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Income Tax - Case Laws
Showing 121 to 140 of 366 Records
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2020 (7) TMI 569 - MADRAS HIGH COURT
Capital gain on property - Transfer u/s 2(47) - acquisition of new property rights - exchange of properties between the assessee and his brother - relinquishment of respective rights in the properties to suit their convenience - whether the arrangement between the respondent – assessee and his brother by way of gift settlement deed would amount to transfer within the meaning of Section 2(47)? - there were 85 properties owned by the assessee and his brother, that the assessee relinquished 50% of the share in 30 properties and that he became the absolute owner in respect of other 55 properties - whether tribunal is correct in law in holding that there is no legal difference between settlement and gift overlooking the basic nature of the settlement? - Whether the Tribunal is correct in law in giving relief to the assessee by placing reliance on the definition of 'gift' under Section 122 of the Transfer of Property Act? -
HELD THAT:- Tribunal concluded that the artificial definition made by Lower Authorities with reference to gift and settlement was not appropriate. The Tribunal was of the opinion that for the purpose of Section 49(1)(ii) of the Act, there was no difference between gift and settlement and that in the instant case, the settlement made with the assessee's brother could not attract capital gains on this count. There are no reasons as to how the Tribunal came to such a conclusion. We are unable to find any such reasoning in paragraph 15 of the impugned order. Therefore, the said finding is not supported by reasons and hence, not sustainable.
Tribunal referred to the decision of the Coordinate Bench in the case of Mr.Abdul Hameed Khan Mohammed [2016 (1) TMI 903 - ITAT CHENNAI] for the assessment year 2011-12.
The Tribunal did not assign any reason as to how the said decision of the Coordinate Bench would apply to the assessee's case. Paragraph 14 of the impugned order is also devoid of reasons.
Accordingly, the above tax case appeal is allowed, the impugned order is set aside and the matter is remitted back to the CIT(A) for a fresh consideration in accordance with law. Considering the fact that the year, in which, the search and seizure operations were conducted in the place of business of the assessee namely 2011, we direct the CIT(A) to give priority to this case.
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2020 (7) TMI 568 - ITAT MUMBAI
Reopening of assessment u/s 147 - Validity of reason to believe - HELD THAT:- The mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him, that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments in the case of NYK Lime (India) Ltd. [2012 (2) TMI 283 - BOMBAY HIGH COURT] and Purity Tech Textile Pvt. Ltd. Vs. ACIT & Anr. [2010 (2) TMI 26 - BOMBAY HIGH COURT ].
As the reopening in the case before us had been resorted to by the A.O on the basis of a “change of opinion” as regards the allowability of deduction of the sales promotion expenses, on the same set of facts and material as were there before his predecessor who had framed the regular assessment vide his order passed under Sec. 143(3), dated 27.03.2015, the same in light of the aforesaid settled position of law cannot be sustained, and on the said count itself is liable to be vacated. We thus not being able to persuade ourselves to subscribe to the view taken by the CIT(A) as regards the validity of the jurisdiction assumed by the A.O u/s 147 of the Act, set aside his order.
Allowable expenses u/s 37 - HELD THAT:- Expenditure incurred by the assessee towards sales promotion expenses viz. (i) conference expenses for doctors, travelling expenses for doctors, other expenses related to doctors and expenses incurred on product reminders given to doctors would not be hit by the “Explanation” to Sec. 37 of the Act. Accordingly, on the basis of our aforesaid observations, we are of the considered view, that the A.O even otherwise on merits was not justified in disallowing the sale promotion expenses by bringing the same within the realm of the “Explanation” to Sec. 37(1) of the Act. Ground of appeal No. 2 is allowed.
Suppressed production - wastage exceeding the DPCO norms - computation of wastage - HELD THAT:- Wastage up to the limits prescribed by the DPCO norms was to be accepted, we concur with him. At the same time, we are unable to persuade ourselves to subscribe to his view that the excess wastage of raw material would ipso facto lead to an inference of suppressed/unaccounted production carried out by the assessee. In our considered view, the aforesaid observation of the CIT(A) de hors any material evidencing the factum of suppressed/unaccounted production carried out by the assessee, cannot be accepted. Unexplained wastage of raw material, in our understanding can only lead to a consequential addition/disallowance of the cost of such raw material as had been debited by the assessee in its “books of accounts” for the year under consideration. Accordingly, we modify the order of the CIT(A) and therein direct the A.O to restrict the disallowance in respect of the excess raw material wastage in terms of our aforesaid observations. Ground is partly allowed.
Deduction u/s 80IB - HELD THAT:- Claim of the assessee that pursuant to the enhancement made by the A.O, its entitlement for deduction u/s 80IB would also be modified, we are unable to find favour with the same, and concur with the view taken by the CIT(A) who has rightly rejected the same.
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2020 (7) TMI 567 - ITAT DELHI
Disallowance u/s 14A read with Rule-8D - HELD THAT:- As observed that the opening balance of investments was ₹ 85.67 Crores, and, thus, investments subjected to Rule-8D were not brought forward from earlier years. It was also observed by the CIT (A) that the AO could not demonstrate that loans were borrowed for making investments in dividend yielding assets only. We find no reason to interfere with this factual finding of the Ld. CIT (A).
