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Income Tax - Case Laws
Showing 221 to 240 of 661 Records
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2021 (8) TMI 941 - ITAT DELHI
Reopening of assessment u/s 147 - multiple entries in the information received from INV Wing where the additions were made by reopening assessment - HELD THAT:-The contention of the ld. DR that the Assessing Officer has applied his mind while framing assessment order does not hold any water because the application of mind is required while issuing notice u/s 148 of the Act and not during assessment proceedings because the challenge is of the notice for reopening the assessment which when served, sets the law into motion.
The original return was selected for scrutiny assessment and the assessment was framed u/s 143(3) of the Act, obviously, after scrutinising the return of income qua the details furnished therewith.
Assessee made a statement at Bar that the balance sheet filed with the return of income clearly showed unsecured loans in liability side and therefore, it cannot be said that the assessee has not disclosed true and material facts in the original return of income.
As carefully gone through the decisions relied upon by the first appellate authority. We find that in none of the decisions the issue was of multiplicity of the entries in the information received by the Assessing Officer which formed the basis for reopening the assessment. In all the decisions relied upon by the ld. DR, the issue was whether the information received amounts to tangible material evidence for reopening the assessment. Whereas the facts of the case in hand relates to the very information itself which contains 11 entries as mentioned elsewhere, where the total amount of escaped income is mentioned at ₹ 2.05 crores which is part of the reasons recorded for reopening the assessment.
We are of the considered view that the assumption of jurisdiction by issue of notice u/s 148 of the Act is bad in law which makes the assessment order framed u/s 147 r.w.s 143(3) of the Act void ab initio. - Decided in favour of assessee.
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2021 (8) TMI 940 - ITAT DELHI
Disallowances being CSR expenditure incurred by the assessee and claimed as deductible expenditure - HELD THAT:- Assessee claimed that these are incurred for the business activity of the company. The facts shows that the assessee is machine manufacturer and the expenditure incurred in Odisha has not been shown before the lower authorities that same are incurred for the purpose of the business. In view of this, it does not satisfy the conditions prescribed u/s 37(1) of the Act. Further, it not the case that the expenditure is otherwise allowable to the assessee u/s 37(1) of the Act and because explanation added by Financial Act 2018 applicable from AY 2015-16 the disallowances is made. Therefore, it is imperative that even before the assessment year 2015-16 to get the deduction u/s 37(1) of the act of the corporate social responsibility expenditure assessee must satisfy the conditions envisaged u/s 37(1) - No infirmity in the order of the ld CIT(A) in confirming the disallowances. - Decided against assessee.
Disallowances on account of interest paid for late deposit of TDS - HELD THAT:- As relying on CHENNAI PROPERTIES AND INVESTMENTS LIMITED [1998 (4) TMI 89 - MADRAS HIGH COURT] we confirm the action of the lower authorities in disallowing the interest expenditure for late deposit of TDS. - Decided against assessee.
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2021 (8) TMI 939 - ITAT KOLKATA
TDS u/s 194I - hire charges paid for the equipment disallowed - addition u/s 40(a)(ia) - As per assessee amount on account of hire charges of equipment was deducted by the Principal Contractor NCC Limited from the amount payable to the assessee-company and since there was actually no payment directly made by the assessee-company on account of hire charges, there was no requirement of deduction of tax at source - HELD THAT:- We are unable to accept the contention of assessee as rightly held by the authorities below, the amount in question on account of hire charges for equipment was payable by the assessee-company to M/s. NCC Limited and even though it was adjusted by NCC Limited against the amount payable to the assessee-company, such adjustment was not possible without crediting the said amount to the account of NCC Limited. The provision of section 194I thus was clearly attracted and the assessee-company was liable to deduct tax at source from the amount in question towards equipment hire charges. Since there was a failure on account of the assessee-company to comply with this requirement, the provision of section 40(a)(ia) was rightly invoked by the Assessing Officer.
However find merit in the alternative contention raised by the ld. Counsel for the assessee that the amount of equipment hire charges in question having been already offered to tax by NCC Limited, the assessee-company cannot be treated as assessee in default for non-deduction of tax at source from the said payment as held in the case of Hindusthan Coca Cola Beverages Pvt. Limited [2007 (8) TMI 12 - SUPREME COURT] and there is no question of making disallowance under section 40(a)(ia). As rightly contended by the ld. D.R., this claim made by the ld. Counsel for the assessee specifically for the first time before the Tribunal, however, requires verification and the matter may, therefore, be sent back to the AO for the limited purpose of this verification. We accordingly restore this issue to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee - Appeal of the assessee as partly allowed for statistical purposes.
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2021 (8) TMI 937 - ITAT HYDERABAD
Estimating the income of the assessee @ 8% on the sub-contract turnover - addition made being the entire sub-contract receipt not found to be genuine and ₹ 18,00,000/- being the amount received from three parties which remained unexplained - HELD THAT:- From the facts of the case it is apparent that the assessee had not maintained proper books of accounts or produced his bank statements to justify the expenditure incurred by him for undertaking the contracts. The assessee has also failed to produce bills and vouchers even to establish that he was undertaking and executing civil contracts. CIT (A) has arrived at his conclusion based on certain contract agreements, bank account etc., which are cited in his order and after perusing those documents we don’t find any strength in the observation made by the Ld. CIT (A).
