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Income Tax - Case Laws
Showing 241 to 260 of 661 Records
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2021 (8) TMI 912 - ITAT MUMBAI
Claim of deduction u/s 10AA in respect of an eligible undertaking to be allowed on standalone basis - HELD THAT:- We find that the deduction u/s 10AA of the Act is to be allowed on stand alone basis in respect of its profits derived from the eligible undertaking and that the losses of non-eligible units need not be set off with the profits of the eligible unit. 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] as held we answer the appeals and the questions arising therein, as formulated at the outset of this order, by 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.
TDS u/s 194H OR 192 OR 194J - Disallowance of commission paid to director u/s 40(a)(ia) - AO observed that the assessee had paid commission to the directors of the assessee company on which no tax was deducted at source - HELD THAT:- We find that this issue is squarely covered by the decision of this Tribunal in assessee’s own case for the Asst Year 2009-10 Section 192, unlike other TDS provision, require deduction of tax at source under the head Salaries only “at the time of payment only‟ and not otherwise. The quantum or accrual of expenses is nowhere disputed by revenue. The DR has fairly conceded the above position and therefore, we find no infirmity in the order of CIT(A) and hence, this ground of the revenue is also dismissed - where commission is paid to directors as per their terms of employment for work done in their capacity as whole time directors, such commission should be treated as an incentive in addition to salary and same would not come within the purview of commission and brokerage as defined in Section 194H nor a fees for Technical services as defined in Section 194J. - Decided against revenue.
Apportioning the salary or operational expenses of CEO, MD or Finance Department etc which are common to both eligible and non-eligible undertakings of the assessee company - HELD THAT:- As decided in own case [2019 (2) TMI 1955 - ITAT MUMBAI] ITAT remanded the impugned issue back to the file of ld CITA for denovo adjudication. We find that the issue in dispute for the year under consideration should also be restored to the file of ld CITA for denovo adjudication in accordance with law. The assessee is at liberty to file fresh evidences, if any, together with all legal case laws, in support of its contentions and the ld CITA is directed to dispose of the set aside appeal after due consideration of all the factual and legal submissions of the assessee company, in accordance with law. Accordingly, the Ground No. 3 raised by the revenue is allowed for statistical purposes.
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2021 (8) TMI 911 - ITAT DELHI
TP Adjustment - Comparable selection - exclusion of the comparables directed by Ld.CIT(A) i.e. Exensys Software Solutions Ltd.; Thirdware Solutions Ltd., Visualsoft Technologies (Seg.); Sankhya Infotech Ltd. from the final list of the comparables - HELD THAT:- We find that the Ld.CIT(A) after considering the material placed on records and has given finding on facts in respect of the functional comparability of the comparables selected by the TPO. The Revenue has failed to effectively rebut the finding of Ld.CIT(A). Moreover, this issue has already been examined in the case of Colt Technology Services India Pvt.Ltd . [2012 (10) TMI 1025 - ITAT DELHI] - No reason to interfere in the findings of Ld.CIT(A).
Claim of depreciation on software - no ownership claim of the assessee proved - HELD THAT:- Undisputedly in this case, the invoices were raised after 15 months as observed by the Assessing Officer. Further, the Assessing Officer has categorically observed that invoices reflected that sales tax/VAT has been charged on sale of goods. Such taxes have been charged in August 2005. He observed that without invoices and charging of sales tax, sale could have not been affected. The assessee had not become the owner of the software wholly or partly before 31.03.2005 hence, on account of ownership claim of the assessee is failed. We are in agreement with the view expressed by the Assessing Officer in our considered view merely downloading of software and providing key to use by the vendor would not ipso facto entitle the assessee for claiming depreciation. Section 32 of the Act provides depreciation on the eligible assets owned wholly or partly by the assessee and used for the business or profession. Hence, the law is clear. There is no ambiguity under the law. Without proper sale, the assessee could not have owned wholly and partly the assets on which depreciation have been claimed. We, therefore, set aside the finding of Ld.CIT(A) on this issue and restore the finding of the Assessing Officer.
Working capital adjustment while benchmarking the international transaction of provision of software services - HELD THAT:- In view of the direction given by Ld.CIT(A), we hereby direct the TPO to allow working capital adjustment to the assessee.
Addition on account of liabilities returned back in relation to acquisition of fixed assets - HELD THAT:- applying the ratio laid down by Hon’ble Supreme Court in the case of CIT vs Mahindra & Mahindra Ltd [2018 (5) TMI 358 - SUPREME COURT] and Nectar Beverages Pvt.Ltd. [2009 (7) TMI 5 - SUPREME COURT] hence, the amount written back in respect of purchase of fixed assets, being capital in nature, is not a write back of trading liability covered u/s 41(1)We find merit in contentions of the assessee. We, therefore, direct the Assessing Officer to delete the addition made on account of liability written back related to capital assets.