Assessee had submitted a computation before the AO wherein it was submitted that the disallowance, if any, could not exceed ₹ 8,34,934/- being the costs of treasury operations - As seen that neither the Assessing Officer nor the Ld. CIT (A) has commented on this computation of the assessee. Thus, apparently, the satisfaction, as contemplated and laid down in the case of Maxopp Investment Ltd. [2011 (11) TMI 267 - DELHI HIGH COURT] to be recorded by the Assessing Officer is completely absent and, therefore, in absence of the required satisfaction, such disallowance could not have been made - since, the Ld. AR has argued that the disallowance may be restricted we, accordingly, restrict the disallowance and direct the AO to delete the remaining disallowance. Ground No.1 of the assessee’s appeal stands partly allowed.
Addition on account of interest on Income Tax Refund - HELD THAT:- AR has fairly accepted that this amount is taxable in the hands of the assessee. However, while dismissing this ground of the assessee’s appeal, we direct that should the interest amount vary subsequently depending on the outcome of the appeals before the Hon’ble High Court and the Hon’ble Apex Court, the AO should substitute such varied amount as the case may be.
Capital subsidy received during the relevant assessment year from the written down value of the respective block of assets - HELD THAT:- It is settled law that the taxation of subsidy, by whatever name called, is determined by the purpose for which the subsidy is granted and not the form/mode/manner in which the subsidy is received/disbursed. We find no reason to interfere with the findings CIT (A) on the issue that the impugned subsidy was a capital receipt.
CIT (A) was not correct in directing the AO to reduce the amount of subsidy from the actual cost of fixed assets and, thereafter, allow depreciation on such actual costs so arrived that. We set aside the order of the Ld. CIT (A) on this issue and we direct the Assessing Officer to allow deprecation on the actual cost of assets without reducing the amount of subsidy there from. Thus Ground No.3 of the assessee’s appeal stands allowed.
Addition on account of license fee - HELD THAT:- It is seen that this issue is covered in favour of the assessee by the following orders of the Hon’ble High Court and the Tribunal rendered in assessee’s case in the earlier Assessment Years. CIT-DR also could not controvert this fact. In view of the binding judicial precedents in asssessee’s own case as enumerated above, we find no reason to interfere with the findings of the CIT (A) on the issue.
Claim of depreciation in respect of UPS - 60% OR 15% - HELD THAT:- UPS is to be considered as an integral part of the computers and depreciation is to be allowed @ 60%. Accordingly, in view of the settled legal position, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also. See CIT vs. BSES Rajdhani Power Limited [2018 (2) TMI 299 - ITAT DELHI].
Depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use - AO disallowed the claim of depreciation by alleging that the assessee has only established the factum of purchase of assets and not the condition of assets being put to use - HELD THAT:- Provisions of Sec.32 do not mandate such requirement. To assume that having purchased and installed the energy saving devices and pollution control equipment but not putting the same to use is, thus, just a baseless surmise and conjecture which stands negated by the certificates from the Chartered Engineers. Therefore, it is our considered opinion that the Ld. CIT (A) was absolutely correct in holding that having installed the devices, the assessee had extensively put the assets to use for the purposes of business and that under the law, the assessee was not required to monitor the outcome of use of such items in its business. The Hon’ble Delhi High Court in the case of CIT vs. Insilco Ltd. reported [2009 (2) TMI 31 - DELHI HIGH COURT] had held that it would be more appropriate to understand the expression ‘use’ as comprehending cases where the machinery is kept ready by the owner for its use in its business.
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2020 (7) TMI 566 - ITAT MUMBAI
Assessment u/s 153A - Addition of unsecured loans as undisclosed in u/s. 68 - HELD THAT:- there is no reference whatsoever to the incriminating material found during the course of search upon the assessee on the basis of which this addition of unsecured loan has been done in the hands of the assessee under section 153A.
It is settled law that in the interest of justice issue can be raised before quasi judicial authorities without any specific ground raised in grounds of appeal. This is particularly so for legal ground. Moreover no tax can be levied except that leviable as per the provisions of law. It is also settled law that there is no estoppel as to law. If an amount is not exigible to tax as per the provisions of law the same cannot be brought to tax on the ground of concession or otherwise.
From the records, it is manifestly clear that the assessment years for assessment year 10- 11 and years preceding to this were not pending at the time of search. Hence assessment for these assessment years did not abate. Hence no addition in these assessment years under section 153A is permissible without incriminating material found during search.
In the present case we have already given a finding that the addition is not based upon any incrimination material found upon search in the case of the assessee. This aspect is only of academic interest as addition has not been made by the assessing officer as deemed dividend. In the case of CIT versus Surat Cotton Spinning & Weaving Mills [1993 (4) TMI 64 - BOMBAY HIGH COURT] once the assessing officer has assessed a particular receipt under a particular head of income the amount is no more available to him for assessment under another head
Moreover the issue that in case of search and seizure assessment under section 153 A no addition can be made without incriminating material found during search is settled by honourable Supreme Court in the case of Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT]. Since we have already held that these additions are not sustainable in assessment u/s 153A. Decided in favour of assessee.