On verifying the paper book of the assessee running to 32 pages, we do not find any concrete evidence to establish that the assessee is actually executing any civil contract works with respect to the contracts he has claimed to have undertaken - assessee could also not furnish proper evidence to establish that the parties from whom the assessee had received the amount of ₹ 18 lakhs is genuine. Therefore, we do not find any infirmity in the order of the Ld. AO. For the above stated reasons, we set aside the order of the ld. CIT (A) and accordingly the order of the ld. AO is hereby reinstated. Appeal of the Revenue is allowed.
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2021 (8) TMI 936 - ITAT DELHI
Assessment u/s 153A - incriminating material was found during the course of search or not? - HELD THAT:- As held by the learned CIT – A that for assessment year 2008 – 09 till assessment year 2011 – 12, no incriminating material was found during the course of search pertaining to these years , we also do not find any material referred in the assessment order, the learned CIT DR also could not show us any incriminating material for all these years, therefore as these are the concluded assessment years, which could have been disturbed only if there is any incriminating material found during the course of search, we also find that the issue is squarely covered by the decision of the honourable Delhi High Court in case of CIT V Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - Therefore we uphold the order of the learned CIT – A deleting all the additions for all these years.
Addition of bogus purchases on protective basis in the hands of the assessee - HELD THAT:- Substantive addition has been made in the hands of another entity to womb assessee has supplied material. The learned departmental representative could not show us any evidence that in the hands of the parties where substantive additions have been made what is the fate of the said addition is. Unless, it is brought over knowledge the fate of substantive addition in the hands of another entity, the addition in the case of the assessee cannot be sustained. In view of this we set-aside this ground of appeal back to the file of the learned assessing officer to 1st ascertain the fate of addition made on substantive basis in the hands of another entity.
If the addition is sustained there on substantive basis, the addition on protective basis in the hands of this assessee deserves to be deleted. If the addition is not sustained in the hands of that assessee on its own merits, even then the protective addition cannot be sustained in the hands of this assessee. If, a finding is arrived in the case of the assessee in whose case substantive addition is made holding that bogus purchases booked by this assessee and not to that party and therefore no addition can be made in the hands of that party then, in that case the addition is required to be tested in the hands of this party is once again a fresh. Appeal of the learned AO are allowed for statistical purposes.
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2021 (8) TMI 934 - ITAT DELHI
Addition u/s 14A - HELD THAT:- CIT(A) applied the law laid down by the Hon’ble jurisdictional High Court in the cases of CIT vs. Holcim India Private Limited [2014 (9) TMI 434 - DELHI HIGH COURT] and Cheminvest Ltd vs. CIT [2015 (9) TMI 238 - DELHI HIGH COURT] wherein it has been held that no disallowance u/s 14 A of the Act can be made in a year in which no exempt income was earned are received by the assessee.
There is no dispute as to the fact that in this particular assessment year the assessee did not earn or receive any dividend income. Ld. CIT(A) has rightly applied the law laid down by the Hon’ble jurisdictional High Court to the facts of the case and deleted the addition made under section 14A of the Act read with Rule 8D of the Rules. We, therefore, do not find any ground to interfere with such findings and consequently confirm the same. Ground No. 1 of the Revenue’s appeal is accordingly dismissed.
Addition u/s 36(1) and (2) - loan balance due from Carrier Launcher Education Foundation (CLEF) was written off - HELD THAT:- Since the assessee had declared the amount in question as income in the earlier assessment years and paid in taxes thereon, Ld. CIT(A) held that the conditions required u/s 36(1)(vii) read with section 36 (2) of the Act.
It is not the case of the Revenue that in the earlier assessment years the assessee did not declare the impugned amount as income. It goes unchallenged that the assessee declared this amount as income in earlier assessment years and also paid the taxes. In view of the decision of the Hon’ble Supreme Court in the case of TRS Ltd vs. CIT [2010 (2) TMI 211 - SUPREME COURT]7, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable; and that,it is enough if the debt is written off as irrecoverable in the accounts of the assessee. There is no doubt that the conditions u/s 36(1)(vii) read with section 36 (2) of the Act are satisfied. The deletion of this addition by the Ld. CIT(A), therefore, does not suffer any illegality or irregularity. We, therefore, confirmed the same and dismiss the other ground of the appeal of the Revenue.
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2021 (8) TMI 930 - GUJARAT HIGH COURT
Denial of principles of natural justice - Penalty u/s 271AA - opportunity of hearing not being given - Whether it was incumbent on the A.O. to have given the writ applicant an opportunity of being heard before making a reference to the T.P.O. under Section 92CA(1) - Whether the A.O. must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise ? - HELD THAT:- If the C.B.D.T. itself has accepted the dictum as laid by the Bombay High Court in Vodafone India Services (P) Ltd [2014 (10) TMI 278 - BOMBAY HIGH COURT] and in Indorama Synthetics [2016 (8) TMI 151 - DELHI HIGH COURT] then, we see no good reason to take the view that no opportunity of hearing is required to be given to the taxpayer by the A.O. before recording his satisfaction or otherwise. Undoubtedly, in the case on hand, a show cause notice was issued by the A.O. and reply was filed by the assessee i.e. the writ applicant and considering the reply, the A.O., thereafter, proceeded to pass the order of reference to the T.P.O. We are of the view that an opportunity of hearing should have been given by the A.O. before he proceeded to overrule all the objections and refer the matter to the T.P.O.