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2021 (8) TMI 909 - ITAT BANGALORE
Claim of Foreign Tax Credit under Section 90 - Whether lower authorities are not justified in failing to appreciate that the case of the Appellant falls under Section 90(1)(a)(ii) and hence the appellant is eligible for relief in respect of tax paid in Tanzania? - whether the tax deducted at source in Tanzania is not an income that accrues or arises outside India and therefore, the same cannot be included in the total income of the Appellant? - HELD THAT:- In the case of section 90(1)(a)(i), relief is granted in respect of income on which income tax is paid in both the countries. Whereas, u/s. 90(1)(a)(ii) of the Act, relief is granted in respect of income tax chargeable in both the countries - under clause (i) assessee should have paid tax in both countries, whereas under clause (ii) it is enough if the income is chargeable to tax in both the countries and there is no mandate that the tax should have been paid in both the countries. He also brought to our attention Article 23 of DTAA between India & Tanzania.
What is said in the case of India-Korea DTAA is squarely applicable to the facts of the present case. We have already referred to the observations of this Tribunal in the case of Ittiam Systems Pvt. Ltd. [2021 (1) TMI 1106 - ITAT BANGALORE] in the earlier paragraphs. Accordingly, relief u/s. 90 to be given on the amount which is lower of the following i.e., Tax paid on income outside India; or payable in India on such doubly taxable income, whichever is lower.
Steps to compute the double taxation relief are as follows:-
(i) Compute global income i.e., aggregate of Indian income and foreign income;
(ii) Compute tax on such global income as per the slab rates applicable as per Indian Income-tax Act;
(iii) Compute average rate of tax (i.e., global income divided by amount of tax);
(iv) Compute amount by multiplying foreign income with such average rate of tax; and
(v) Compute tax paid in foreign country.
The amount of relief shall be lower of (iv) & (v) i.e., tax paid on income outside India and tax payable under the Indian Income-tax.
We direct the AO to grant FTC as above. This ground is partly allowed.
Deduction u/s 80G - AR submitted that this issue though raised before the CIT(Appeals), but he failed to adjudicate the same. The evidence is available to the extent of ₹ 3,78,000 for payment of donation and the assessee is entitled to donation u/s. 80G - HELD THAT:- After hearing both the parties, we remit this issue to the file of AO for fresh decision on this issue with a direction to the assessee to provide necessary evidence in support of the claim of deduction u/s. 80G.
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2021 (8) TMI 908 - ITAT DELHI
TP Adjustment - international transaction pertaining to purchase of capital goods from AE - AO made adjustment by denying the 8% markup charged by the AE on the supply of capital goods and disallowed the depreciation also to that extent - assessee contested that the purchase of capital goods cannot be benchmarked separately. The main argument was the depreciation do form a component of operating cost and hence cannot be given separate treatment - HELD THAT:- Since, the assessee has been denied proper opportunity, the TPO and the ld. DRP did not have the benefit of examining the purchase of capital goods, the issue of allowability or not of the markup of 8% charged by the AE has not been determined as per the approved methods, we hereby deem it fit to remand the matter to the file of the ld. DRP to determine the ALP as per the approved methods after giving an opportunity to the assessee to make their submissions. The assessee is also hereby directed to comply with the directions of the ld. DRP in furnishing the complete details and substantiating their case.
Addition of liquidated damages incurred by the assessee pursuant to breach of contractual arrangements - HELD THAT:- As decided in ow case [2019 (12) TMI 667 - ITAT DELHI] the charges pertain to contractual obligation which was not complied with but the AO held it as penalty. The matter has been remanded back to the file of the AO for fresh examination in the assessment year 2014 -15 as well as 2013014. We have given due consideration to the observations of the ld. DRP, the expense also do not pertain to the year in question. Hence, the AO is hereby directed to examine the issue afresh with regard to the allowability of the expenses per se and also the year to which the expenses belong to.
Interest on Foreign Term Loan - AO disallowed the interest paid on foreign term loan as no TDS was deducted by the assessee - AO disallowed it on the grounds that the assessee failed to deduct TDS on the interest credited in the books whereas the assessee submitted that only an amount of ₹ 5,06,995/- has been accrued on the loan received - HELD THAT:- As DRP referred the matter to the AO for factual verification. Since, it is a matter of factual verification, we decline to interfere with the order of the ld. DRP.
Reconciliation of amounts in 26AS - HELD THAT:- The revenue as per the books of accounts of the assessee was ₹ 2,39,74,386/- against the revenue as per 26AS of ₹ 5,73,39,416/- thus, reflecting a difference of ₹ 3,33,65,030/- the sum which has been treated as income of the assessee by the Assessing Officer and the ld. DRP. The assessee is hereby directed to submit the reconciliation statement and the accounting principles used with reference to the continuity of treating the various receipts.
Effect of order u/s 154 - HELD THAT:- AO failed to take into consideration the order u/s 154 passed by the TPO on 26.03.2021 reducing the TP addition. The same is hereby directed to be rectified.
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2021 (8) TMI 905 - ITAT AMRITSAR
Revision u/s 263 - treating the surrendered amount of income as deemed income u/s 69/69A or from normal business income - No additions made by the AO u/s 115BBE - HELD THAT:- As the assessee in rectification proceeding under section 154 had submitted the manner in which the amount of ₹ 1.5 crore was treated in the accounts of the assessee. After considering all the aspect and considering the decision of the Tribunal, the assessing officer has not proceeded against the assessee.