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2020 (7) TMI 565 - ITAT DELHI
Addition on account of deduction of interest expenditure u/s 24 (b) - whether interest was paid on loan which was meant for investment in shares and bonds and not for the purpose of purchasing the property - grievance of the assessing officer is that that above interest expenditure cannot be granted as deduction from income from house property - HELD THAT:- In the previous year has reached at a finding that until the amount has been utilized in the investment of bonds et cetera, no interest can be claimed by the assessee as deduction under the income from house property. However when such bonds have been redeemed and utilized for the purpose of purchase of the property, then the borrowed fund from HSBC bank amounts to utilization of same for the purpose of purchase of the property. As held that since the amount was purchased from the borrowed funds of the HSBC bank, interest paid by the assessee should be allowed as a deduction. The above facts are not disputed by the revenue. Even it was not shown to us that the order of the learned CIT – A for assessment year 2011 – 12 has not been accepted by the revenue and is agitated before the higher forum. In view of this, we do not find any infirmity in the order of the learned CIT – A in directing the learned assessing officer to ascertain the interest on funds utilized for acquisition of the property on which rental income has been earned by it during the year and to grant deduction of such interest under section 24 (b) - Decided against revenue.
Disallowance u/s 14A read with Rule 8D - CIT- A directed the learned AO to restrict the disallowance to the extent of the exempt income earned - HELD THAT:- CIT-A's direction are in view of the decision of JOINT INVESTMENTS PRIVATE LIMITED VERSUS CIT [2015 (3) TMI 155 - DELHI HIGH COURT]. Also further directed AO to recompute the disallowance to exclude the interest expenditure, which pertains to the income from house property and in respect of the interest expenditure related to the income from other sources - Consider the remaining interest expenditure for the purpose of computation of the disallowance. With respect to the disallowance of 0.5% of the average value of the investment, he directed the learned assessing officer to consider only those bonds, which yielded tax-free income. After hearing the parties on this issues, we do not find any infirmity in the order of the learned CIT – A in directing the AO so.
As CIT – A has followed the order of his predecessor and honourable Delhi High Court. The revenue has not challenged the order of the learned CIT – A for assessment year 2011 – 12, at least as no evidences produced before us. In view of this, we do not find any infirmity in the order of the learned CIT – A. Accordingly ground number two and three of the appeal of the AO is dismissed.
Addition on account of various business expenses claimed - HELD THAT:- On careful analysis of the order of the learned CIT – A, we found that he relied on the order of his predecessor for assessment year 2011 – 12 wherein all the facets of the allowability of those expenditure have been considered and disallowance has been deleted. We also do not find any infirmity in the order of the learned CIT – A in following the order of his predecessor, when revenue could not produce any evidence before us that the order of the CIT – A for assessment year 2011 – 12 has not been accepted by the revenue. - Decided against revenue.
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2020 (7) TMI 545 - SUPREME COURT
Income accrued in India - Taxability of income attributable to a “permanent establishment” - fixed place in India, arising from the ‘Agreement for avoidance of double taxation of income and the prevention of fiscal evasion’ with the Republic of Korea (“DTAA”) - to what extent activities of the business were carried on by the Assessee through the Mumbai Project Office? - High Court held that the question as to whether the Project Office opened at Mumbai cannot be said to be a “permanent establishment” within the meaning of Article 5 of the DTAA would be of no consequence AND there was no finding that 25% of the gross revenue of the Assessee outside India was attributable to the business carried out by the Project Office of the Assessee - HELD THAT:- A reading of the Board Resolution would show that the Project Office was established to coordinate and execute “delivery documents in connection with construction of offshore platform modification of existing facilities for ONGC”. Unfortunately, the ITAT relied upon only the first paragraph of the Board Resolution, and then jumped to the conclusion that the Mumbai office was for coordination and execution of the project itself. The finding, therefore, that the Mumbai office was not a mere liaison office, but was involved in the core activity of execution of the project itself is therefore clearly perverse.
Equally, when it was pointed out that the accounts of the Mumbai office showed that no expenditure relating to the execution of the contract was incurred, the ITAT rejected the argument, stating that as accounts are in the hands of the Assessee, the mere mode of maintaining accounts alone cannot determine the character of permanent establishment. This is another perverse finding which is set aside. Equally the finding that the onus is on the Assessee and not on the Tax Authorities to first show that the project office at Mumbai is a permanent establishment is again in the teeth of our judgment in E-Funds IT Solution Inc. [2017 (10) TMI 1011 - SUPREME COURT]
Though it was pointed out to the ITAT that there were only two persons working in the Mumbai office, neither of whom was qualified to perform any core activity of the Assessee, the ITAT chose to ignore the same. This being the case, it is clear, therefore, that no permanent establishment has been set up within the meaning of Article 5(1) of the DTAA, as the Mumbai Project Office cannot be said to be a fixed place of business through which the core business of the Assessee was wholly or partly carried on.