No satisfaction being recorded in the order disposing of the objections - We find substance in the contention raised as A.O. could be said to have overlooked or rather ignored the jurisdictional requirement of a satisfaction in accordance with para 3.4 of the instruction No.3 of 2016 referred to above that there ought to be an income or potential of an income arising and/or being affected on determination of the A.L.P. of an international transaction or specified domestic transaction. In the absence of such satisfaction being recorded in the order disposing of the objections, the reference to the T.P.O. would also be without jurisdiction. We take notice of the fact that in the objections, a specific plea in this regard was taken, however, we do not find a word in this regard in the order disposing of the objections. On this issue, the only reply of the learned Senior Counsel appearing for the Revenue is that the same is self-serving and adherence the record. In other words, the only argument is that the Arm’s Length Price on the interest paid would have bearing on the income. We are not convinced with such stance of the Revenue.
We allow the present writ application. The proceedings are remitted to the A.O. for fresh consideration of the matter and the issues as discussed in the present order. The A.O. shall give an opportunity of hearing to the assessee and thereafter, proceed to pass a reasoned order or a speaking order dealing with the objections in accordance with law.
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2021 (8) TMI 929 - MADRAS HIGH COURT
Settlement Commission order u/s 245D(4) - whether no additional income was offered by the 2nd respondent for the assessment year 2012- 13 over and above the income disclosed in the returns filed under Section 139/142 (1) - whether the 1st respondent was justified in allowing the application filed by the 2nd respondent assessee to be proceeded particularly in the light of damning conclusions arrived by it in the course of proceedings before passing the impugned order settling the case of the 2nd respondent? - HELD THAT:- As attempt of the 2nd respondent was not bona fide and there was no true and full disclosure in the application filed under Section 245C (1) of the Income Tax Act, 1961. On this limited score itself, the 1st respondent Settlement Commission ought to have dismissed the application.
The 1st respondent Settlement Commission failed to note that it is not obliged to settle every case which comes up for being settled before it, if on facts, it finds that the attempt of and income tax, assessee-applicant was not bona fide before it and there was no true and full disclosure in the application filed under section 245C (1) of the Income Tax Act, 1961.
The olive branch extended to an assessee under the provisions of Chapter XIXA of the Income Tax Act, 1961 is intended to give a one-time chance to such defaulters who show remorse and make amendments by filing an application to settle the case with bona fides and sincerity by making a true and full disclosure of additional income which was not disclosed in the returns filed under section 139 of the Income Tax Act, 1961.
In this case, the 2nd respondent has been ill advised to not to make true and full disclosure and to take a chance considering the fact that the scope of enquiry before the 1st respondent Settlement Commission is a summary proceeding and proceeds on the principle of trust and assumption that an applicant has made a bona fide disclosure for settling the case. The 1st respondent merely relies on the inputs given by the departments to verify the claim of an income tax assessee.
Also noticed that even for the search year no additional amount of income was offered over and above the amount disclosed in the returns filed under section 139 of theIncome Tax Act, 1961. On this score also, the application was liable to be rejected for the aforesaid search assessment year.
Therefore do not find any reasons to sustain the impugned order of the 1st respondent Settlement Commission as the 2nd respondent had not made true and full disclosure as was required under the provisions of the Income Tax Act, 1961. The 2nd respondent had a golden opportunity to settle the case under Chapter XIX A of the Income Tax Act, 1961 which was squandered by the 2nd respondent.
Though, the 2nd respondent has eventually accepted the additional amounts determined by the 1st respondent Settlement Commission, the 1st respondent Settlement Commission ought to have dismissed the application filed by the 2nd respondent assessee, as the 2nd respondent took a calculated risk by not offering the correct amount as additional income which was not disclosed in the regular returns for the respective assessment years. The fact that the provisions of the Income Tax Act, 1961, pertaining to the settling a cases have been scrapped with effect from 1.4.2 2021 is of no consequence. Even if the provisions of the Income Tax Act, 1961 pertaining to settling of the case under Chapter XIXA were in the statute book, it would have made no difference.
The impugned order is set aside. The case is remitted back to the jurisdictional assessing officer to complete the assessments for the respective assessment years preferably within a period of three months from date of receipt of this order
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2021 (8) TMI 928 - ITAT MUMBAI
Disallowance of payment of liquidated damages and interest on delayed payment of Value Added Tax (VAT) as deduction - HELD THAT:- It is payment made for breach of contractual obligation by the assessee. These facts are not disputed by the revenue. Hence we hold that any payment made for breach of contractual obligation in the form of liquidated damages, cannot be construed as penal in nature. Hence the provisions of Explanation 1 to section 37(1) of the Act cannot be brought into operation at all in the facts of the instant case. Accordingly, we direct the ld AO to grant deduction towards liquidated damages.
Assessee had remitted the VAT dues to the Government with some delay for which it had duly suffered interest upto the date of payment. This interest payment is purely compensatory in nature and becomes an allowable deduction. The same cannot be construed as penal in nature and does not fall within the provisions of Explanation 1 to section 37(1) - Reliance in this regard has been rightly placed by the ld AR on Lachmandas Mathuradas [1997 (12) TMI 16 - SUPREME COURT] wherein it was held that the interest on sales tax is compensatory in nature and would be allowable as deduction in computing profits of the business. Accordingly, we direct the ld AO to grant deduction towards interest on delayed payment of VAT.