In our view the decision of the Tribunal in the matter of Dev Raj Hi Tech Machines Ltd [2015 (11) TMI 1375 - ITAT AMRITSAR] was clearly applicable to the facts of the present case. In fact the said case was referred by the Principle CIT , however she had neither distinguished nor discussed while passing the impugned order. PCI had simply relied upon the explanation 2 to section 263 of Act and wrongly held that the assessing officer did not make sufficient inquiries.
The order passed by the PCIT cannot be upheld because the assessing officer had made sufficient enquiries and had correctly taken income surrendered by the assessee as business income and after due considerations of reply. Secondly the view taken by the assessing officer was supported by the view of Tribunal in the case of Dev Raj Hi Tech Machines Ltd [2015 (11) TMI 1375 - ITAT AMRITSAR] thus it cannot be said that the view taken by the assessing officer was not a plausible view ,hence it was erroneous. Admittedly when two views are possible, then the view taken by the assessing officer cannot be said to be wrong as the same was not to the liking of the opinion of the PCIT, for the above-said purposes, we may rely upon Max India. [2007 (11) TMI 12 - SUPREME COURT]. Lastly the finding recorded by the DCIT relying upon explanation 2 to section 263 cannot be sustained, as explanation 2 to section 263, which was inserted w.e.f 1.6.2015 and was held to be prospective - We found that the order passed by PCIT was not in accordance with law and therefore, we quash the same.
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2021 (8) TMI 904 - ITAT AMRITSAR
Capital Gain on the acquisition of Land - Claim of exemption u/s 10(37) - Agriculture land - whether the acquired Land falls within the purview of 10(37) of the Income Tax Act or not? - HELD THAT:- CIT(A) has rightly held that the Land was the land reference u/s 2(14) (iii) of the Act as it is situated within 650 m of the Municipality limit. CIT appeal had rightly held that the Land was acquired by way of compulsory acquisition under National Highway Authority of India act.
CIT(A) has wrongly held that the Land was under agricultural use for a period of two years before its acquisition. He was improperly swayed by the compensation order passed granted by the acquisition authorities, giving the compensation by treating the Land as agriculture.
There is a distinction between the grant of compensation for the Land at an agriculture rate and cultivation of the Land fortwo years for agricultural purposes before acquisition. The SDM report categorically mentioned that no compensation for standing crops was given to the assessee. No evidence was found that the Land was used for agricultural purposes for two years prior to its acquisition.
Capital gain tax would be leviable on the said compensation received as the land would continue to be the capital asset within the meaning of section 45 of the Income Tax Act. In our opinion, the assessee is liable to pay the capital gain tax on the compensation amount received by the assessee on the land that was not under cultivation.
Undoubtedly, the Land other than 8 kanal 30 marlas was the capital asset within the meaning of section 2 (14)(iii) read with section 10(37) r/w section 45 of the Income Tax Act and therefore, any capital gain arising to the assessee on the sale of the land land would be the subject matter of the capital gain.
Long terms capital gain to the file of the AO, therefore, the pro rata interest earned on compensation received for cultivated and non-cultivated land shall, be calculated by AO, and consequential benefit shall be given to the assessee on compensation received on cultivated land. As we have held, assessee's land partly was urbanized agricultural cultivated Land and remaining as a capital asset. Therefore the assessee would not be entitled to the benefit of section 54B of The Income Tax Act 1961. Appeal of the Revenue is partly allowed.
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2021 (8) TMI 903 - ITAT PUNE
Addition on account of proportionate interest - CIT(A) confirmed the disallowance made by the AO only on the ground that the assessee failed to establish the commercial expediency regarding the interest free loans made in the year under consideration - HELD THAT:- DR vehemently argued the said decision of ITAT for A.Y. 2011-12 [2017 (1) TMI 1758 - ITAT PUNE] is not applicable for the year under consideration for the reason that the CIT(A) held clearly there is a change of facts compared to earlier years and the year under consideration. We note that the Co-ordinate Bench of Tribunal discussed the issue in detail wherein we find the facts and circumstances arose in A.Y. 2011-12 and in the year under consideration i.e. 2012-13 are identical.
Respondent-Revenue did not bring on record any view contrary to the view taken by the Coordinate Bench of Tribunal in assessee's own case for A.Y. 2011-12 and in view of the same, we find the order of CIT(A) is not justified. The finding of Co-ordinate Bench of Tribunal rendered in A.Y. 2011-12 vide its order dated 27-01-2017 [2017 (1) TMI 1758 - ITAT PUNE] in assessee's own case is applicable to the facts and circumstances for A.Y. 2012-13. Thus, the addition made by the AO and confirmed by the CIT(A) is deleted and the grounds raised by the assessee are allowed.
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2021 (8) TMI 901 - ITAT MUMBAI
Addition of short term capital gain - LIFO v/s FIFO method - Addition in respect of L&T shares by following the LIFO method for calculating the short term capital gain - HELD THAT:- ICICI Bank securities statement had a mistake wherein the sale of shares were shown out of bonus shares considering the cost at nil. The assessee also produced correct statement before CIT(A). CIT(A) failed to consider the same and confirmed the order of AO. Similarly, there are several other mistakes which were pointed out by the Ld. Counsel of the assessee before us. Under these circumstances, we are of the opinion that the capital gain of the assessee should be computed on the basis of method followed by the assessee consistently which is stated to be FIFO method. We note this was the contention of the assesse before the first appellate authority.