Also, as correctly argued by Shri Ganesh, the Mumbai Project Office, on the facts of the present case, would fall within Article 5(4)(e) of the DTAA, inasmuch as the office is solely an auxiliary office, meant to act as a liaison office between the Assessee and ONGC. This being the case, it is not necessary to go into any of the other questions that have been argued before us. Appeal against the impugned High Court judgment is therefore dismissed.
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2020 (7) TMI 544 - SUPREME COURT
Receipt of non-competitive fee - non-compete fee payable under the Deed of Covenant - capital receipt or revenue receipt - substantial question of law that was raised by the High Court - difference in members of ITAT - majority decision of ITAT said that non-competitive fee was a capital receipt u/s 28(iv) income tax act and not a revenue receipt as envisaged in Section 28(ii) of I.T. Act - whether the said Deed of Covenant can be said to contain a restrictive covenant as a result of which payment is made to the appellant, or whether it is in fact part of a sham transaction which, in the guise of being a separate Deed of Covenant, is really in the nature of payment received by the appellant as compensation for terminating his management of CDBL, in which case it would be taxable under Section 28(ii)(a)?
HELD THAT:- Clearly, without any recorded reasons and without framing any substantial question of law on whether the said amount could be taxed under any other provision of the Income Tax Act, the High Court went ahead and held that the amount of INR 6.6 crores received by the assessee was received as part of the full value of sale consideration paid for transfer of shares – and not for handing over management and control of CDBL and is consequently not taxable under Section 28(ii)(a) - Nor is it exempt as a capital receipt being non-compete fee, as it is taxable as a capital gain in the hands of the respondent-assessee as part of the full value of sale consideration paid for transfer of shares. This finding would clearly be in the teeth of Section 260-A (4), requiring the judgment to be set aside on this score.
The reasons given by the learned Assessing Officer and the minority judgment of the Appellate Tribunal are all reasons which transgress the lines drawn by the judgments cited, which state that the revenue has no business to second guess commercial or business expediency of what parties at arms-length decide for each other.
As decided in Guffic Chem (P) Ltd. [2011 (3) TMI 6 - SUPREME COURT] the agreement entered into by the assessee with Ranbaxy led to loss of source of business; that payment was received under the negative covenant and therefore the receipt of ₹ 50 lakhs by the assessee from Ranbaxy was in the nature of capital receipt. In fact, in order to put an end to the litigation, Parliament stepped in to specifically tax such receipts under the non-competition agreement with effect from 1-4-2003.”
Decided in favour of assessee.
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2020 (7) TMI 543 - ITAT DELHI
Exemption u/s 11 - Charitable purpose u/s 2(15) - whether the provisions of Section 11(4A) were attracted to the assessee’s case? - why the receipts from charges received by the Chamber should not be considered as commercial in nature and why the receipts should not be hit by the provisions of section 2(15)? - whether by rendering specific services to members and non-members for a fee, a trade, professional or similar association can be said to be carrying on a business activity? - HELD THAT:- Respectfully following the consistent decisions of the Tribunal in assessee’s own case for the preceding assessment years [2017 (9) TMI 1458 - ITAT DELHI], [2018 (5) TMI 2009 - ITAT NEW DELHI] we do not find any infirmity in the order of the CIT(A) in holding that the activities of the assessee are charitable in nature and the assessee is entitled to the claim of exemption u/s 11 of the IT Act. - Decided in favour of assessee.
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2020 (7) TMI 542 - KARNATAKA HIGH COURT
Stay petition - Submission seeking to defend the Revenue by contending that petitioner has been shown concession to pay 20% of the tax amount, that too in six equal installments is too fragile to be countenanced - HELD THAT:- Admittedly, an application was filed before the PCIT seeking stay of assessment order. The same has also been disposed of without hearing the petitioner. Generally, in all cases, an application filed before any quasi judicial authority is required to be heard before any orders are passed and more so, in the case of this nature, where the assessee becomes liable to pay huge taxes.
The third respondent- PCIT shall grant an opportunity to petitioner to put forth its case so far as the application for stay is concerned. - No coercive steps to recover the tax amount shall be initiated till PCIT passes his order.
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2020 (7) TMI 541 - MADRAS HIGH COURT
Stay proceedings - HELD THAT:- Considering the fact that there has been an order of interim stay in force, since 30.05.2019, we are of the view that it would be inequitable to modify or alter the interim order at this juncture, especially, when the main appeal is ripe for hearing before the 1st respondent. Accordingly, the appeal stands disposed of and the interim order granted on 30.05.2019, shall continue to remain in force, till the appeal filed by the appellant before the 1st respondent is heard and disposed of. Since the appeal is of the year 2018, having been filed on 30.01.2018, the 1st respondent is requested to dispose of the appeal at an early date, preferably, within a period of six weeks from the date of receipt of the copy of this order.
