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Income Tax - Case Laws
Showing 161 to 180 of 747 Records
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2021 (10) TMI 1112 - GUJARAT HIGH COURT
Initiating the proceedings u/s 153C - grievance made on the part of the petitioner that the respondent has not disposed of the objections raised by the petitioner against the reopening - HELD THAT:- Noticing the requirement of the law, where the respondents have chosen not to dispose of objections raised to the satisfaction notes, without expressing any opinion on the correctness of initiation of the proceedings, the request is being granted to the assessee of availing opportunity of hearing. The objections raised by the assessee shall be considered by the respondent authority concerned which shall decide the same within the period of four weeks of the date of receipt of copy of this order. The order of disposing of the objection, if goes against the petitioner, the petitioner shall be availed the time of four weeks to avail the legal recourse in accordance with law.
Present petition stands disposed of. Notice is discharged. Ad-interim relief, granted earlier stands vacated.
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2021 (10) TMI 1111 - KERALA HIGH COURT
Deduction claimed u/s 80P(2)(d) - as argued reply filed by the petitioner was not even referred to, while passing the order of assessment - Petitioner contends that though an appeal is available u/s 246A of the Act, failure to consider the reply submitted by the petitioner amounts to violation of the principles of natural justice - HELD THAT:- As rightly argued by the respondent, this Court will not interfere normally under Article 226 of the Constitution of India on orders of assessment issued by the assessing authorities. It is equally settled that when there is a violation of the principles of natural justice, this Court can step in, even against assessment orders, to avoid the unnecessary travails of an assessee, in pursuing the statutory remedies.
In the instant case, Ext.P9 show cause notice was issued on 22.03.2021 directing the petitioner to show cause as to why the assessment should not be completed as per the draft assessment order. The response of the petitioner was also sought for in the said show-cause notice. Petitioner’s response to Ext.P9 is produced as Ext.P10, wherein it has raised an objection of some substance, however brief it may be. Certain documents were also produced along with Ext.P10. However, while issuing the order of assessment, it is seen that there is no reference at all to the response submitted by the petitioner nor is there any consideration of the document produced along with Ext.P10.
Whether the contentions raised by the petitioner in Ext.P10 or whether the document produced along with Ext.P10 may have a bearing upon the case is not a matter which this Court can go into at this stage. An order of assessment is the foundation on which the rights of the assessee depend upon. It is necessary that the assessing authority considers the objections filed by the petitioner especially when a show-cause notice in the form of Ext.P9 had been issued, eliciting the response of the petitioner. Failure to consider the said response offered by the petitioner in the facts of the case is a negation of the rights of natural justice. In the said view of the matter, I find that the order of assessment suffers from the infirmity of violation of the principles of natural justice and is liable to be set aside.
Accordingly, set aside Ext.P11 assessment order dated 19-04-2021 issued by the respondent and direct the respondent to consider and pass fresh orders for the assessment year 2018-19, relating to the petitioner, after affording an opportunity of hearing to the petitioner, as expeditiously as possible.
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2021 (10) TMI 1110 - KERALA HIGH COURT
Stay of demand - deposit of 20% of the total demand - HELD THAT:- Exts.P2 and P8 directing deposit of 20% of the total demand are both made by the Income Tax Officer and not by the Appellate authority. Petitioner has not yet moved any application for stay of the assessment order in the pending appeal, before the 2nd respondent. As rightly pointed out by the learned Standing counsel, the Appellate Authorities are not bound by any office memorandum issued by the department, since they are exercising adjudicatory powers and possess discretionary powers.
In considering the grant of stay pending appeal, the High Court of Delhi had clearly observed in Turner General Entertainment Networks case [2019 (1) TMI 1365 - DELHI HIGH COURT] that while, the authorities concerned have to apply their mind to decide such applications and pass appropriate orders independent of the office memorandum. The judgment of the High Court of Kerala, produced as Ext.P9, stands on a different footing since, in that case, this Court had directed the consideration of the appeal without insisting on any deposit due to the peculiar nature of the facts involved in that case.
Petitioner, if he is so advised, ought to move an appropriate application for stay before the Appellate Authority. If such an application is preferred, needless to say, the appellate authority shall pass appropriate orders within a period of two months from the date of receipt of such an application. Further, if the Appellate Authority feels it desirable to consider and pass orders on the appeal itself, liberty is granted to the Appellate Authority to do so.
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2021 (10) TMI 1109 - ITAT HYDERABAD
Validity of reopening of assessment - absence of a valid Section 143(2) notice issued by the Assessing Officer - HELD THAT:- AO has himself filed a remand report dt.13-07-2021 inter alia making it clear that he had issued 148 notice on 21-03-2014 followed by the assessee’s latter submissions dt.07-01-2015 seeking to treat the original return filed on 31-07-2008 as the one in response to re-opening only. Learned assessing authority further states that it had issued only Section 142(1) notice(s) dt.21-01-2014 and 30-12-2014 thus, a Section 143(2) notice in the entire re-assessment process. We thus quote hon’ble apex court’s landmark decision in ACIT Vs. Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] holding that Section 143(2) notice has to be mandatorily issued before framing an assessment.