The capital gain is required to be computed on the basis of FIFO method and not on LIFO method as has been done by the AO. In other words, the capital gain on sale of shares by the assessee is to be computed by taking the cost of shares on LIFO basis meaning thereby that bonus shares issued on 17.07.2013 are not to be taken following the FIFO method. It is for this reason, we are not in agreement with the conclusion drawn by the CIT(A) and accordingly we restore the matter back to the file of the AO with the direction to compute the short term capital gain on FIFO method after allowing reasonable opportunity of hearing given to the assessee. Appeal of the assessee is allowed for statistical purposes
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2021 (8) TMI 898 - ITAT MUMBAI
Assessment u/s 153A - Deemed dividend addition u/s 2(22)(e) - whether the statement recorded during search u/s 132(4) of the Act or extracts of books of accounts maintained by the assessee constitute incriminating materials found during search or not? - HELD THAT:- As decided in assessee;s own case [2021 (8) TMI 894 - ITAT MUMBAI] such materials/evidences can not be said to be found during the course of search. We further find merits in the contentions of the assessee that materials has to be found during search and it has to be incriminating. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. In our considered opinion, the findings of the ld CIT(A) that statement recorded during search constitutes incriminating material is also not correct as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search - we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year - Decided in favour of assessee.
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2021 (8) TMI 897 - ITAT MUMBAI
Assessment u/s 153A - Addition u/s 68 - unsecured loan treated as unexplained cash credit - HELD THAT:- Indisputably the assessment in the instant year has not abated on the date of search. Keeping in view the said facts and circumstances, we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating record found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment.
Addition u/s 68 - Assessee has discharged its burden by furnishing documents to establish the identity, creditworthiness of the lender, genuineness of the transaction and source of funds of the lender etc. It is a well settled proposition that with regard to burden of proof viz., the claim for deduction and/or exemption is upon an assessee - in matters of addition and disallowance, the same is on Revenue. Subsequently, once the assessee has submitted evidences, the burden on the assessee stood discharged and the onus to disprove lies and shifts to the revenue or on the other side by way of onus of proof.
Therefore, in absence of any evidence, addition made merely on the basis of presumption and assumption cannot be sustained. The case of the assessee finds support from the decision in the case of Umacharan Shaw & Bros. [1959 (5) TMI 11 - SUPREME COURT]wherein it was held that there was no material on which the Income-tax Officer could come to the conclusion that the firm was not genuine. There are many surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof in these matters. We also find merits in the without prejudice contention of the ld AR that under Section 68 assessee has no onus to explain the source of source as the 1st Proviso to section 68 of the Act was introduced via the Finance Act, 2012, w.e.f. 1st April 1, 2013. The provisions are applicable where the sum so credited consists of share application money, share capital, share premium. The impugned addition is made on account of not proving source of source of the alleged bogus loan entries. Therefore, the provision doesn’t apply in the case of the assessee. Hence, the assessee only has to prove the source of the funds and not the “source of source”. - Decided in favour of assessee.
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2021 (8) TMI 896 - ITAT MUMBAI
TP Adjustment made on account of notional interest on loan given to wholly owned subsidiary by the assessee company - As argued only LIBOR rate should be taken for the purpose of adding notional interest income on account of interest free loan given to foreign subsidiary - HELD THAT:- As relying on own case [2021 (2) TMI 1018 - ITAT MUMBAI] we direct the ld. TPO to consider only LIBOR rate @1.52% as arm’s length price for benchmarking the interest free loan given by the assessee to its AE and recompute the transfer pricing adjustment accordingly. Accordingly, the ground No.1 raised by the assessee is partly allowed.
Transfer pricing adjustment made on account of fee for corporate guarantee - HELD THAT:- As decided in own case [2021 (2) TMI 1018 - ITAT MUMBAI] we do not find any merit in the submissions of the assessee that provision of corporate guarantee is not an international transaction. As regard the arm's length rate of fee/commission, the learned Counsel for the assessee relying decision of the Asian Paints India Ltd. (supra) has submitted that it should be reduced to 0.2% - on careful perusal of the decision rendered in case of Asian Paints (supra), we find that in the facts of the said case the assessee itself had charged commission @ 0.2% over the years and the Tribunal has accepted the claim of the assessee which was not contested by the Revenue. Taking note of these facts the Hon'ble Jurisdictional High Court has dismissed the appeal of the Revenue. These are not the facts in case of the present assessee. Therefore, we are not inclined to interfere with the decision of learned Commissioner (Appeals) on this issue.
Disallowance made on account of alleged non-genuine purchases - HELD THAT:- All the documents furnished by the assessee are only self-serving documents which are available in the books of accounts of the assessee company and which are not corroborated by third party confirmation. Even the assessee had failed to produce parties for examination as directed by the ld. AO. In these circumstances, it would be just and fair to conclude that the purchases made from the aforesaid suppliers remain unverifiable - corresponding sales made out of disputed purchases had not been doubted by the Revenue, it would be safe to conclude that assessee could have made purchases from grey market in order to have some savings in indirect taxes and the incidental profit element thereon for making purchases in cash. Based on the report of the task group for diamond sector published by the Government of India, Ministry of Commerce and Industry in this regard, wherein the benign / presumptive taxation threshold was set at 2.5%, we hold that profit percentage embedded in the value of disputed purchases estimated at 2.5% thereon would meet the ends of justice. The ld. AO is directed accordingly.