Disallowance of bad debts written off - HELD THAT:- We find that under invoicing of sale amounts got triggered pursuant to the Central Excise Audit conducted in earlier years and Audit Report dated 16.12.2005 was submitted wherein the under invoicing of sales to the extent of ₹ 39 lacs was pointed out to the assessee, which fastened an excise duty liability of ₹ 6,36,480/- on the assessee.This payment towards excise duty does not include any penalty for any violation of any law in force. Since the additional excise duty liability fastened on the assessee company could not be recovered from the customers, but still the assessee had to pay the same to the Government, the said excise duty was duly paid by the assessee and claimed as deduction during the year on the ground of bad debts written off. This is in our considered opinion, is squarely allowable as deduction both u/s 43B as well as u/s 36(1)(vii) of the Act. Hence we direct the ld AO to allow the same as deduction.
Deposits written off - We find that these are regular business deposits paid by the assessee in its ordinary course and since the said deposits were not recoverable by the assessee company, the same were sought to be written off by the assessee in its books of accounts and claim the said business loss as deduction. The fact of those deposits becoming irrecoverable is not disputed by the revenue before us. Hence the regular business deposits which became irrecoverable, when written off, would be squarely allowable as deduction u/s 28 of the Act as a business loss.
Disallowance of advances written off - HELD THAT:- As the deposits / advances written off were sought to be disallowed by the ld AO on the ground that no evidences were furnished by the assessee. But we find that from the bare perusal of the aforesaid chart, all the advances / deposits were given only in the ordinary course of its business by the assessee company - since the same were not properly examined by the ld AO in the original assessment proceedings, in the interest of justice and fairplay, we deem it fit and appropriate, to restore this issue to the file of ld AO for denovo adjudication in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is also at liberty to furnish fresh evidences, if any, in support of its contentions. Accordingly, the Ground No. 8 raised by the assessee is allowed for statistical purposes.
Reduced claim of deduction u/s 10A - whether deduction u/s 10A of the Act is to be granted qua the eligible unit before setting off losses of other non-10A units? - AO restricted the claim of deduction u/s 10A of the Act by setting off the loss incurred by the non-eligible unit of the assessee with the profits made by the STPI unit which is eligible for deduction u/s 10A of the Act, which action was upheld by the ld CITA also - HELD THAT:- We find that this issue is no longer res integra in view of the decision of the Hon‟ble Supreme Court in the case of CIT vs Yokogawa India Ltd [2016 (12) TMI 881 - SUPREME COURT] holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee.
Computation of deduction u/s 10A - HELD THAT:- As AR stated that the ld AO had denied deduction u/s 10A of the Act in respect of export proceeds in the sum of ₹ 17.33 lacs which was realised beyond the prescribed period . In this regard, the ld AR submitted that the ld AO verify the Foreign Inward Remittance Certificate (FIRC) and decided the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law. This was fairly agreed by the ld DR before us. Accordingly, we restore this issue to the file of ld AO to verify the FIRC and decide the issue of allowability of deduction u/s 10A of the Act for the same in accordance with law.
Disallowance of interest u/s 36(1)(iii) - Sufficiency of own funds - HELD THAT:- We find from the perusal of the balance sheet of the assessee for the year under consideration, that the assessee is having sufficient own funds of ₹ 77.04 crores which is several times more than the Capital Work in Progress figure of ₹ 1.13 crores. Hence it could be safely presumed that the Capital Work in Progress had been invested only out of own funds and not out of borrowed funds, by following the ratio laid down in the case of HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Respectfully following the same, we direct the ld AO to delete the disallowance of interest u/s 36(1)(iii).
Deduction for share issue expenses - HELD THAT:- We find that there is no dispute that the amounts spent on account of share issue expenses were incurred only for increasing the authorised share capital of the assessee company. We find that the Hon‟ble Supreme Court in the case of Brooke Bond India Ltd [1997 (2) TMI 11 - SUPREME COURT] had held that expenditure incurred on issuing share to increase share capital by a company would not be allowable as revenue expenditure and it would only be capital in nature. Respectfully following the said decision, the Ground No. 8 raised by the assessee is hereby dismissed.
Disallowance made on account of provision for warranties - HELD THAT:-We find that the assessee had furnished detailed explanation with regard to the provision for warranties before the ld CITA together with the basis of making the provision, its allowability as deduction in the earlier assessment years and with various decisions of Hon‟ble Supreme Court and Hon‟ble High Courts. We find that the ld CITA had simply brushed aside all the arguments of the assessee and made general observations which are not at all germane to the issue in dispute before him and upheld the action of the ld AO. We find that since sufficient opportunity was not given to the assessee by the ld AO in the assessment proceedings itself, we deem it fit and appropriate, in the interest of justice and fairplay, to restore this issue to the file of ld AO for denovo adjudication in accordance with law by duly considering all the submissions of the assessee in this regard. Needless to mention that the assessee be given reasonable opportunity of being heard.