An assessee’s letter seeking to treat the original return as that filed in furtherance to Section 148 notice requires issuance of a valid Section 143(2) notice.
Thus the impugned re-assessment frame herein on 31-03-2015 is non est in law. The same stands quashed therefore. All other pleadings on merits are rendered infructuous. - Decided in favour of assessee.
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2021 (10) TMI 1108 - ITAT BANGALORE
Addition of deferred revenue income - HELD THAT:- We notice that the coordinate bench has upheld the view taken by Ld. CIT(A) on an identical issue in assessment year 2007-08 [2020 (1) TMI 1011 - ITAT BANGALORE] including the view taken by CIT(A) on alternative contention of the assessee. Following the same, we uphold the view taken by the Ld. CIT(A) on this issue in this year also. The alternative direction given by Ld. CIT(A) to A.O. is also upheld.
Disallowance u/s 14A - HELD THAT:- We notice that the A.O. has made disallowance out of administrative expenses under Rule 8D(2)(iii). As per the decision rendered in the case of Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] only those investments which have yielded exempt income should be considered for computing average value of investments for the purpose of Rule 8D of I.T. Rules. Accordingly, we modify the direction given by Ld. CIT(A) and direct the A.O. to exclude all investments which did not yield any exempt income while computing average value of investments for the purpose of Rule 8D of I.T. Rules and compute the disallowance accordingly.
Disallowance of software expenses - AO took the view that software purchases are in the nature of capital expenditure - AO disallowed the claim of the assessee and allowed depreciation @ 60%/30% depending upon the date of purchase of software - HELD THAT:- We direct the A.O. to examine the issue afresh as per the directions given by the Tribunal in assessment year 2011-12 [2020 (12) TMI 470 - ITAT BANGALORE] with regard to treating of software purchases as capital in nature. The AO should also examine the issue with regard to other directions issued by Ld CIT(A).
Disallowance of brand building expenses - Revenue or capital expenditure - HELD THAT:- We hold that the brand building expenditure is allowable as revenue expenditure. We notice that the Ld. CIT(A) has observed that some of the invoices produced by the assessee do not relate to the year under consideration and further some of the expenditure is liable for tax deduction at source. Accordingly, we restore this issue to the file of the A.O. for examining the above said two observations made by CIT(A) and to take appropriate decision in accordance with law.
Computation of deduction u/s 10A and 10AA - Reduction of expenses incurred in foreign currency from the export turnover while computing deduction u/s 10A - whether the expenditure incurred by the assessee in foreign currency is towards providing technical service outside India or not? - contention of Ld A.R is that assessee is providing BPO services and not any technical service as contemplated in the definition of “export turnover” given in sec.10A/10AA - HELD THAT:- As relying on M/S MPHASIS LTD [2014 (8) TMI 690 - KARNATAKA HIGH COURT] we direct the AO not exclude the expenditure incurred in foreign currency from export turnover.
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2021 (10) TMI 1107 - ITAT BANGALORE
Addition u/s 2(22)(e) - deemed dividend - Proof of substantial interest - assessee being a shareholder having substantial interest in the companies loans imparted by assessee - HELD THAT:- The agreement dated 14.11.2005 entered between both the companies makes it clear that BBPL has made investments in various projects of The Embassy Group and CAPL is involved in these ventures. It is further mentioned that CAPL shall pay money to BBPL as and when required to support the real estate investment activities. It has also been mentioned that the amount invested by CAPL shall be adjusted against the properties.
It is an undisputed fact that the amounts invested by CAPL has been adjusted against the properties assigned to CAPL by BBPL, vide assignment agreements dated 28.03.2015. Thus the original agreement dated 14.11.2005 stands corroborated by the assignment agreements dated 28-03-2015. These uncontroverted documents supports the submissions of the assessee that the amounts given by CAPL to BBPL are not loans or advances contemplated in sec.2(22)(e) .
What is required to be seen is whether CAPL has advanced moneys as pure loan amounts or for business purposes. The agreements produced by the assessee before Ld CIT(A), which were also confronted with the AO, would prove that the transactions entered between the parties are business transactions. The Ld A.R also submitted that both the companies are maintaining accounts as running accounts only and real estate investment activity was agreed to be a continuous activity. Hence the question of making one to one reconciliation, as contended by Ld DR. would not arise in these types of transactions.
Accordingly, we confirm the order of Ld CIT(A) in deleting the additions made u/s 2(22)(e) of the Act in all the three years under consideration.
Protective addition of undisclosed income in the hands of the assessee - When the sources stood explained, the question of making any addition on substantive basis or protective basis does not arise. Accordingly, we do not find any infirmity in the order of Ld CIT(A) in deleting the additions made on protective basis in all the three years. - Assessee appeal allowed.
