incentives - Nature of expenses - HELD THAT:- In the case of CIT Vs Chaphalkar Brothers [2017 (12) TMI 816 - SUPREME COURT] Hon'ble Supreme Court has held that where the object of respective subsidy schemes of State Governments was to encourage the development of Multiple Theatre Complexes, incentives would be held to be capital in nature and not revenue receipts, and, following the same logic, the sales tax subsidy schemes, which are admittedly to encourage industrial growth in the specific areas and the overall scheme in all the sales tax subsidy and exemption schemes unambiguously indicate so, are capital receipts in nature.
Pre-payment of deferred sales tax liability as a capital receipt - HELD THAT:- This issue is covered, in favour of the assessee in the case of CIT Vs Sulzer India Ltd [2014 (12) TMI 267 - BOMBAY HIGH COURT] which is now approved by Hon'ble Supreme Court in the case of CIT Vs Balkrishna Industries Ltd [2017 (11) TMI 1626 - SUPREME COURT]
Excise duty exemption availed by the assessee as capital receipt - HELD THAT:- As decided in Swastik Sanitary Works Ltd. [2006 (4) TMI 89 - GUJARAT HIGH COURT] it was a case in which, the Government subsidy was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries. In such a case, specified percentage of the fixed capital cost, which was the basis for determining the subsidy, would be granted. The Court held that, such basis for determining the subsidy was only a measure adopted under the scheme to quantify the financial aid and it was not a payment, directly or indirectly to meet any portion of the actual cost of acquisition of capital asset.
Disallowance of Community Welfare Expenses - HELD THAT:- Right from the assessment years 1988-89 to 1994-95, the coordinate benches have allowed appeal of the assessee on this point, and from the assessment years 1995-96 to 2004-05, in which the first appellate authority has deleted similar disallowance, the coordinate benches have rejected the grievances of the Assessing Officer, against the reliefs so granted by the CIT(A). Learned Departmental Representative does not dispute this position but relies upon the stand of the Assessing Officer nevertheless. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches all along.
Pre-operative expenses - HELD THAT:- The expenses, being in the nature of expenses incurred for the expansion of existing business, cannot be disallowed. Accordingly, the disallowance was deleted.
Additional depreciation on all the eligible assets acquired before 01.04.2008 - HELD THAT:- As decided in Gloster Jute Mills Limited [2017 (3) TMI 1807 - ITAT KOLKATA] only objection of the AO is that the provisions refer to "new machinery or plant" and therefore the machinery will cease to be a new machinery after the end of the first year in which it is installed or put to use. In our view this stand taken by the revenue is not supported by the language of statutory provision. The condition imposed by the relevant provisions is that Plant and Machinery must be new at the time of installation to be eligible for additional depreciation u/ s 32(1)(iia) and not new in subsequent years. The expression "new machinery" is therefore to be construed as referring to the condition that at the time of acquisition or installation the machinery or plant should be new. Going by the legislative history of the relevant provision, we are of the view that the condition for allowing additional depreciation only in the initial assessment year ceased to exist as and from 01-04-2006. The plain language of the section warrants such an interpretation. - Decided in favour of assessee.
Unutilized CENVAT credit - HELD THAT:- Learned representatives fairly agree that this issue is covered, in favour of the assessee, by decisions of the coordinate benches in assessee‟s own cases for the assessment years 1999-2000 to 2004-05, even though the learned departmental representative rather dutifully relied upon the stand of the Assessing Officer. We see no reasons to take any other view of the matter than so taken by the coordinate benches.
Compute Surcharge @ 7.5% instead of @10% while computing Tax us 115-O - HELD THAT:- As in terms of the provisions of Finance Act 2010 the applicable surcharge was 7.5%, that the related Finance Bill was introduced in the Parliament on 26th February 2010, and that, in terms of the provisions of Section 294 of the Income Tax Act, “If on the 1st day of April in any assessment year provision has not yet been made by a Central Act for the charging of income-tax for that assessment year, this Act shall nevertheless have effect until such provision is so made as if the provision in force in the preceding assessment year or the provision proposed in the Bill then before Parliament, whichever is more favourable to the assessee, were actually in force”. It was on this basis of this factual and legal position, and following in the case of Kesoram Industries & Cotton Mills Ltd [1965 (11) TMI 41 - SUPREME COURT] that the learned CIT(A) has granted the impugned relief. No material has been brought before us to dislodge these findings and contrary to the legal position set out above. In this view of the matter, we see no reasons to disturb the conclusions arrived at by the learned CIT(A). We approve the same and decline to interfere in the matter.