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2020 (7) TMI 540 - ITAT DELHI
Addition being the difference in the opening balance of the claim of advance received - HELD THAT:- Although the CIT(A) called for a remand report from the AO while deciding the issue, the AO has not asked anything about this difference nor the CIT(A) has given any opportunity to the assessee to explain the same - we deem it proper to restore this issue to the file of the AO with a direction to give an opportunity to the assessee to substantiate the difference in the opening balance in the books of the assessee as well as M/s Gulab Farms Pvt. Ltd., and decide the issue as per fact and law. Ground No.1 by the assessee is accordingly allowed for statistical purposes.
Addition of consultancy charge to the assessee for the year under consideration - CIT(A) while deleting the above addition has directed the AO to sustain the addition being the difference in the balance as per ledger account of assessee and M/s V.C. Solutions which is in the nature of unexplained credit - submission of the ld. Counsel that the difference is due to the grossing up of amount of TDS by M/s VC Solutions and the assessee has shown the net amount excluding the TDS and there was wrong credit in the name of Ms Chandni - HELD THAT:- Although the ld.CIT(A) has called for a remand report from the AO, this issue was not properly explained by the assessee during the remand proceedings to the AO nor the CIT(A) has considered the same properly in the light of the arguments advanced by the ld. Counsel - we deem it proper to restore the issue to the file of the AO with a direction to grant an opportunity to the assessee to substantiate its case - Decided in favour of assessee for statistical purposes.
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2020 (7) TMI 539 - ITAT DELHI
Reopening of assessment u/s 147 - Notice after four years - notice barred by limitation - CSR expenditure allowability - HELD THAT:- When the issue is covered in favour of the assessee on merits by the order of the jurisdictional High Court reopening on that issue does not survive.Thereafter referred plethora of the judicial precedents and held that there was no ‘non disclosure’ on the part of the assessee. Even otherwise on our examination of the facts and the assessment order, we find that with respect to the CSR expenditure the AO himself refers to the details of ‘other expenses’ filed during the assessment proceedings.
For prior period expenditure also the AO refers to the details filed and disallowance made during the regular assessment proceedings. With respect to the employee’s contribution fund the AO refers to the information already available with the return of income. Disallowance u/s 14A was merely to correct the incorrect computation in the original assessment proceedings.
With respect to the deprecation on computer software, AO has changed his opinion with respect to the rate of depreciation. He merely applies 25% rate of depreciation instead of 60% as applied in original assessment proceedings. It is apparent that the AO has not pointed out that what facts were not disclosed by the assessee. AO also not brought on record any specific information, which the assessee has failed to disclose in the original return.
No infirmity in the order of the CIT (A) in stating that reopening is barred by limitation and the period of six years for reopening is not available to the assessee. CIT (A) is also correct in deciding that in absence of any failure on part of the assessee, extended limitation period of six years cannot be available to the ld AO; therefore, the reassessment order is passed beyond limitation. No infirmity, as argued by CIT DR, in the order of ld CIT (A). In absence of any failure on the part of the assessee, accordingly, we dismiss the appeal filed by the AO on the limited issue that order passed by the ld AO is barred by limitation. Ground No. 1 is dismissed.
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2020 (7) TMI 538 - ITAT DELHI
Exemption u/s 54 - Long term capital gain arising on sale of residential flat at Varsova (Mumbai) against the purchase of new residential property made during the year - HELD THAT:- The CBDT in Circular No. 672 dated 16/12/1993 has clarified that in terms of a scheme of the allotment and construction of the flat/house by the co- operative societies or the other institution are similar to those mentioned in para 2 of CBDT circular No. 471/Dated 15/10/1986 and thus such case may be treated as the construction of the flat for the purpose of section 54 and 54F of the Act. The Tribunal in the case of Ayushi Patni [2019 (1) TMI 1130 - ITAT PUNE] after following the decision of the Hon’ble Bombay High Court in the case of CIT Vs Smt. Beena Jain [1993 (11) TMI 7 - BOMBAY HIGH COURT] treated the date of the taking possession as the date of the purchase of the flat and allowed benefit of section.
Thus, in view of undisputed facts of the case and the decision rendered in the case of CIT Vs. Smt. Beena K. Jain (supra), we hold that the assessee is eligible for claiming exemption u/s 54F on the entire amount of capital gain utilized for purchase of residential property. Consequently, the appeal of the assessee is allowed and the appeal of Revenue is dismissed.
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2020 (7) TMI 537 - ITAT DELHI
Income of lease rental earned from property along with facilities - rental income from letting of workstation i.e. machinery, plant or furniture - Income from house property or income from other source - Whether leasing of plant, machinery furniture was incidental to the letting of the building ? - HELD THAT:- Use of the building is incidental to the main object of leasing of workstation by the assessee. As noted from the brief facts of the case that the assessee has given ground and first floor of the building on the rent to another party separately and income from which has been offered by the assessee under the head “income from the house property” and which has not been disturbed by the Assessing Officer.
Thus, in the instant lease under reference, the prime objective is exploitation of asset in the form of workstations installed by the assessee and not the building or any part thereof. The use of easement and common areas by the second party is incidental to the lease of exploitation of workstation. The workstation in the form of plant and machinery are inseparable from the building and for exploitation or use of the workstation, the use of the building is incidental. We find that Ld. CIT(A) has also relied on the decision of Garg Dyeing and Processing Industries [2012 (12) TMI 191 - DELHI HIGH COURT] wherein as held that where the letting was inseparable, section 56(2)(iii) was rightly invoked.