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2021 (10) TMI 1106 - ITAT DELHI
Revision u/s 263 by CIT - Case was selected for scrutiny - assessee had claimed rental income and claimed deduction u/s 24B as interest paid for home loan against the property bearing No.C-207, Sarvodaya Enclave, New Delhi-110017 - on the basis of audit objection, the Assessing Officer initiated rectification proceedings u/s 154 however, same was dropped instead the Assessing Officer (“AO”) made proposal for revising the assessment u/s 263 of the Act made to the Ld.Pr.CIT - Whether objections of the assessee were not duly considered by the Ld. Pr. CIT before passing the impugned order? - HELD THAT:- From the order of the Ld. Pr. CIT, it is clear that he set-aside the assessment order and directed the Assessing Officer to investigate the issue and pass a speaking order.
In our considered view, this approach of the Ld. Pr. CIT is erroneous as the law is clear that the Ld. Pr. CIT either he can make enquiry himself or cause such enquiry to be made but such exercise is to be made before passing the order u/s 263 of the Act. It is not disputed by the Revenue that proceedings u/s 154 of the Act were dropped by the same Assessing Officer who had requested for exercising powers u/s 263 of the Act by the Ld. Pr. CIT. It is also not disputed that the revision by the Ld. Pr. CIT is based upon the audit objections.
Pr. CIT did not dispose of the objections of the assessee that assessment order passed by the Assessing Officer was without jurisdiction. Under these undisputed facts, we are of the view that the exercise of power u/s 263 of the Act by the Ld. Pr. CIT is not accordance with law. Therefore, the same deserves to be quashed. We, therefore, hereby quash the impugned order being unjust and contrary to the settled law. The grounds raised in this appeal by the assessee are allowed. Appeal of the assessee is allowed
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2021 (10) TMI 1105 - ITAT DELHI
Deduction u/s 80IB(11A) - AO disallowing the deduction claimed as the predominant activity of the assessee is milling/de-husking of paddy, which does not constitutes a ‘manufacturing activity’, and is beyond the scope of Section 80IB(11A) and that the activity of storage and transportation undertaken by the assessee are only incidental to the main manufacturing activity off the assessee - HELD THAT:- The aforesaid issue is squarely covered in favour of the assessee by the order of the Co-ordinate Bench of Tribunal in assesse’s own case for the A.Y. 2009-10 [2021 (6) TMI 258 - ITAT DELHI] Following the order of the co-ordinate Bench in the case of a group company, LT Foods Ltd. [2020 (10) TMI 88 - ITAT DELHI] allowed deduction claimed u/s 80 IB(11 A) - activities involving cleaning, steaming, soaking, drying, polishing, grinding etc. clearly fall within the expression “ handling” as contemplated under section 80 IB(11 A) - de- husking of the paddy to convert it into rice is an integral part of reducing the post- harvest food grain loss as it enhances life of food grain and reduces the loss of food grain and contributes to the preservation of food grains - CIT(A) has righty allowed the claim of deduction under section 80IB(11A) of the Act and we decline to interfere with the order of the ld. CIT(A).
Disallowance u/s 14A - HELD THAT:- The assessee is not liable for any disallowance on interest as no interest bearing funds have been utilized for the purpose of making investment. Since, the share of profit from the partnership is mere distribution of income which is already been taxed, hence the provisions u/s 14A are not attracted in such case. Further, we also affirm the principle of no disallowance is called for where there is no exempt income earned. The AO is directed to re- compute the disallowance, keeping in view the guidelines mentioned above.
Prior period Expenses - amount comprised of excess input tax receivable and bank processing charges - AO disallowed prior period expenses on the grounds that they do not relate to the relevant previous year - HELD THAT:- The relevant facts are that the aforesaid expenditure was duly claimed as deduction in the computation of income as the same were business expenditure incurred in the ordinary course of running the business and allowable revenue deduction u/s 37(1) of the Act. Further, in so far as bank processing chargesis concerned, the processing charges was accounted and charged by the bank during the relevant assessment year only, but the assessee inadvertently debited the same into prior period expenses. In view of the above, the disallowance of prior period expenses is being deleted in toto.
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2021 (10) TMI 1104 - ITAT ALLAHABAD
Validity of selection of case for scrutiny under compulsory scrutiny criteria - the assessee has challenged the scrutiny assessment as the Assessing Officer has not obtained necessary sanction from the competent authority as per the instruction of CBDT - Whether there was no information nor satisfaction of the department for conducting survey and thus the entire survey proceedings is nothing but a biased action on the part of the department which is illegal and unjustified? - HELD THAT:- There is no much gap between the survey and the post survey enquiry conducted by the AO therefore the post survey enquiry are part and partial of the survey proceedings and would deem to be concluded on the conclusion of the post survey enquiry on 27.01.2012. Thus, when the fact of the conducting the survey as well as the post survey enquiry is not in dispute then the case of the assessee would certainly fall under the category of selection under compulsory scrutiny. No substance or merit in the additional ground raised by the assessee. The same is dismissed. Ground no. 1 of the original grounds is general in nature and does not require any specific adjudication.