Disallowance u/s.14A of the Act r.w.Rule 8D(2)(iii) - Assessee made suomoto disallowance of administrative expenses - HELD THAT:- We find that assessee had only made an adhoc disallowance of ₹ 1 lakh in the instant case u/s.14A of the Act and had also not provided the basis of arriving at such disallowance before the lower authorities. Hence, there is no need to record any satisfaction by the ld. AO to disapprove the said adhoc disallowance. The ld. AO had proceeded to make the disallowance based on computation mechanism provided under Rule 8D (2)(iii) of the Rules, which action cannot be faulted with. The only dispute before us is with regard to disallowance made under Rule 8D(2)(iii) of the Rules.
Hon’ble Special Bench of Delhi Tribunal in the case of ACIT vs. Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI] had held that only those investments which had yielded exempt income to the assessee during the year alone should be considered for the purpose of making the disallowance under Rule 8D(2)(iii) of the Rules. Respectfully following the same, we hereby direct the ld. AO to consider only the investments of ₹ 40,01,64,994/- and apply 0.5% thereon for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules which would work out to ₹ 20,00,825/-. AO is directed to disallow a sum of ₹ 19,00,825/- (20,00,825- 1,00,000) in the instant case u/s.14A of the Act read with Rule 8D(2)(iii) of the Rules. Accordingly, the ground No.4 raised by the assessee is partly allowed.
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2021 (8) TMI 895 - ITAT MUMBAI
Maintainability of appeal - Monetary limit - Low tax effect - DR submitted that the appeal is protected under the exception provided in paragraph 10(e) of Circular No. 3/2018 dated 11.07.2018 as amended by the Central Board of Direct Taxes vide letter dated 20.08.2018 - HELD THAT:- We have not found any reference to information received from any of the external sources as mentioned in paragraph 10(e) of circular dated 20.08.2018. Even, in course of hearing, learned Departmental Representative was unable to demonstrate that any information from external sources as per paragraph 10(e) of circular noted above was received by the AO. It is to be concluded that the only information available with the AO was the information received from DGIT (Inv.).
In case of ITO vs. Late Amarchand P. Shah [2019 (8) TMI 1402 - ITAT MUMBAI] the Tribunal has held that DGIT (Inv.) since works under the CBDT, could not be called an external source. The aforesaid decision has been followed in a number of decisions of the Tribunal as cited by the learned Authorized Representative.
As per the ratio laid down in the decisions referred to above, information received from DGIT (Inv.) is not of the nature as referred to in paragraph 10(e) of CBDT Circular dated 20.08.2018. That being the case, the present appeal of the department will not be protected under the exception provided therein.
Since, aforesaid decisions are by various Division Benches of the Tribunal, they are binding precedents. Accordingly, respectfully following the aforesaid decisions cited by the learned Authorised Representative, we hold that the instant appeal of the revenue is not protected by paragraph 10(e) of CBDT circular dated 20.08.2018. Hence, would not be maintainable in view of the CBDT circular No. 17/2019 dated 08.08.2019. Accordingly,dismiss the appeal.
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2021 (8) TMI 894 - ITAT MUMBAI
Assessment u/s 153A - addition based on statement recorded u/s 132(4) - whether the statement recorded during search u/s 132(4) of the Act or extracts of books of accounts maintained by the assessee constitute incriminating materials found during search or not? - HELD THAT:-materials/evidences can not be said to be found during the course of search. We further find merits in the contentions of the assessee that materials has to be found during search and it has to be incriminating. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. In our considered opinion, the findings of the ld CIT(A) that statement recorded during search constitutes incriminating material is also not correct as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search. Therefore after perusing the material on record and considering rival contentions and also the decisions cited before us, we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year. The case of the assessee is supported by the decision of the co-ordinate bench of the Tribunal in the case of DCIT vs. Shivali Mahajan & others [2019 (3) TMI 1196 - ITAT DELHI]
On the issue of statement recorded u/s 132(4) of the Act being incriminating material, we are not in agreement with the conclusion drawn by the Ld. CIT(A). In our considered view the statement recorded under section 132(4) of the Act can not be considered as incriminating material found in the course of search. Besides it is a settled legal position that in an assessment framed under section 153A of the Act which is unabated on the date of search, no addition can be made without incriminating seized materials.
Deemed dividend addition u/s 2(22)(e) - In the case of Akruti City Ltd. vs. DCIT [2010 (8) TMI 1081 - ITAT MUMBAI] The identical issue was decided in favour of the assessee by holding that financial transactions out of business expediency between two sister concerns can not be called as loans or advances for the purpose of invoking section 2(22)(e) of the Act. The same view as held by the Hon’ble High Court of Punjab & Haryana in the case of CIT vs. Suraj Dev Dada [2014 (5) TMI 625 - PUNJAB & HARYANA HIGH COURT] wherein it has been held that it will be a travesty of law to apply the provision of section 2(22)(e) of the Act where the assessee had running account with the company with whom the assessee advanced money to the company as and when required for the purpose of business and also in real sense the assessee has not derived any benefit from the funds of the company.