Loss on stock options offered to the employees - Debit under the head “Employees Compensation Expenses‟ under the employee stock option scheme - HELD THAT:- As long as a loss, even though it may not actually have crystallized, can be reasonably estimated, as indeed has been done in this case, it has to be taken into account in the computation of business income. In view of these discussions, as also following the views of the coordinate bench in the assessee‟s own case, we uphold the plea of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance - The assessee gets the relief accordingly.
Disallowance u/s 14A r.w.r.8D - MAT computation u/s 115JB - HELD THAT:- As we restrict the disallowance under section 14A under rule 8D so as not to disallow any amount on account of interest, and delete the adjustment on account of 14A disallowance from book profits computed under section 115 JB. The assessee gets the relief accordingly.
Deduction u/s 80-IA on captive power generating units -“market value‟ is required to be taken into account -HELD THAT:- As which market value of the power is to be taken into account in the computation of profit for deduction under section 80IA, i.e. the market value to the end consumer or market value in the power trading companies, is no longer res integra. There are several decisions of the coordinate benches holding that it is market value for the customer which must be adopted for this purpose, such as in the case of West Coast Paper Mills Ltd [2005 (6) TMI 547 - ITAT MUMBAI] The same were the views of another coordinate bench in the case of Reliance Industries Ltd. [2019 (2) TMI 178 - BOMBAY HIGH COURT] Hon'ble jurisdictional High Court has upheld the Tribunal‟s order holding that it is price to the consumer, and not the intra-power companies trading price, which must be taken into account - we deem it fit and proper to uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment - The assessee gets the relief accordingly.
Disallowance of claim made for Rail System u/s 80-IA - HELD THAT:- Authorities below had decided the matter in favour of the assessee, came up before a coordinate bench of this Tribunal, and, in the said case, the matter was decided in favour of the assessee.
While it is indeed true that there is no res judicata in the income tax assessment proceedings, at the same time, following the principles of consistency duly recognized by Hon'ble Supreme Court in the case of Radhasoami Satsang Vs CIT [1991 (11) TMI 2 - SUPREME COURT] unless there is a change in the material facts, the issues which have been settled one way or other must to be disturbed. In this view of the matter, and respectfully following the coordinate bench in the case of Ultratech Cement Ltd (supra), we uphold the plea of the assessee. The Assessing Officer is, therefore, directed to delete the impugned disallowance in respect of claim of 80IA in respect of rail system.
Deduction claimed u/s. 80IA in respect of the Port facility developed by the Appellant - HELD THAT:- As a result of the construction of the jetty, the travel distance from the factory to the port from 110 kms is said to have been reduced to 11 km, there are significant savings in stevedoring and storing charges as also in wharfage. The manner in which the computations of the Assessing Officer work is that if the assessee spends Rs 100 in covering a distance of 11 km, the savings are worked out on the basis that the assessee will, at best, spend Rs 120 (that is at 20% markup on the actual expenses of Rs 100); that is a clearly incongruous approach. There is no good reason to reject the actual figures, just because actual figures show higher savings. There is thus not only there is no legally sustainable reason for invoking section 80IA(10), what the Assessing Officer has done post invoking section 80IA(10) is equally devoid of legally sustainable reasons.
Considering case of Assam Cardon [2005 (12) TMI 212 - ITAT CALCUTTA-A] we uphold the plea of the assessee, and vacate the adjustment made by the Assessing Officer to the claim of the assessee- particularly when similar claims were all along allowed to the assessee. The Assessing Officer is directed to delete the disallowance made by him, and grant the claim of deduction under section 80IA in respect of the jetty, as claimed by the assessee.
Treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s 80IA as cost of the eligible undertakings - HELD THAT:- It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any event, the fiction envisages under section 80IA(5) is to enable computation of profits on a standalone basis, rather than to increase the scope of profits itself and allocate notional expenditure to the eligible units. When the eligible units are other units are treated as independent of each other, and the profit computations are on a standalone basis, the eligible unit must get the corresponding credit for the CENVAT credits availed by the other units. Viewed thus, not accounting for the CENVAT credit does not, in our considered view, vitiate the profits of the eligible undertaking, as long as all such credits are fully availed by the other units as is the undisputed position anyway. What the assessee has done is that the expenses are debited net of the CENVAT credit availed. To this extent, we see no infirmity in the stand of the assessee.
As also bearing in mind the entirety of the case, we uphold the plea of the assessee, and direct the Assessing Officer to delete the impugned adjustment on account of CENVAT in the profits of the eligible units. The assessee gets the relief accordingly.
Apportioning indirect Head Office expenses and in adjusting such allocated amount in computing Tax Holiday u/s 80IA/ 80IC - HELD THAT:- The fiction of the eligible units being treated on a standalone basis does not require that the profits of the units are to be computed as if they are independent of each other, and once that fiction sets in, the expenses incurred by someone other than eligible unit, in the interest of the eligible unit, are to be taken into account while computing the profits of the eligible unit. Accordingly, the allocation of expenses, as the learned Assessing Officer rightly contends, must be done. The assessee has further contended that HO expenses are not “derived from‟ or “derived by‟ the eligible undertakings, and, for this reasons, these expenses cannot be allocated to the eligible undertaking. We see no reasons to decline allocation of head office expenses to ensure that the profits of the eligible units are correctly worked out, on the basis of hypothetical independence embedded in the eligible units being treated on a standalone basis. To this extent, we reject the plea of the assessee. However, the basis of allocation as turnover is not really correct and reasonable, nor the relationship between the turnover and expenses always linear; the allocation would be more appropriate based on expenditure incurred by the units vis-à-vis overall expenditure. To this extent, we uphold the plea of the assessee.
As also bearing in mind the entirety of the case, we reject the grievance of the assessee against allocation of HO expenses, but we permit the assessee‟s plea to the limited extent that the allocation of HO expenses should be done on the basis of expenditure incurred by the units vis-à-vis overall expenditure.
Claim for exclusion of profit on sale of investment being capital profit while computing book profits u/s. 115JB - HELD THAT:- We uphold the plea of the assessee and direct the Assessing Officer to delete the impugned addition to the book profits under section 115JB. The assessee gets the relief accordingly.
Leave encashment on provision basis while computing book profits u/s. 115 B - HELD THAT:- We are of the considered view that the stand of the Assessing Officer is unsustainable in law in view of the Hon'ble Supreme Court‟s judgment in the case of Bharat Earth Movers Ltd [2000 (8) TMI 4 - SUPREME COURT] wherein Their Lordships have observed that “we are satisfied that the provision made by the appellant-company for meeting the liability incurred by it under the leave encashment scheme proportionate with the entitlement earned by employees of the company, inclusive of the officers and the staff, subject to the ceiling on accumulation as applicable on the relevant date, is entitled to deduction out of the gross receipts for the accounting year during which the provision is made for the liability. The liability is not a contingent liability”. Accordingly, we delete the impugned adjustment. The assessee gets the relief accordingly.
Payment of NPV of the sales tax liability, under the HP General Sales Tax (Deferred Payment of Tax) Scheme 2005 - difference between the sales tax liability and the NPV paid can be treated as capital receipt - case of the assessee is that the purpose of the scheme is expansion of industries and industrialization of the backward areas, and that the issue is now settled in favour of the assessee in the case of Sulzer India Ltd [2014 (12) TMI 267 - BOMBAY HIGH COURT] - HELD THAT:- This is a recurring issue and has come up for consideration in a number of preceding assessment years. In the assessee‟s own case for the immediately preceding year, and for the detailed reasons set out in paragraphs 37 to 39 and following the decisions in the preceding assessment years referred to therein, we have upheld the similar relief allowed to the assessee. We see no reasons to take any other view of the matter for this assessment year. Respectfully following our decisions in the assessee‟s own cases, we uphold the relief granted by the learned CIT(A) on this count as well. We thus confirm the conclusions arrived at by the CIT(A) on this count as well, and decline to interfere in the matter.