Addition u/s 68 - unexplained cash credit - HELD THAT:- The assessee has shown the unsecured loan of ₹ 2,60,000/- which means the remaining unsecured loans was repaid by the assessee. Assessee has failed to explain the source of cash credit of ₹ 8,50,000/- and repayment of the unsecured loan of ₹ 8,30,000/-. The consolidated balance-sheet as referred by the learned AR has been re-casted and filed at this stage but was not produced before the authorities below. Even the capital account balance of the assessee shown in the consolidated balance-sheet as on 31st March, 2011 is contrary to the balance-sheet of M/s Rastogi Mobile Zone wherein there is a negative capital balance. AR has submitted that the loan amount is mistakenly shown as capital balance in the consolidated balance-sheet but the same is the unsecured loan amount of ₹ 10,29,797/-. This figure alongwith the current liabilities of M/s OM Jewellers is again not matching with the unsecured loan shown by the assessee in the return of income for the assessment year 2012-13 -Therefore, the assessee has grossly failed to explained the source of the cash credits - Decided against assessee.
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2021 (10) TMI 1103 - ITAT MUMBAI
Penalty levied u/s 221 r.w.s. 140A(3) - Claim of the assessee that post amendment of Sec. 140A(3) w.e.f 01.04.1989 without there being any amendment in Sec. 221(1) of the Act no penalty could be levied for non-payment of self-assessment tax - Whether no penalty under sub-section (3) to Sec. 140A could have validly been imposed on the assessee for its failure to discharge its admitted self-assessment tax liability? - HELD THAT:- Admittedly, it is a matter of fact borne from the record that the assessee company except for the aforesaid interest income on the ICD”s with NBFC”s had no other source of income. Insofar the availability of the aforesaid funds invested with the NBFC”s are concerned, we find that as the same were sourced from the parent company, viz. Mercantile Ports and Logistics Ltd. [formerly known as SKIL Ports & Logistics ltd) Guernesey (SPLL-G)] for a specific purpose i.e for Karanja port development project, and were invested by it with the NBFC”s, therefore, the same were not freely available to the assessee for discharging its admitted tax liability.
We are in agreement with the view taken by the CIT(A) that as the assessee was in no financial position to pay the self-assessment tax at the time of filing of return of income, therefore, no penalty u/s 221(1) r.w.s 140A(3) could have been imposed on it. We, thus, in terms of our aforesaid observations concur with the view taken by the CIT(A) that considering the serious financial constraints of the assessee due to which it had failed to discharge its admitted self-assessment tax liability at the time of filing its return of income, and for a period thereafter, no penalty under Sec. 221(1) r.w.s 140A(3) could have even otherwise be imposed on it.
Finding no infirmity in the view taken by the CIT(A) we uphold his order. Accordingly, the appeal filed by the revenue being devoid and bereft of any merit is dismissed.
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2021 (10) TMI 1102 - ITAT DELHI
Income accrued in India - Fixed place PE - business connection in India - Attribution of profits - Whether the appellant has a permanent establishment (PE) under Article 5(2) & 5(4)/5(5) of the India-Mauritius DTAA? - AO Proceeded by attribution of profit to PE and attributed 30% of the gross advertising revenue and made attribution - HELD THAT:- Considering the past history of the assessee in light of the decision of this Tribunal [2020 (10) TMI 1019 - ITAT DELHI] read with the decision of the Hon'ble Supreme Court in the case of E-funds IT Solutions Inc. [2017 (10) TMI 1011 - SUPREME COURT]. we hold that the assessee has no business connection in India in terms of section 9(1) of the Act and has no PE under Article 5(2), 5(4) and 5(5) of India Mauritius DTAA.
Since we have held that there is no PE, we are of the considered view that there cannot be any attribution of profit as held by this Tribunal in assessee's own case in A.Ys. 2009-10 and 2011-12. TPO has accepted the international transactions at Arm's length and no adverse inference was drawn. We have also gone through the TP assessment order and find no adjustment.
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2021 (10) TMI 1101 - ITAT CUTTACK
Assessment of trust - special fund received through donation treated as revenue receipt - Rectification of mistake u/s 154 - to consider expenditure for running of the trust but the Assessing Officer has left out the same and proceeded to consider the donations partly for specific purpose and others not for the specific purpose - HELD THAT:- As the amount of donation has been given for the specific purpose. Assessing Officer has bifurcated three donations as specific purpose and left out other donations not being specific purpose without giving any reason. The donations are being specific purpose and being capital receipts are not coming within the ambit of definition of income as defined under section 2(24)(ii).
It being a capital receipts, there is no necessity of routing through income and expenditure account, as claimed by the AO - some donations have been received for the special project undertaken by the trust and, therefore, same cannot be treated as revenue receipt. It is not the case that the assessee trust has not disclosed the donation and have not accounted for.
The amount received clearly demonstrates for the purpose of various project development and building construction. In view of above, I am of the considered view that the amount received by the assessee trust for specific direction to use the same for different project undertaken by the assessee and is entitled for deduction u/s. 11 - decisions relied by assessee, support the case of the assessee, wherein, the corpus funds received by the trust are considered as capital receipts, not includible in income of the trust. - Decided in favour of the assessee.