In the case of Shambhu Investment [2003 (1) TMI 99 - SC ORDER] the issue of taxability of the rental income under the head “income from house property” vis-à-vis income under the head “profit and gains of business and profession”, whereas in the present case dispute between the parties regarding the lease rental income should be taxed under the head “income from house property” or under the head “income from other sources”. - Decided against assessee.
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2020 (7) TMI 525 - ITAT AHMEDABAD
Deduction u/s.80IA(4) - losses arising in eligible business, if any, prior to exercise of option towards ‘initial assessment year’ to be artificially carried forward and notionally adjusted from the profits arising from eligible business in the ‘initial assessment year’ - whether the assessee is entitled in law for claim of deduction of income arising from eligible business during the year under s. 80IA(1) r.w.s. 80IA(4) without making adjustments towards losses arising in the earlier assessment years prior to exercise of option of ‘initial assessment year’ with reference to the eligible business? - HELD THAT:- The manner of determination of quantum of deduction as provided under s.80IA(5) has since been clarified by the CBDT Circular No.1 of 2016 dated 15.02.2016 and is devoid of controversy any more. Having regard to the wide ranging controversies, the CBDT circular has given categorical interpretation on exercise of option of choosing ‘initial assessment year’ referred to sub-section (5) of Section 80IA of the Act in favour of the assessee.
CBDT has also clarified that embargo placed under s.80IA(5) of the Act for quantification of deduction of profits and gains of an eligible business would apply from the assessment years immediately succeeding ‘initial assessment years’ only. Having regard to express elucidation by CBDT, the CIT(A), in our view, has rightly decided the issue of manner of computation of quantum of deduction under s.80IA(5) in favour of the assessee.
The assessee while determining the eligible profit, is not required to notionally reduce losses arising from eligible business in the earlier years already set off against other business of assessee in terms of Sections 70, 71 & 72 of the Act prior to exercise of option of ‘initial assessment year’. The losses arising in ‘eligible business’, if any, subsequent to earmarking of ‘initial assessment year’ shall however continue to be governed by embargo placed in Section 80IA(5) of the Act. - Decided in favour of assessee.
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2020 (7) TMI 524 - ITAT CUTTACK
Revision u/s 263 - Income recognition method - method accounting regularly employed by the appellant in recognizing the revenue from sale of residential flats which was submitted and considered during the assessment proceedings u/s.143(3) - whether assessee was duty bound to follow AS-7 for revenue recognition? - HELD THAT:- Assessee is a construction company engaged in the construction of flats/residential units on the land owned by it without any contract with the customers for construction of flats/residential units. It is ample clear that the assessee company is consistently following revenue recognition method by adopting completed project method, wherein, the revenue is recognised at the time of sale of flats/residential units by way of registered sale deed in favour of the customers and advance from customer and work in progress is recognised at cost in the balance sheet. Assessee has recognised revenue on two broad heads viz; sale of flats and sale of plots/land and amount of advance is transferred to the sales account when the registered sale deed is executed in favour of the customers adding the amount of advance pertaining to flats/residential units/plots sold during the relevant financial year and further adding the amount of advance received during the year.
PCIT could not point out any defect in the revenue recognition method i.e. completed project method/percentage completion method adopted by the assessee and we are satisfied that the method consistently followed by the assessee and accepted by the department for recognition of revenue by following AS-2 alongwith AS-9 is a reasonable and right method for recognition of revenue on sale of flats/residential units/land.
As per section 43CB the profits and gains of a construction company arising from construction contract or a contract for providing services shall be determined on the basis of percentage completion method and the same is mandatory for revenue recognition w.e.f. 1.4.2017 i.e. assessment year 2017-18 and this method of revenue recognition was not mandatory and compulsory to be followed for assessment year 2013-14.
PCIT cannot revise or revisit the assessment order(s) by pressing into service the provisions of section 43CB of the Act in the present case. Findings arrived at by PCIT in the impugned order without any deliberation of explanation of the assessee explaining the method of accounting of revenue on account of sales and regarding non-applicability of AS-7 cannot be held as valid and sustainable without any further examination and exercise. PCIT cannot direct the AO for denovo assessment without assigning any defects or deficiencies in the method of accounting of revenue recognition on account of sale of flats/residential units/land and regarding non-applicability of AS-7 as contended by ld counsel for the assessee during the proceedings u/s 263.
We are of the considered view that the revisionary order passed by the Ld. Pr. CIT is without jurisdiction - Decided in favour of assessee.
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2020 (7) TMI 523 - ITAT PUNE
Disallowance of deduction claimed on account of diminution in the market value of Government securities classified under the category ‘Held to Maturity’ - HELD THAT:- The essence of the matter is to examine as to whether a particular expenditure/loss is deductible and not whether the same is recorded in the books of account. If a particular amount is deductible as per law, the same has to be allowed as deduction irrespective of the fact that it was not recorded in the books of account. It is further noticed that the assessee did not record such diminution of value of securities to the extent of ₹ 2.65 crores in its books of account so as to satisfy the RBI norms, which provide for valuing the securities as such without any diminution in their value at the year end. RBI guidelines mandate reflection of certain transactions in a certain way and do not supersede the taxing principles.