The issue is also clarified by CBDT in its circular No.19/2017 dated 12.06.2017 wherein it has been clarified that trade advances in the nature of commercial transactions would not fall within the ambit of words “loans/advances within the meaning of section 2(22)(e) of the Act. Considering the facts and circumstances of the case in the light of various decisions as discussed above, we are of the considered view that the money advanced is used for the purpose of business of the former and therefore can not a loan/deposit to be treated as deemed dividend. Accordingly, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. Thus we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee.
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2021 (8) TMI 886 - MADHYA PRADESH HIGH COURT
Reopening of assessment u/s 147 - Assessment time barred - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia in Section 149 - Constitutionality of certain provisions of CBDT Notification No.20/2021 dated 31.03.2021 and Notification No.38/2021 dated 27.04.2021 - HELD THAT:- The similar challenge to Constitutionality of these provisions is made before the various High Courts. The High Court of Delhi in Mudra Finance Limited vs. Income Tax Officer Ward 17(1), Delhi [2021 (8) TMI 197 - DELHI HIGH COURT] & in Mon Mohan Kholi vs. Assistant Commissioner of Income Tax & Anr. [2021 (8) TMI 196 - DELHI HIGH COURT], Tata Communications Transformation Services Limited [2021 (8) TMI 196 - DELHI HIGH COURT] and High Court of Calcutta in Babaria Properties and Investments Private Limited & Anr. vs. Union of India and others. [2021 (8) TMI 788 - CALCUTTA HIGH COURT] have entertained the similar petitions and granted interim protection to the petitioners therein.
As respondents prayed for time to file reply but did not dispute the aforesaid contentions of learned counsel for the petitioner that similar petitions have been entertained by other High Courts and interim protection has been granted.
Considering the aforesaid, the respondents are permitted to file reply in the matter.
Till the next date of hearing, no coercive action be taken against the petitioner pursuant to the impugned notifications.
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2021 (8) TMI 885 - MADHYA PRADESH HIGH COURT
Reopening of assessment u/s 147 - Assessment time barred - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia in Section 149 - Constitutionality of certain provisions of CBDT Notification No.20/2021 dated 31.03.2021 and Notification No.38/2021 dated 27.04.2021 - HELD THAT:- The similar challenge to Constitutionality of these provisions is made before the various High Courts. The High Court of Delhi in Mudra Finance Limited vs. Income Tax Officer Ward 17(1), Delhi [2021 (8) TMI 197 - DELHI HIGH COURT] & in Mon Mohan Kholi vs. Assistant Commissioner of Income Tax & Anr. [2021 (8) TMI 196 - DELHI HIGH COURT], Tata Communications Transformation Services Limited [2021 (8) TMI 196 - DELHI HIGH COURT] and High Court of Calcutta in Babaria Properties and Investments Private Limited & Anr. vs. Union of India and others[2021 (8) TMI 788 - CALCUTTA HIGH COURT] have entertained the similar petitions and granted interim protection to the petitioners therein.
As respondents prayed for time to file reply but did not dispute the aforesaid contentions of learned counsel for the petitioner that similar petitions have been entertained by other High Courts and interim protection has been granted.
Considering the aforesaid, the respondents are permitted to file reply in the matter.
Till the next date of hearing, no coercive action be taken against the petitioner pursuant to the impugned notifications.
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2021 (8) TMI 884 - BOMBAY HIGH COURT
Validity of reopening of assessment u/s 147 - writ petition on the ground that the jurisdictional fact for issuance of such notice is absent - HELD THAT:- We do not appreciate the attempt of the petitioner to have the notice u/s 148 of the Act interdicted by presenting this writ petition on the same day of lodging of objection to the notice by submitting a detailed reply. Obviously, the objection was intended to persuade the Assistant Commissioner to revoke the impugned notice. On the contrary, if indeed the petitioner perceived that there was no justification for the Assistant Commissioner to issue the impugned notice since the jurisdictional fact was absent, the petitioner could have raised the said point at the first instance before this Court prior to submitting to the jurisdiction of the Assistant Commissioner.
Petitioner appears to have pursued the writ remedy as a parallel remedy, which is impermissible in law. Now, with the pleadings on record, it does appear to us, at least, prima facie, that the contention of the petitioner of an error of jurisdictional fact having vitiated the proceedings initiated by the Assistant Commissioner is not tenable.
As decided in Rajesh Jhaveri Stock Brokers (P.) Ltd [2007 (5) TMI 197 - SUPREME COURT] the Supreme Court analysed the provisions of Section 147 of the Act and observed that if the condition precedent for invocation of powers under Section 147 read with Section 148 to 152 of the Act is present, i.e., there is prima facie finding that income assessable to tax has escaped notice, it would be open to the assessing officer to proceed for reopening of the assessment proceedings.
We also find from such decision that if the assessing officer has cause or justification to know or suppose that income has escaped assessment, it can be said that he has reason to believe that an income has escaped assessment. In such a case, the High Court would not be clothed with the jurisdiction to examine the reasons which weighed in the mind of the assessing officer to issue the notice. As has correctly been contended by Ms. Razaq, this is not the appropriate stage for the purpose of examining the reasons assigned by the Assistant Commissioner.