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2021 (10) TMI 1100 - ITAT LUCKNOW
Assessment u/s 153A - Addition u/s 68 - whether unsupported entries appearing in the books of account can also fall under the term ‘incriminating documents’ ? - HELD THAT:- In completed assessments, the additions u/s 153A can only be made on the basis of some incriminating material. The argument of learned CIT, D.R. that unsupported entries, recorded in the books of account, also comes under the definition of incriminating material, is of no force as these entries cannot be called incriminating as the assessee had recorded such transactions in the books of account. They are also not ‘unsupported’, but are duly and properly supported by documentary evidences, such as bank statements, Demat statements and real time transactions through screen based trading on recognized stock exchanges. Simply because certain persons have admitted to have provided these entries as accommodation entries, cannot make these entries incriminating unless such persons are subjected to cross examination by the assessee.
As in case of completed assessments, the additions can only be made on the basis of incriminating material respectfully following the judgment of Hon'ble Supreme Court in the case of Meeta Gutgutia [2018 (7) TMI 569 - SC ORDER] and Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] we do not find any infirmity in the order of learned CIT(A). Therefore, the appeals filed by the Revenue are dismissed.
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2021 (10) TMI 1099 - ITAT JAIPUR
Correct head of income - assessment of income earned from investment made in mutual funds under the head "business income" or "Short Term Capital Gain" - second round of litigation - whether the assessee acted as an investor or a trader while dealing with sale and purchase of shares and mutual funds? - HELD THAT:- In the second round of litigation, we found that the basic issue i.e. the business income or investment income was confined to the gain from the mutual funds only whereas on the contrary, the entire matter was restored back for a fresh decision which comprises of the income from sale of shares and also redemption of mutual funds.
The lower authorities completely ignored the specific ground taken by the assessee before the ITAT and had confined its findings only to the redemption of mutual funds and that too was decided against the assessee on the ground that no evidence of investment in the mutual fund was furnished by the assessee. Whereas on the contrary, the ld. AR strongly relied upon his submissions made before the lower authorities and drawn our attention to the fact that the assessee had already placed on record the various evidences which were sufficient to reach to a conclusion by the revenue authorities but as per the ld. AR, all the evidences filed by the assessee were ignored by the lower authorities by giving a finding that no evidence to corroborate the investment in mutual funds was furnished by the assessee.
We restore the matter back to the file of the A.O. with direction to decide the same afresh by taking into consideration the transactions in the mutual funds as well as shares carried out by the assessee. Appeal of the assessee is allowed for statistical purposes only.
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2021 (10) TMI 1098 - ITAT BANGALORE
TP Adjustment - comparable selection - turnover of the companies sought for exclusion is more than 200 crores - HELD THAT:- As considering 10 times to 1/10 of the turnover the alleged comparable is much more than the turnover of assessee.
We note that, assessee in Acusis Software India Pvt.Ltd [2018 (8) TMI 1885 - KARNATAKA HIGH COURT] AND Autodesk India Pvt.Ltd [2018 (7) TMI 1862 - ITAT BANGALORE] were captive service provider like assessee before us.
Respectfully following the same we direct the Ld.TPO to exclude the comparable’s alleged hereinabove for exclusion.
Computing deduction under section 10AA - As reduced communication expenses and travelling and conveyance expenses incurred from the export turnover - HELD THAT: - We respectfully following the view taken by Hon’ble Supreme Court direct the Ld.AO to recompute deduction under section 10AA of the Act in accordance with the principles laid down in case of CIT vs HCL Technologies [2018 (5) TMI 357 - SUPREME COURT]
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2021 (10) TMI 1097 - ITAT BANGALORE
Disallowance u/s 14A read with Rule 8D - As submitted assessee had sufficient money of its own for making all the investments - HELD THAT:- We are in agitation with the contention of the ld. AR. However, assessee should prove the availability of interest free funds to make such investments by filing necessary cash flow statements on the date of investment in view of decision by the Hon’ble Supreme Court in the case of Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] - Respectfully following the same, we direct the Ld.AO to carry out necessary verification based on the documents filed by assessee in accordance with law.
For disallowance under section Rule 8D(iii) needs to be computed as assessee has not even disallowed suo moto expenditure that could be attributable to earning of such income. In our view it would be fair enough to restrict the disallowance at 0.5% of investment that yielded dividend income. Ld.AO is directed to compute the disallowance under Rule 8D (iii) as directed here in above.
Disallowance of proportionate interest u/s 36 (1) (iii) - AO disallowed interest expenditure incurred on bank overdraft and interest payable to financial institutions - as submitted advances were given to the sister concern due to commercial expediency who also engaged in the same business as that of assessee - HELD THAT:- The audited accounts filed by assessee revealed that there were sufficient funds with assessee as on 31/03/2013. The argument that assessee had sufficient own funds cannot be the only reason to allow the claim of assessee. And we also note that, when assessee had sufficient funds, why should it depend on borrowed funds. In any case, if at a given point of time assessee has own funds and they have advanced it as interest-free loans to sister concerns for meeting their business needs, in which assessee also has an interest, then such advances should not lead to disallowance of interest paid on borrowings. In other words, unless the assesses establishes with cash flow statements about availability of its own funds at the time of making the interest-free advances.