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2021 (8) TMI 927 - ITAT BANGALORE
Royalty u/s 9(1)(vi) - TDS u/s 195 - Validity of demand raised u/s 201(1) and interest charged u/s 201(1A) - Assessee sells its products mainly through online marketing. - AO has mainly invoked the provisions of sec. 9(1)(vi) of the Act in respect of payments made to M/s Facebook and M/s Rocket Science Group (MailChimp) to hold that the same is “royalty” - for payments made for Amazon Web Services, the AO has also referred to the provisions of DTAA entered into India and USA in addition to sec.9(1)(vi) - HELD THAT:- On careful perusal of the relevant provisions of the agreement entered by the assessee with Facebook and Rocket Science Group (Mailchimp) would show that both these non-resident companies are allowing the assessee to use the facilities provided in their sites, which includes, inter alia, software facilities also. The purpose of compelling the assessee to use those facilities, as could be inferred by us, is to create an environment of ease in creating the “advertisement content” to suit the platforms of Facebook or Mailchimp. The environment of ease is beneficial and time saving to both the advertiser and the advertising platform. Thus the facilities have been created by the non-resident companies for mutual benefit. However, a person shall get the right to use those facilities only when he enters into an agreement with them for hosting his advertisement or for sending bulk mails, meaning thereby, the use of facilities is intertwined with the activity of placing advertisement in web portal of Facebook or sending bulk mails. In case of web hosting charges paid to AWS, the assessee is allowed to use the information technology infrastructure facilities.
In the two case YAHOO INDIA (P.) LTD.[2011 (6) TMI 162 - ITAT, MUMBAI] and PINSTORM TECHNOLOGIES (P.) LTD.[2012 (12) TMI 601 - ITAT MUMBAI]Tribunal held that the amount paid by the assessee to M/s Google Ireland Ltd for the services rendered for uploading and display of banner advertisement on its portal was in the nature of business profit on which no tax is deductible at source, since the same was not chargeable to tax in India in the absence of PE of Google Ireland Ltd in India.
In the instant case, the recipients, i.e, M/s Facebook and Rocket Science group only allow the assessee to use their facilities for the purpose of creating advertisement content. The payment made to Amazon Web Services (AWS) is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities
The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in the case of Facebook and Mailchimp. In the case of AWS, the payment is made only for using of information technology infrastructure facilities on rental basis. Hence the question of transferring the copy right over those facilities does not arise at all. The agreements extracted above also make it clear that the copyright over those facilitating software is not shared with the assessee. In any case, the main purpose of making payment is to place advertisements only and not to use the facilities provided by the non-resident companies. Thus the facilities provided by the nonresident companies are only enabling facilities, which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of AWS, the payment is in the nature of rent payments for use of infrastructure facilities.
We are of the view that the these non-resident recipients stand on a better footing than those assessees before the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Ltd (supra). Accordingly, following the ratio laid down by Hon'ble Supreme Court, we hold thatthe payments made to the above said three non-resident companies do not fall within the meaning of “royalty” as defined in DTAA. AO has not made out an alternative case that these payments are taxable as business income in India. Hence, there is no necessity for us to deal with that aspect
We are of the view that the payments made by the assessee to the three non-resident companies referred above cannot be considered ad “royalty payments” and hence they do not give rise any income chargeable in India under Indian Income tax Act in all the three years under consideration. In that view of the matter, there is no requirement to deduct tax at source from those payments u/s 195 of the Act.
Hence the assessee herein cannot be considered as an assessee in default u/s 201(1) of the Act. - Decided in favour of assessee.
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2021 (8) TMI 926 - ITAT AHMEDABAD
Addition u/s 68 - unexplained cash credit - amount received by the assessee from the NRIs - creditworthiness of the parties who have subscribed the shares of the assessee company - HELD THAT:- On making the reference to the average conversion rate of the dollar into Indian currency, on the basis of information available on Google as applicable for the year 2011 and 2012. The return of income in Indian currency works out at ₹ 2,25,14,877/- only ( $ 2,20,215* ₹ 47 + $ 2,29,524* ₹ 53) for Shri Mayur Patel and ₹ 1,29,44,382/- only for Shri Vimal Patel. Based on these documents, we can draw an inference that there were sufficient funds available with these investors namely Shri Mayur Patel and Shri Vimal Patel for acquiring the shares of the assessee company. Accordingly, we do not find any infirmity in the order of the learned CIT (A) for the deletion made by him with respect to these two investor.
Coming to the remaining three investors namely Shri Divyesh Patel, Ketu Patel and Rima Patel who have subscribed shares of the assessee company. In this connection we note that the assessee has not filed any copy of the income tax return filed by them in their country of residence i.e. USA. Likewise, the assessee has also not filed the bank statement of these parties maintained by them in their country of residence except the NRE accounts maintained in India. Admittedly, all the transactions were routed through the banking channel i.e. NRE account. In this regard, we find that there is a circular issued by the CBDT bearing number 05 of 1969 dated 20-02-1969 wherein it was instructed that there cannot be any tax liability on the amount remitted by the NRI in India for investment in India
Thus the amount received by the assessee from the NRIs in the manner as discussed above cannot be treated as unexplained cash credit under the provisions of section 68 of the Act. Accordingly, there is no question for treating the amount of share capital received by the assessee as unexplained cash credit under section 68 - Appeal of the assessee is allowed.