Treatment of the securities as investment or stock-in-trade - AR has relied on the judgment in Pr.CIT Vs. Bank of Maharashtra [2018 (3) TMI 316 - BOMBAY HIGH COURT] in which, in identical circumstances held that the securities held by the assessee bank as `Held till Maturity’ will not be treated as investment. No contrary point of view has been brought to our notice by the ld. DR. Respectfully following the precedent, we overturn the impugned order on this score and hold that such securities should be taken as stock-in-trade and not investments.
Computation of amount of diminution value on securities - as premium on year to year basis and secondly, difference between the market value and the face value of the securities - We find that the amount of premium on investment has been separately claimed as deduction by the assessee. Such premium has been offloaded from the purchase cost to bring such securities at face value and all the subsequent calculations for valuing at the market price at the end of the year and calculation of profit at the time of sale of in a later year, have been done with reference to the face value without premium. Thus, it is clear that the amount of premium on investment has not been taken into consideration at the time of computing diminution of the value of the securities. AO has not made any separate disallowance towards write off of premium on these securities. We, therefore, order to delete the addition of ₹ 2.65 crores and odd. Thus, these three grounds are allowed.
Disallowance u/s 36(1)(viia) - Amount of provision which was not made in the books of account - HELD THAT:- As decided in BANK OF MAHARASHTRA [2014 (10) TMI 210 - ITAT PUNE]Tribunal did not allow deduction u/s 36(1)(viia) of the Act in respect of the amount of provision which was not made in the books of account. Also see STATE BANK OF PATIALA VERSUS COMMISSIONER OF INCOME-TAX AND ANOTHER. [2004 (5) TMI 12 - PUNJAB AND HARYANA HIGH COURT] - Decided against assessee.
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2020 (7) TMI 522 - ITAT CUTTACK
Revision u/s 263 - revenue recognition method - assessee company is following percentage completion method of accounting for revenue recognition but while considering the revenue recognition of the Surekha Vatika Project, proper method was not applied by the assessee leading to incorrect revenue recognition instead of the proper method which recognizes the revenue - HELD THAT:- It is well settled principle that the AO is required to make reasonable, sufficient and adequate enquiry of impugned issues during assessment proceedings and in case of no enquiry or insufficient or inadequate enquiry, Pr.CIT is empowered to revise the order holding the same as erroneous and prejudicial to the interest of the revenue. But if this proposition is evaluated in the facts and circumstances of the present case then, it is clearly discernible that the AO by way of notice u/s.142(1) dated 26.10.2015 and 30.7.2015 called the documents/information from the assessee which includes copy of the audited balance sheet, profit and loss account, Annual report alongwith details of bank accounts maintained including bank name, branch details and a/c no. supported with bank statements for the financial year 2012-13 relevant to assessment year 2013-14.
As observed that the Assessing Officer also called the details of party-wise purchase and sales of land/flat, details of project-wise percentage of construction as on 31.3.2013, estimate cost of each projects and estimate sales price thereof and closing stock details with detail valuation and method of valuation, which were submitted by the assessee and this fact has not been negated or disputed by Pr. CIT in the impugned order as well as during the arguments before us by Ld. CIT DR.
In view of copies of notices and replies of the assessee available at APB page 43 to 51, we are satisfied that during assessment proceedings, the AO made proper, sufficient and adequate enquiry on the issues including issue of revenue recognition of the assessee by following percentage completion method, project-wise revenue recognition.
It is not a case of no enquiry, inadequate enquiry or insufficient enquiry. Therefore, without holding so, the impugned assessment order cannot be tagged or alleged as erroneous and prejudicial to the interest of revenue.
The methodology adopted by the assessee for revenue recognition was being consistently followed by the assessee during previous and subsequent assessment years and same cannot be tinkered or disturbed by placing new method of revenue recognition wherein work in progress shown by the assessee has not been taken into consideration. In such type of case, inquiry should have been conducted by the revisional authority himself to record the finding that the assessment order was erroneous.
In the present case, the Pr. CIT has not made inquiry himself on the submission/reply of the assessee to before exercising his power u/s.263 of the Act vide dated 23.3.2018 (APB pages 59 to 68) and relevant part as reproduced by the ld Pr. CIT in para 4 of the impugned order. He merely set aside the assessment order and directed the AO to redo the assessment denovo on the issue, which is not permissible as per principle laid down by Hon’ble Delhi High Court in the cases of Jyoti Foundation [2013 (7) TMI 483 - DELHI HIGH COURT] and DG Housing [2012 (3) TMI 227 - DELHI HIGH COURT].