We decline interference and relegate the petitioner to the forum before the Assistant Commissioner. The impugned notice shall be taken to its logical conclusion in accordance with law. If any adverse finding is rendered against the petitioner, obviously the same must have the support of reasons. Thereafter, the petitioner shall be at liberty to explore his remedy in accordance with law.
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2021 (8) TMI 883 - MADRAS HIGH COURT
Exemption u/s 11 - Registration u/s 12AA denied - proof of charitable activity u/s 2(15) - ITAT allowed the exemption - HELD THAT:- The undisputed facts are that the assessee-Trust was established and is administering Matriculation School offering education both in Tamil and English medium. It has also established a Teachers Training College during the financial year 2007-08. The income for four financial years was taken into consideration by the appellant and noting the figures, the appellant opined that the income is in excess of expenditure for both the educational institutions and came to the conclusion that the Trust has been established with a clear motive of earning profits.
As appreciated the assessee-Trust for establishing the school with medium of instruction in Tamil and that itself was held to be a charitable activity carried on by the assessee-Trust and by providing free bus service, it would motivate the students to attend the school and get themselves educated in Tamil medium and merely because, bus services were provided free of cost cannot be treated to be an activity for making profit. The assessee's institution was rightly regarded as an institution carrying on educational activity and in the absence of any material available with the appellant, the Tribunal was right in itself observing that there was nothing on record to show that the Teachers Training College has been established solely for making profit. Furthermore, the Tribunal was right in its observation that excess of income over expenditure by itself is not a reason to hold that the assessee-Trust is not engaged in charitable activities.
There was no finding that the Trustees had applied the monies of the Trust for their personal benefit or for any other purpose other than education. The infrastructure facilities, which were provided by the assessee-Trust were also rightly taken note of by the Tribunal.
The observation of the appellant that only two of the Trustees were authorized to administer the Trust, the same was held to be not a reason to reject the case of the assessee-Trust and it is common that the day-to-day activities of a Trust cannot be entrusted to all 14 Trustees and therefore, the President and Secretary of the Trust have to administer the Trust and there is nothing wrong in such an arrangement made by the assessee - Tribunal was right in observing that if in any particular assessment year, if there was any error in the manner in which the funds of the Trust were administered, it would be open to the Assessing Officer to examine the case and decide as to whether the assessee-Trust was entitled to the benefit of Section 11 of the Act for a particular assessment year or not. Thus, the Tribunal rightly held that the assessee-Trust was entitled to registration under Section 12AA of the Act.
For the above reasons, we find that there is no error in the order passed by the Tribunal by directing registration to be granted to the assessee-Trust under Section 12AA of the Act - Decided in favour of assessee.
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2021 (8) TMI 874 - ITAT DELHI
Addition in respect of the Supervisory and Risk Management expenses - CIT-A deleted the addition - HELD THAT:- CIT(A) holding the issue will be decided in the appeal of sister concern and held that in instant case the main question was that expenditure should be capitalized or not and from the fact discussed, it is clear that expenditure is not required to be capitalized and held that finding of AO that the expenditure should be capitalized cannot be accepted and granted a relief to the assessee.
AR stated that in preceding year and in succeeding year same expenses were allowed in the case of the assessee. On the other hand, Ld. DR did not have anything to controvert the arguments of the assessee. In our considered opinion principle of consistency applies and in such case addition cannot be made and we do not find any merit in the appeal filed by the revenue and we are of the opinion that CIT(A) has passed detailed and reasoned order and same does not required any kind of interference at our end. In the result, the appeal filed by the revenue is dismissed.
Nature of receipt against termination of lease agreement - taxable under the head income from other sources or income from house property or not taxable as capital receipt - CIT(A) confirming the finding of the AO for treating the amount received on termination of lease agreement - HELD THAT:- Assessee preferred first statutory appeal before CIT(A) who confirmed action of the AO holding that appellant could not give any justification regarding claim of standard deduction - the receipt is capital receipt then why the appellant had claimed standard deduction. In this case appellant had shown it as revenue receipt under the head income from house property and claimed the standard deduction. Appellant has submitted that it is a capital receipt but the appellant itself has shown it as revenue receipt and claimed standard deduction. So in such circumstances, we confirm the finding of the lower authorities and do not want to interfere in the order passed by the CIT(A).
Lower authorities have passed detailed and reasoned order same does not require any kind of interference at our end. In the result appeal filed by the assessee is dismissed.
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2021 (8) TMI 873 - ITAT KOLKATA
Addition of employees’ Provident Fund (PF) and ESI - delay in depositing employees’ contribution to PF and ESI - CIT-A deleted the addition - HELD THAT:- We note that the Ld. CIT(A) has taken note that the payments in respect of PF & ESI accounts (i.e. both the employees and employers’ contribution) has been made by the assessee within the due date of filing of return of income (ROI) u/s. 139(1) of the Income-tax Act (hereinafter referred to as the “Act”) i.e. before 30.09.2013. This fact has been taken note by the Ld. CIT(A) from perusal of Annexure 5A and 5B of the Tax Audit Report dated 26.09.2013. And since the assessee has deposited the PF & ESI deposits before the due date of filing of ROI, the assessee correctly relied upon the decision of CIT Vs. M/s. Vijayshree Ltd. [2011 (9) TMI 30 - CALCUTTA HIGH COURT] and held since both the contributions as per the PF & ESI Act has been made on or before the filing of return of income u/s. 139(1) of the Act, so no disallowance to be made u/s. 36(1)(va) - Decided in favour of assessee.