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2021 (8) TMI 925 - ITAT BANGALORE
Computation of Long Term Capital Gain - AO held that the buyback agreement was an independent transaction and worked out short term capital gains in respect of super structure to be constructed and to be transferred, thus, the long term capital gains was computed excessively - Revenue argued CIT(Appeals) adopted the value of land as on 1.4.1981 at ₹ 250/sq.ft. as against ₹ 100/sq.ft. by the AO - HELD THAT:- CIT(Appeals) after considering the submissions of the assessee that on reverse indexation method, the value of land as on 1.4.1981 is @ ₹ 781.25 / sq.ft., considered the same at ₹ 250 / sq.ft, which is most reasonable and the same is to be adopted. See LATE SMT KRISHNA BAJAJ VERSUS ASST COMMISSIONER OF INCOME TAX [2013 (12) TMI 544 - KARNATAKA HIGH COURT]
Determining the value for the surrender of land to the developer by the assessee and the co-owner for development of a housing project - JDA entered - AR submitted that the JDA has to be read along with supplementary agreement to JDA which suggests that the assessee has transferred 75.72% proportionate share of undivided interest in land as against the original transfer of 51.85% of undivided share in land and assessee will retain only 24.28% of proportionate share of undivided interest in land - HELD THAT:- When we read JDA dated 13.10.2014 along with supplementary agreement it shows that assessee transferred only 24.28% of undivided interest in land to the developer for a consideration of ₹ 13.30 crores and 11475 sq.ft. of constructed area. Further, the 6 flats agreed to be surrendered by the landlord by the revised JDA agreement comprises of two components i.e., land and building. The value of proportionate area of undivided interest in the landed property of 8957.37 sq.ft at ₹ 24,611.64 per sq.ft. and the value of building of constructed area of 11934 sq.ft. charged at ₹ 2,500 per sq.ft. works out to ₹ 2,98,35,000. The land value will be ₹ 10,91,65,000 worked out at ₹ 24,611.44 per sq.ft. The registered valuer has given the value of land in his report at ₹ 20,000 to ₹ 22,000 per sq.ft. which is kept on record at page 127 of PB. Therefore, the valuation adopted for 11934 sq.ft. constructed area cannot be compared with the value of constructed area of 11475 sq.ft. retained by the Owner. Being so, this was rightly followed by the CIT(Appeals) as mentioned in his order. We do not find any infirmity in the valuation of the CIT(Appeals) towards transfer of 75.72% undivided interest in land to the developer.
CIT(Appeals) calculated the short term capital gain on sale of built-up area at Nil - The assessee herein transferred 75.72% of undivided share in land to the developer. The JDA and supplementary agreement cannot be read isolatedly and it gives distorted picture on transfer of landed property to the developer. When we read JDA dated 13.10.2014 along with supplementary agreement to JDA dated 19.8.2015, it suggests that the whole arrangement is to transfer 75.72% of undivided share in land to the developer and this is a single transaction so that there is no computation of short term capital gain in this case as computed by the AO. The CIT(Appeals) has given relief on a different count and computed the short term capital gain at Nil. The same is confirmed.
Exemption u/s 54 - HELD THAT:- As in this case the deduction was claimed by assessee u/s. 54 of the Act and there was no prohibition in this assessment year with regard to owning more than one residential house so as to deny exemption u/s. 54
The assessee in this case purchased new residential house situated at No.228 (originally part of No.285 and sub-numbered as 285/1, renumbered as 66 and later as No.228) 4th Main Road, Malleshwaram, Bangalore – 560 055, PID No.7-3-66 for a consideration of ₹ 7.5 crores along with stamp duty totalling to ₹ 7,99,50,636. The assessee’s share in the value of property is ₹ 3,99,75,318 on which the assessee is entitled to deduction u/s. 54. The same is directed to be granted.
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2021 (8) TMI 924 - ITAT DELHI
Assessment of trust - carry forward of deficit - HELD THAT:- CIT(A) correctly drawing support from the decision of the Hon’ble High Court of Delhi in the case of Raghuvanshi Charitable Trust [2010 (7) TMI 158 - DELHI HIGH COURT] directed the AO to allow the set off of carry forward deficit. - Decided against revenue.
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2021 (8) TMI 923 - ITAT MUMBAI
Assessment u/s 153A - Whether no search conducted on the assessee but a survey under section 133A of the Act was conducted? - whether the assessment is to be framed under section 143(3) r.w.s.153C of the Act or under section 143(3) r.w.s.153A of the Act. - HELD THAT:- Assessment has to be framed u/s 143(3) r.w.s. 153C of the Act as there was no search on the assessee u/s 132(1) of the Act. The assessee was only covered under survey action u/s 133A of the Act on 24.01.2011. So the score the order of the AO is bad in law
In the present case the assessee is a person other than the searched person. Proceedings u/s 153C of the Act can be initiated when the pre-conditions are fulfilled otherwise the proceedings and consequent assessment would be rendered bad and invalid. We note that no such satisfaction has been recorded by the AO of the searched person on the basis of incriminating materials seized during the search as has been testified and brought out by RTI application by the assessee and response thereto by the AO that no satisfaction has been recorded by the AO of the searched person i.e. Katrina Kaif.
No incriminating documents were seized during search on Kaitrina Kaif belonging to the assessee as is apparent from the punchnama prepared during search. Also during the course of recording of statement of Kaitrina Kaif not even a single query was raised on the basis of materials seized from Ms Katrina Kaif about the assessee - contentions of the Ld. Counsel of the assessee carry weight that even if the assessment framed is presumed to be under section u/s 143(3) r.w.s. 153C of the Act, even then the assessment is bad in law as the notice has been issued with the satisfaction of the AO of the searched person. In our opinion the assessment framed by the AO is without jurisdiction and can not be sustained.