We reach to a logical conclusion that the issuance of notice u/s.263(1) of the Act and impugned revisional order u/s.263 of the Act is not sustainable and revisionary authority had no valid jurisdiction to revise the assessment order. Consequently, the impugned notice as well as revisional order u/s.263 of the Act are hereby dismissed. - Decided in favour of assessee.
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2020 (7) TMI 521 - ITAT DELHI
Exemption u/s 10(34) - dividend income received by SARA fund - exemption claimed by the appellant on its share of dividend income of dividend income received by SARA Fund (venture capital Fund - (VCF) - HELD THAT:- CIT(A) have taken a wrong view by holding that the assessee cannot grow tax-free income u/ss 10(34) and 10(35) of the Acts unless additional tax has been paid as per the provisions of Sections 115-0 and 115-R of the Act and as such the exemption claimed u/ss 10(34) and 10(35) is to be allowed only if the dividend income distributed as per the provisions of Sections 115-O and 115-R whereas, the conditions laid down u/s 115-O to avail the exemption u/s 10(34), is to be complied with at the level of venture capital undertaking and not at the stage when the investor, the assessee in this case, received the dividend income from VCF. So, the assessee is entitled for exemption u/s 10(34) of the Act and its share of dividend income is out of dividend income received by SARA fund.
When the company with which SARA Fund has been invested, had already paid additional income tax on the earned dividend as required u/s 115-0 of the Act, SARA fund was not required to pay additional income tax second time on the same income. - Decided in favour of the assessee.
Disallowing expenses by taxing the share of the appellant in interest income from VCF under the head "Other Sources” on gross basis and not on net basis in disregard of the fact that income of a VCF - HELD THAT:- A person who makes investment in the venture capital company or venture capital fund, the assessee in this case, earned the income out of such investment which income shall be treated firstly as investment directly in the venture capital undertaking and venture capital fund or venture capital company is only a pass through vehicle. So, in these circumstances, the assessee-company is entitled to book expenditure incurred by SARA fund as if the same has been incurred by the assessee directly in the venture capital fund. So, we are of the view that the expenses disallowed by Ld. CIT(A) by taking the shares of the assessee in interest income from VCF under the head other sources on gross basis and not the net basis, which requires to be determined by treating the same nature of income like long term capital gain, short term capital gain, dividend and other income such as interest etc. Grounds determined in favour of the assessee.
Income from other sources - HELD THAT:- In the balance sheet / revenue account of SARA fund and the assessee has rightly disclosed the income by subtracting the amount which is the amount of capital nature and as such not taxable in the hands of investor by treating the same nature of income like LTCG, STCG, Dividend and other income such as interest etc. and as such to be taxed as per the provisions as applicable under different heads of income meaning thereby a person who makes investment in the VCC and VCF - the assessee in this case, earned the income out of such investment, which income shall be treated as if the investment was directly in the VCU and VCF and VCC is only a pass through vehicle.
Assessee has rightly taken the net income for tax at ₹ 11,97.38,454/- by subtracting the amount of ₹ 5,62,61,546/- and the assessee is liable to be taxed accordingly. So, Ld. CIT(A) has erred in holding that the appellant's share in the payment of ₹ 5.62,61,546/- (17,60,00,000 - 11,97,38,454) @ 22.73% i.e. ₹ 1,27,88,250/- as income from other sources in the hands of assessee, which is required to be assessed in view of the provisions contained u/s 115U of the Act. - Decided in favour of the assessee.
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2020 (7) TMI 520 - ITAT DELHI
Addition u/s 69C OR 68 - Addition of share application money - Wrong mention of section - assessee contends that such unexplained credits are outside the ambit of section 69C - HELD THAT:- Wrong mention of section would not vitiate the entire assessment. Moreover, the first appellate authority, at para 4.3 of his order, has also acknowledged this inadvertent error. No merit in this application moved by the assessee. Accordingly, the same stands rejected
It is true that the Assessing Officer did not proceed further after serving the summons u/s 131 of the Act. In our considered opinion, if the summons were served and share applicants being family members, the Assessing Officer had all powers to enforce their attendance.
Before the first appellate authority, the assessee furnished complete bank statements alongwith source of availability of funds with share applicants, but the same has been discussed summarily by the ld. CIT(A) and also by the Assessing Officer in his remand report.
When the income of the share applicants does not justify the share application money, then the burden is heavier on the assessee to prove the credit worthiness of the share applicants.
Though the assessee did file documentary evidences, it appears that the same have not been thoroughly examined by the authorities below. Therefore, in the interest of justice and fair play, we deem it fit to restore the entire assessment to the file of the Assessing Officer.
The assessee is directed to furnish documentary evidences to show the availability of funds with share applicants and the Assessing Officer is directed to examine thoroughly and decide the issue afresh after giving reasonable and sufficient opportunity of being heard to the assessee.
In so far as the addition on account of share application money from Pawan Goyal & Sons, HUF is concerned, there is no dispute that this was opening balance brought forward from the preceding Assessment Years and, therefore, it is outside the ambit of section 68. To this extent, we do not find any error or infirmity in the findings of the ld. CIT(A). Addition of ₹ 6,50,000/- stands deleted. - Appeal of the revenue allowed in part for statistical purposes.
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