Disallowance u/s.14A - HELD THAT:- As assessee brought our notice that the assessee has not received any exempt income. This fact has been confirmed by the Ld. CIT(A). The Ld. CIT(A) after taking note of this fact that the assessee has not received any exempt income during the year under consideration has given relief by relying on the decision of this Tribunal in assessee’s own case for AY 2011-12 [2018 (4) TMI 440 - ITAT KOLKATA]. We do not find any infirmity in the order of the Ld. CIT(A) on this issue and for that we rely on the ratio of the decision of the Hon’ble Delhi High Court in the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] and CIT Vs. Hero Cycles [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT]
Disallowance of interest on borrowed fund as advanced to the subsidiary company free of cost - HELD THAT:- From the facts discussed, the assessee company which is the holding company had advanced loan interest free due to business exigency to tide over the deficit (due to low tariff rate of electricity), so even if interest free advances are given to subsidiary/sister concern, interest expenditure could not have been disallowed and for such a proposition we rely on the ratio of the decision in the case of S A Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] which is also applicable to the facts of this case. Therefore, we are of the opinion that the disallowance of interest on loan to subsidiary u/s. 36(1)(iii) of the Act by the AO has been rightly held to be unjustified. Further we note that the issue is squarely covered in favour of the assessee by order of the Coordinate bench of this Tribunal in assessee’s own case [2018 (4) TMI 440 - ITAT KOLKATA] ad [2014 (2) TMI 1366 - ITAT KOLKATA] and there is no change in facts and law and the Ld. DR was unable to controvert the same by producing any cogent material, therefore, we find no reason to interfere in the impugned order of the Ld. CIT(A) and the same is hereby upheld. Therefore, we uphold the action of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.
Subsidy received from National Jute Board - revenue or capital receipt - AO added the said amount to the total income of the assessee on the ground that it is a revenue receipt - AO has made the addition mainly on the reason that assessee failed to deduct from the cost of plant and machinery the sum and has also claimed the depreciation on this amount of machinery - HELD THAT:- It is settled that revenue receipt are chargeable to tax on the other hand capital receipts are not unless specifically made taxable under the Act. If subsidies are given for various purpose like for promoting, construction of new industries, expansion of existing industries etc. then it is on capital account. On the other hand, the object of the subsidy scheme was to enable the assessee to run the business more profitably or to meet day to day business expenses, then the receipt shall be of revenue nature. So, if the object of this assistance/subsidy was to enable the assessee to set up a new unit or to expand the existing unit then the receipt shall be capital receipt not chargeable to tax. Therefore, the taxability of subsidies has to be determined by looking into the purpose for which it is given - Thus scheme for which this subsidy was given to the assessee Ld. CIT(A) has rightly decided in favour of the assessee. Ground of appeal of revenue is dismissed.
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2021 (8) TMI 871 - ITAT DELHI
Assessment of trust - Addition on account of excess fees - AO brought on record sufficient material to show that assessee had collected excess fees, in addition to the fees fixed by State Government - CIT(A) held that the assessee has applied more than 85% of total receipt for its object. Thus, the predominant object of the assessee has been fulfilled - HELD THAT:- Considering the facts the assessee has applied more than 85% of the total receipt on charitable purpose and there is no expressed finding of AO that assessee is not carrying the charitable activities. Therefore, we do not find any merit in the grounds of appeal raised by the revenue. Thus we have heard the order of Ld. CIT(A).
Disallowance of depreciation - AO disallowed the depreciation on fixed assets by holding that it amounts to double deduction as the assessee has already obtained the benefit under section 11 - CIT-A allowed the depreciation claim - HELD THAT:- Considering the decision of Hon’ble Bombay High Court INSTITUTE OF BANKING PERSONNEL SELECTION [2003 (7) TMI 52 - BOMBAY HIGH COURT] which has been affirmed by Hon’ble Apex Court in CIT Vs Rajasthan and Gujarati Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT] we do not find any merit in the ground of appeal raised by the revenue.
Addition u/s 68 - anonymous donations u/s 115BBC - HELD THAT:- As decided in own case [2019 (11) TMI 1657 - ITAT DELHI]the appellant has discharged the primary onus casted upon it to prove the identity of depositors, genuineness of transactions and credit worthiness of the depositors and therefore the unsecured loans accepted by the appellant from 5 persons during the year under appeal are treated as explained and substantiated - non production of the depositors by the' appellant Has wrongly been made a ground to make addition to make, addition u/s 68 of the Act. Further the action of the A.O. to treat the deposits under reference as anonymous donations u/s 115BBC is completely unlawful since all the loan creditors had opening balances and had also filed copies of ITRs, Thus, by no stretch of imagination could the AO treat these loans as anonymous donation u/s 115BBC. Now coming u the failure to produce the depositor for the personal deposition the same cannot be treated as a ground so as to make the addition of the loans accepted from them. Decided against revenue.
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