Undisclosed receipt from the clients - Addition on the basis of some rough workings found from the back up of the computer of Ms. Sandhya Ramachandran for the period for which she was not employed with the assessee company - HELD THAT:- We find that seized documents do not prove that any cash is paid to Mr. Zarine Khan whose name is mentioned in the document. We also note that Mr. Zarine Khan has not been examined. Moreover Ms. Sandhya Ramachandran stated in her statement that she was not aware of the seized documents as the same pertain to the period prior to joining the employment. Addition in this case is based upon surmises and conjuncture and AO & ld CIT(A) have failed to bring any material on record and consequently the same can not be sustained. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. The ground no. 1 of the assessee’s appeal is allowed.
Addition of undisclosed professional receipts on the basis of blackberry conversation between one Ms. Sandhya Ramachandran and unknown some third party - HELD THAT:- We find that this addition was also based on conjuncture and surmises. Upon perusal of the record before us we find that there is no evidence of any cash payment to Ms. Katrina Kaif or on her behalf. Even the third party who was on the chat with Ms. Sandhya Ramachandran is not known and Ms. Katrina Kaif in her statement has denied such transactions.
Addition on the basis of entries in the loose papers seized - CIT(A) deleted the addition by observing and upholding that addition as made by the AO is based upon the presumptions, assumptions and extrapolation and there was no materials before the AO - HELD THAT:- The Supreme Court in Comman Cause [2017 (1) TMI 1164 - SUPREME COURT] was dealing with incriminating materials in form of random sheets and loose papers, computer prints, hard disk, pen drives etc. which were found during search. It was held that entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. The Bombay High Court in CIT v Devesh Agarwal [2017 (3) TMI 893 - BOMBAY HIGH COURT] has held that no addition can be made on the basis of presumptions, surmises and conjectures. In view of these facts and the decisions as stated above, we are inclined to uphold the order passed by the ld CIT(A) on this issue. The ground no. 2 is allowed.
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2021 (8) TMI 922 - ITAT MUMBAI
Rectification of mistake u/s 154 - debatable issue - Granting short interest u/s 244A - not adjusting the refund granted first towards the interest receivable and the balance remaining against the tax amount receivable by the assessee - HELD THAT:- Adjustment of refund issued earlier has to be adjusted against the interest and only thereafter against the principal amount of tax. The issue is squarely covered by the various decisions of Union Bank of India [2016 (8) TMI 688 - ITAT MUMBAI], DCIT vs. State Bank of Saurashtra [2017 (10) TMI 1252 - ITAT MUMBAI], Bank of Baroda vs. DCIT [2018 (12) TMI 1836 - ITAT MUMBAI] and DCIT vs. Peerless General Finance & Investment Co. Ltd. [2017 (8) TMI 237 - ITAT KOLKATA] - Thus a refund issued to the assessee on various dates has to be first adjusted against the interest due on the income tax and thereafter against the principal amount. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to make adjustment of refund as indicated above. - Decided in favour of assessee.
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2021 (8) TMI 921 - ITAT MUMBAI
Maintainability of appeal - low tax effect - Penalty u/s 271(1)(c) - Estimation of income on bogus purchases - whether addition is based on information received from external sources in the nature of law-enforcement agencies namely Sales Tax Authorities? - scope of CBDT Circular no 17/2019 dated 08.08.2019 r.w Circular No. 3/2018 dtd. 11/07/2018 as amended on 20.08.2018 - HELD THAT:- Admittedly, it is a settled position of law that quantum proceedings and penalty proceedings are independent and distinct proceedings and confirmation of an addition cannot on a standalone basis justify imposition/upholding of a penalty u/s 271(1)(c) of the Act. Adopting the same logic, we are of the considered view that unless a specific exception is provided in the circular w.r.t penalty also, it could by no means be construed that penalty was to be treated at par with the quantum additions.
discernible from Clause 10(e) of the aforesaid CBDT Circular No. 3/2018 (as amended on 20.08.2018), the same applies only to additions which were based on information received from external sources. As noticed by us hereinabove, since the levy of penalty by no means could be construed as an addition within the meaning of Clause 10(e) of the aforesaid circular, therefore, we do not find any merit in the contentions advanced by the ld. D.R that the aforesaid exception carved out in the CBDT Circular No. 3/2018 (supra) would also take within its realm a penalty imposed under Sec. 271(1)(c) w.r.t the additions made by the A.O towards bogus purchases on the basis of information received from Sales Tax Department, i.e an external agency. Accordingly, we are of the considered view that the appeal of the revenue is covered by the CBDT Circular No. 17/2019, dated 08.08.2019, and thus, in our considered view is not maintainable. - Decided against revenue.
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2021 (8) TMI 920 - ITAT MUMBAI
Special rate of tax qua the interest income of the assessee - exigibility to tax of the interest income on fixed deposits & bank interest - assessee had failed to substantiate that the interest income in question was offered for tax in his return of income filed in U.S.A. - whether or not the assessee was eligible to avail special rate of tax on the interest income on fixed deposits & bank interest @10% and 15% as per the India-USA DTAA? - CIT(A) had concluded that the assessee having failed to file the TRC and Form 10F with the A.O, thus, could not have sought exigibility to tax of the interest income on fixed deposits & bank interest @10% and 15% on the basis of the India-USA DTAA - HELD THAT:- Assessee could not furnish the TRC in the course of the assessment proceedings because of paucity of time there were justifiable reasons for the assessee in not filing the TRC in the course of the assessment proceedings. But then, we cannot also remain oblivious of the fact that the A.O had declined to apply the special rate of tax as per the DTAA, for the reason, that the assessee had failed to substantiate that the interest income in question was offered by him for tax in his return of income filed in U.S.A. As observed by us hereinabove, the very basis of rejection of the assessee’s claim for applying of special rate of tax as per the India-USA DTAA by the A.O is absolutely misconceived and in fact misplaced.