Cessation of liability towards sundry creditors, which was outstanding for a very long period of time - HELD THAT:- CIT(A) has rightly observed, just because entries are old entries and have remained unpaid, and particularly when the Assessing Officer has not conducted any enquiries which lead to the conclusion about lack of bonafides of such entries, it cannot be inferred that there is a cessation of liability and these entries can be added to the income of the assessee. We have noted that the Assessing Officer has not conducted any enquiries whatsoever, and there is nothing more than the entries being old that has been put against the assessee. In these circumstances, in our considered view, the learned CIT(A) was indeed justified in deleting the impugned addition on account of income from the cessation of liability. We approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.
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2022 (11) TMI 1308 - DELHI HIGH COURT
Benefit of VSV Act - delay in payment - Timeline to pay under the VSV - Petitioner Companies were unable to pay the disputed amount as determined by Respondents in Form 3 prior to the last date provision permitting the Respondents to extend the time for payment - Petitioners stated that the delay in payment was not intentional and the Petitioners always intended to settle the dispute with the Income tax department and avail the benefit of VSV Act - Petitioners seek a direction to the Respondents to accept the declaration/application (Form 1 and Form 2) filed by the Petitioners as valid declarations though delayed - HELD THAT:- Timeline to pay under the VSV was not mandatory as the last date stipulated under the VSV Act (3 of 2020) was extended by virtue of Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020.
This Court is further of the opinion that the delay in payments of the amounts, in the present cases are attributable to unforeseen and extraneous circumstances that were beyond control of the Petitioners. In fact, the country was intermittently in lockdown on account of the COVID-19 pandemic from 25th March, 2020. In recognition of these difficulties as pointed out hereinabove, the Scheme was amended several times to extend the deadline for payment. Moreover, death of the Managing Director of the companies was an extraordinary and exceptional event which would render non-grant of relief on equitable consideration irrational.
Though this Court is in agreement with the submission of learned counsel for the respondents that the power to condone the delay with regard to delay in payment is not vested with the Departmental Authorities, yet this Court under its inherent powers in extraordinary writ jurisdiction under Article 226 of the Constitution of India can pass any order necessary to remedy the injustice. The Supreme Court in B.C.Chaturvedi v. Union of India [1995 (11) TMI 379 - SUPREME COURT] has held “It deserves to be pointed out that the mere fact that there is no provision parallel to Article 142 relating to the High Courts, can be no ground to think that they have not to do complete justice”.
Consequently, the power of the High Court under Article 226 of the Constitution of India to grant relief in extraordinary and exceptional circumstances cannot be taken away or curtailed by any legislation.
No prejudice caused to the respondents by accepting the prayer of petitioner - This is also a fit case where no prejudice will be caused to the Respondents by accepting the prayer of the Petitioners. Rather, the Respondents benefit and achieve the purpose of the Scheme, namely, to reduce pendency of cases, generate timely revenue for the government and provide certainty and savings of resources that would be spent on the long-drawn litigation process.
Consequently as the delay in payment in the present cases were unintentional and supported by justifiable reasons, this Court is of the opinion that the cause of substantial justice deserves to be preferred, and this unintentional delay deserves to be condoned. This approach will only further the object and purpose of the VSV Act.
Relief - The present writ petitions are allowed and the respondents are directed to accept the declarations/applications (Forms-1 and 2) dated 04th March, 2021 filed by the petitioners as valid declarations/applications within two weeks and accept the balance disputed amounts as stipulated by respondents in Forms-3 dated 07th May, 2021 and 22nd June, 2021 issued under VSV Act along with simple interest @ 9% per annum till the date the amounts are paid within four weeks.
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