For this reason a cash flow statement needs to be verified for the period under consideration. We therefore remit this issue back to Ld.AO for due verification. Assessee is directed to file the cash flow statement during the period under consideration which shall be verified by the Ld.AO in accordance with law.
Disallowance u/s 35D - expenses claimed by assessee is 1/5 of total expenses which has been amortised over a period of time -HELD THAT:- These expenses were incurred by assessee during financial year 2008-09 towards converting Brigade Enterprises Pvt.Ltd., to Brigade Enterprises Ltd., that is conversion of private limited company into public limited company.
Authorities below have rejected the claim of assessee by following the decision of Hon’ble Supreme Court in case of Brooke Bond India Ltd. [1997 (2) TMI 11 - SUPREME COURT] We note that in the said case it was also held that the expenditure incurred on public issue for the purpose of expansion of the companies are to be treated as capital expenditure. However by virtue of the provision of section 35D of the Act, amortisation of such capital expenditure is allowable.
As in the preceding four assessment years, the Ld.AO did not disallow the expenses under section 35D. As the nature of expenditure is not disputed by the Ld.AO, and that the section allows amortisation of such expenses that have been incurred towards expansion/extension of the undertaking, it could not be denied in the subsequent period also.
Disallowance of deduction claimed u/s 80 IB - Whether loss of one eligible undertaking is to be set off against the profits of another eligible undertaking? - Whether when the gross total income is positive, the deduction u/s. 80IA can be worked out independently without setting off of losses of other eligible units? - HELD THAT:- This question stands already answered by the Hon’ble Madras High Court in the case of Chamundi Textiles (Silk Mills) Ltd.[2012 (6) TMI 317 - MADRAS HIGH COURT] held that only an assessee having positive profits from eligible undertaking could claim such deduction. Their Lordships also held that, for arriving at such profit, income from various units had to be calculated, and if one of the unit was running at loss, gross total income had to be arrived at considering such loss also. In the present case, the table extracted at page 14 of this order shows that there were loss in certain eligible units. However, the gross total income computed after setting off losses from eligible units was positive - In our view, the computation of gross total income in respect of the eligible units u/s. 80IB in the present facts of the case is to be consonance with the above principles approved by the Hon’ble Supreme Court in the case of IPCA Laboratories Ltd. [2004 (3) TMI 9 - SUPREME COURT]
We direct the Ld.AO to compute the profits under the head ‘business income’ from eligible undertaking by netting of the losses earned by assessee from other eligible undertaking for determining the deduction to be computed under section 80IB(10) of the act.
Whether the deduction claimed can be only against the business profits or can it be against the other heads of income? - If the gross total income was loss, deduction u/s. 80IA/IB was to be rejected. Section 80IA/IB for that matter, are controlled by 80AB of the Act. Gross total income means gross total income computed as per the provisions of the Act. This was clearly interpreted by the Hon’ble Supreme Court in the case of Synco Industries Ltd [2008 (3) TMI 13 - SUPREME COURT] and it was held that gross total income had to be arrived at after making deduction as per appropriate computation provisions including income u/s. 60 to 64, adjustment of interest losses and after setting off of brought forward losses and unabsorbed depreciation. Only if resultant gross total income is positive the assessee was entitled for deduction under chapter VIA of the Act. Same proposition is upheld by the Hon’ble Supreme Court in the case of Reliance Energy Ltd. [2021 (4) TMI 1237 - SUPREME COURT]
Respectfully following the ratio laid down by Hon’ble Supreme Court, we remand this issue back to the Ld.AO to recompute the deduction under section 80IB(10) of the Act, on the principles laid down in case of Reliance Energy Ltd. (supra), as explained hereinabove.
Appeal of assessee stands partly allowed.
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2021 (10) TMI 1096 - ITAT MUMBAI
Disallowance u/s 14A - Sufficiency of own funds - validity of the jurisdiction assumed by the A.O as regards the satisfaction recorded by him - simpliciter rejection by the AO - as submitted by the assessee that as it had sufficient non-interest bearing funds available with it throughout the year which were far much higher than the investments made in the exempt income yielding securities, therefore, no part of the interest expenditure claimed as deduction was liable to be disallowed - HELD THAT:- A.O on the basis of his general observations had dislodged the claim of the assessee that no expenditure was incurred for earning of the exempt dividend income and had worked out the disallowance u/s 14A r.w. Rule 8D.
As per observation made in case GODREJ & BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX & ANR. [2017 (5) TMI 403 - SUPREME COURT] we are of the considered view, that the issue that an A.O before taking recourse to the provisions of Sec. 14A(2) and (3) r.w Rule 8D of the Income Tax Rules 1963, is statutorily obligated to give a clear finding with reference to the assessee”s accounts as to how the expenditure claimed by the assessee in respect of its non-exempt income were related to the exempt income; is no more res-integra pursuant to the aforesaid judgments of the Hon”ble Apex Court.