As stated by the A.R rightly that the assessee was not seeking credit of taxes paid on his income abroad, but was seeking taxing of his interest income as per the special rates on the basis of the India-USA DTAA. Considering the fact that the assessee had filed the TRC with the A.O though after the conclusion of the assessment, coupled with the reasons that had led to delay in obtaining of the same alongwith the Form 10F, we are unable to persuade ourselves to the summarily rejection or in fact discarding of the same by the CIT(A).
As the assessee had filed the TRC and Form 10F, therefore, there was no justification in declining the applying of the special rate of tax qua the interest income on fixed deposits & bank interest amounting to ₹ 17,87,709/- @10% and 15% that was claimed by him on the basis of the India-USA DTAA in his return of income. - we direct the A.O to determine the taxability of the interest income as per the special rate of tax on the basis of India-USA tax treaty. - Decided in favour of assessee.
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2021 (8) TMI 918 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - Bogus LTCG - As per AO assessee taken accommodation entry for claiming bogus capital gain - HELD THAT:- We are of the considered view that it cannot be said that there is no reason to believe that the income chargeable to tax has escaped assessment because such exercise of reopening has been made only after due inquiries and recording of statements of concerned persons, as referred to herein above, and on having found prima facie material, impugned notice is issued to the petitioner. It further appears that, no procedural lapse and/or deviation from procedure prescribed in reopening and the reasons recorded do not lack validity as necessary approvals from the competent authority appears to have been received.
Function of the assessing authority at this stage is to administer the statute and what is required is a reason to believe and not to establish fact of escapement of income and therefore, looking to the scope of Section 147 as also sections 148 to 152 of the Act, even if scrutiny assessment has been undertaken, if substantial new material is found in the form of information on the basis of which the assessing authority can form a belief that the income of the petitioner has escaped assessment, it is always open for the assessing authority to reopen the assessment.
AO has reason to believe that the petitioner is a beneficiary of accommodation entry and basis for formation of such belief is several inquiries and the investigation by the Investigation Wing, Ahmedabad and report thereof. The reasons for the formation of the belief by the Assessing Officer in the instant case, appear to have a rational connection with or relevant bearing on the formation of belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. Accordingly, no interference is called for at the hands of this Court in this petition under Article 226 of the Constitution of India. - Decided against assessee.
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2021 (8) TMI 916 - ITAT DELHI
Assessment u/s 153A - Bogus purchases - suppression of the gross profit by obtaining bogus purchase bills by the assessee - HELD THAT:- Only addition made by the learned assessing officer is with respect to the gross profit rates of the assessee as per books of accounts and the gross profit rates derived on the basis of instances found from tally software during the course of search. The learned assessing officer has not disturbed the book results but has made an addition of the gross profit, which the assessee should have earned according to him based on the incriminating documents found for subsequent years for the impugned years. CIT – A as also not deleted the addition on that basis but for the reason that the comparison made by the learned assessing officer of different material of different lots sold at different time.
DR has agreed that that the learned assessing officer has computed the gross profit by taking transactions of the nearby dates. However, it is not denied that the learned assessing officer has taken the highest rate of sales as well as lowest rates of purchases for computing the additional gross profit that should have been earned by the assessee. The assessee has produced the copies of the paper book, which are placed before the learned CIT – A wherein he has verified the details of the material sold, quantity sold with respect to the various bills placed in those paper books and found that the comparison of the gross profit made by the learned assessing officer is not comparable.
Another argument of the learned departmental representative is that the subsequent year’s acceptance of the book results by the learned assessing officer cannot help the case of the assessee in deleting the addition in those years, which are in appeal.
We find that the subsequent years assessments are also completed u/s 143 (3) of the act and no addition has been made by the learned assessing officer. Admittedly in subsequent years there was no seized material available and the learned assessing officer has not extrapolated the gross profit in subsequent years, which he did for the impugned years in the appeal, however the acceptance of the subsequent years gross profit shows that the books of accounts prepared by the assessee are acceptable. The gross profit ratio of the subsequent years is also not of much difference compared to the years in this appeal. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the addition on account of suppressed gross profit, which was not based on any incriminating material found during the course of search for the respective years and because of erroneous comparison made by the learned assessing officer. - Decided against revenue.
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2021 (8) TMI 914 - DELHI HIGH COURT
Validity of assessment order - imposition of penalty under Section 274 read with Section 271AAC(1) and penalty under Section 274 read with Section 270A of the Income Tax Act, 1961 - HELD THAT:- This Court is of the view that Section 144B(1)(xvi)(b) mandatorily provides for issuance of a prior show cause notice and draft assessment order before issuing the final assessment order - Since in the present case no prior show cause notice as well as draft assessment order have been issued, there is a violation of principles of natural justice as well as mandatory procedure prescribed under “Faceless Assessment Scheme”.
The impugned assessment order, notice of demand, show cause notice for imposition of penalty under Section 274 read with Section 271AAC(1) and penalty under Section 274 read with Section 270A of the Act, dated 22nd April 2021, are set aside and the matter is remanded back to the Assessing Officer, who shall issue a draft assessment order and thereafter pass a reasoned order in accordance with law - petition allowed by way of remand.
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