The failure on the part of the A.O to strictly comply with the aforesaid statutory obligation that was cast upon him, can safely be gathered from the fact that there is no clear finding by him with reference to the assessee”s accounts, as to how to the other expenditure claimed by the assessee in respect of its non-exempt income were related to the exempt income - a simpliciter rejection by the A.O of the aforesaid claim of the assessee which is only backed by his general observations, surmises and conjectures can by no means justify the validity of the jurisdiction assumed by him for computing the disallowance u/s 14A r.w. Rule 8D(2)(iii) in the hands of the assessee. We, thus, not finding favor with the view taken by the CIT(A) who had upheld the validity of the jurisdiction assumed by the A.O for computing the disallowance u/s 14A r.w Rule 8D(2)(iii) set-aside the same - Decided in favour of assessee.
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2021 (10) TMI 1095 - ITAT MUMBAI
Capital gain computation - AO in adopting stamp duty value as per Section 50C of the Act as full value of consideration - Scope of amendment to Section 50C - HELD THAT:- Difference in consideration adopted by the stamp valuation authority and the assessee is less than 5% and we find that there is an amendment which has been brought in Section 50C of the Act by way of third proviso w.e.f. 01/04/2019 wherein tolerance band of 10% has been specified. This amendment in third proviso has been held to be retrospective in operation by the Co-ordinate Bench of this Tribunal in the case of Maria Fernandes Cheryl [2021 (1) TMI 620 - ITAT MUMBAI] stating that the said proviso even though not stated to be prospective must be construed as curative in nature and hence to be given retrospective aspect - Thus we direct the ld. AO to consider only ₹ 58,50,000/- as sale consideration while computing the capital gains as against ₹ 61,16,000/-.
Exemption u/s 54EC - investment made by her in NHAI capital gain bonds within a period of six months - The primary fact of date of handing over of cheque together with the application form is duly supported by an affidavit filed by the sub-broker Shri Gobind M Vaswani who had categorically affirmed that he has collected the application form together with the cheque from the assessee on 24/10/2013 and had indeed handed over the same to authorised agent i.e. M/s. Karvy Stock Broking Ltd., on 24/10/2013 itself. The contents of this affidavit has not been controverted by the revenue by bringing in contrary evidences thereon. The law is very well settled that in the event of an affidavit not tested by the department in the manner known to law, then the contents of the said affidavit is to be construed as true and correct. Reliance in this regard is placed on the celebrated decision of the Hon’ble Supreme Court in the case of Mehta Parikh & Co. vs CIT[1956 (5) TMI 4 - SUPREME COURT]
We have no hesitation in holding that assessee is entitled for claim of exemption u/s.54EC of the Act in respect of investment made by her in NHAI capital gain bonds within a period of six months from the date of transfer. Accordingly, the grounds raised by the assessee are allowed.
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2021 (10) TMI 1094 - ITAT DELHI
Loss incidental to business - non-recovery of certain business advances made to certain parties in the normal course of its business - Whether such loss incidental to business, upon being written off in the Books of the Appellant is a claimable deduction allowable u/s 28 r.w.s. 37 of the Income Tax Act, 1961? - AO and the CIT(A) held that the deduction claimed on account of advances written off was a claimable deduction only u/s 36(l)(vii) r.w.s.36(2) - HELD THAT:- Even though assessee might have claimed as a bad debt in the profit and loss, but before the AO as well as ld. CIT(A) the assessee claimed that it was actually a business loss in the normal course of carrying on business, as the advances were given to aforementioned parties during the course of business in the earlier years for the reasons mentioned above as business advance and then it was duly explained the circumstances in which these advances could not be recovered either due to dispute or for different various reasons as discussed above, and therefore, it was claimed as business loss while computing the profit and loss account for the year under consideration.
Firstly in the case of Govinda Infraproperty Pvt. Ltd. (Govinda) in whose account the assessee has written off the advance of ₹ 3,92,00,000/-, there was an agreement between the assessee and the said party for the purpose of developing the assessee’s security business across the India wherein the assessee was required to pay service fee of 10% of the business value that service provider would generate for the assessee - it cannot be held that there was no business advance or there can be any iota of doubt that such advance had become irrecoverable which assessee has written off. Once, during the course of carrying out business any advance has been given for the business purpose and the same was not being recovered or it had become irrecoverable due to dispute, then if it has been written off by the assessee, then such a loss has to be allowed in the computation of profit and loss account. It is a decision of the company or the businessman to write off such an advance. There are cogent reasons for non recovery and consequently any loss arising from such writing off cannot be questioned nor the prudence of the businessman and can be questioned - All the submission and explanation by the ld. counsel incorporated above are not only plausible explanation but also fully supported by documentary evidences filed before the authorities below. We are thus in tandem with the submission of the Ld. Counsel and accordingly, the loss claimed on such an advance given to Govinda Infraproperty is accepted and same is directed to be allowed.
Advance written off in the case of Linton Distributors Pvt. Ltd.loss claimed in this year cannot be held to be non genuine. Even the inquiry and observations made by the AO u/s.133(6) had already been explained by the assessee in detail as incorporated above and also each and every observation of the AO in the remand report which has no adverse inference. Neither the AO nor ld. CIT (A) can question the credibility of assessee whether the said party was capable of complying with the said order or did not had any experience or there is any inquiry leading to any finding that said party was itself bogus. Again the wisdom and the business prudence of the assessee cannot be questioned to test the said transaction on preponderance of probability when there is no adverse material against the assessee with regard to business dealing of the assessee with the said party. The reasoning given by the ld. CIT(A) for disallowing the said claim of loss cannot be accepted and the explanation and the submission given by the assessee with the documentary evidence as discussed above are accepted and hence the loss claimed with regard to advance paid to this party is allowed as business loss.
In the case of Om Sai Assotech Pvt. Ltd., again it was on account of works contract awarded by the appellant executed by M/s. Environ Energy Pvt. Ltd. for comprehensive operations and maintenance of sites in Rest of West Bengal (ROWB) circle maintained by VIOM Networks discovered that due to certain defaults and short comings of Om Sai in the execution of the work Environ Energy had made certain deduction for which the assessee after making repeated request and series of discussion managed to get the said deduction/penalty reduced. The assessee also realized that certain excess payments were made by the appellant on behalf of Om Sai as discussed above. The assessee requested and duly informed Om Sai about the proposed deduction and liability towards the sub-contractor which were discharged by the assessee on its behalf, however, Om Sai failed to settled the accounts and there arose a dispute between the assessee and Om Sai. There is a letter written by the assessee raising a final demand notice on 01.04.2014 calling upon it to make a payment of ₹ 1,56,64,000/- towards the excess amount towards deductions proposed by Environ Energy - said party did not make the payment. The assessee has also filed the suit against the High Court claiming the amount along with interest and OM Sai has filed a counter claim before the High Court against the assessee for recovery of sum of ₹ 9.30 crores against the appellant. Thereafter, the assessee finally considered that there is no point going through for protracted litigation and took a business decision to write off the amount in its books. Such write off of loss is incidental to the business operation; therefore, we do not find any reason as to why such loss can be disallowed.
With regard to Metro Railways Kolkata entire detail and discussion about the manner in which the dispute had arisen and why the assessee was forced to write off the said deposit paid to the KMR has been discussed in detail in the foregoing paragraphs. The matter had also reached to stage of an arbitration as per the Hon’ble Kolkata High Court order and the consequence of written off had already been stated above. In a nutshell, there is no dispute that either the assessee’s explanation is not correct or the transaction entered with KMR was not genuine.
Once assessee had any business transaction with any party during the course of which if assessee had incurred any loss and for which detailed justification and explanation has been given with documentary evidences, we failed to understand as to why such a loss can be disallowed once there is no controversial material or inquiry denied by the said party. Simply rejecting the explanation on flimsy grounds without any inquiry cannot be sustained. Accordingly, we do not find any reason to uphold such findings. Accordingly, the entire claim of advance written off is allowed.
Disallowance u/s 14A - HELD THAT:- It is an undisputed fact that assessee has earned exempt income against which assessee had made suo moto disallowance of ₹ 1,418 u/s.14A whereas the Assessing Officer has proceeded to make disallowance of ₹ 1,87,024/- once since exempt income itself is ₹ 6,525/-, the disallowance u/s.14A cannot exceed more than exempt income as held in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] which has also been followed in the case of GVK Project Ltd. [2018 (5) TMI 1786 - DELHI HIGH COURT]. Thus, the disallowance made by the Assessing Officer is restricted to ₹ 6,525/- and balance is deleted.
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2021 (10) TMI 1093 - ITAT KOLKATA
Disallowance of certain expenses specifically incurred for the project and also interest disallowance - assessee submitted as alleged disallowance of interest and administration expenditure pertains to projects under construction and the disallowance is rightly made and also made a request that suitable direction should be given to the AO that the year in which these projects can be completed, the assessee should be entitled to claim the alleged disallowance of expenses - HELD THAT:- Since the assessee is following percentage completion method, the alleged expenses and interest expenditure which were having direct nexus with the projects undergoing during the year cannot be claimed as revenue expenditure for the year under appeal and, therefore, should form part of the work-in-progress and the assessee shall be eligible to claim the amount as an expenditure when the projects with which they are connected are completed and assessee starts selling the units of the project.- Decided against assessee.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- It is a settled judicial precedence that disallowance of interest expenditure u/s 14A of the Act is not called for if the assessee has sufficient capital and reserve and surplus that interest free funds available are in excess of the investments held during the year.
Since the interest free funds available with the assessee are in excess of the investment in equity shares at the close of the year and there being no specific finding by the AO about the nexus of the interest bearing funds having been applied for investment in equity shares, we find no justification in the finding of the ld. CIT(A) confirming the interest disallowance u/s 14A of the Act made by the AO. We accordingly set aside the finding of the ld. CIT(A) and allow the ground no. 3 raised by the assessee.
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