|
Advanced Search Options
Income Tax - Case Laws
Showing 61 to 80 of 806 Records
-
2021 (9) TMI 1432 - KERALA HIGH COURT
Nature of expenses - amount expended by the assessee towards preoperative expenses for establishing a plant - whether would constitute capital expenditure or revenue expenditure? - HELD THAT:- The case on hand satisfies all the independent and interrelated tests broadly laid down by the Sakthi Sugars [2010 (8) TMI 456 - MADRAS HIGH COURT] and Priya Village Roadshows Ltd [2009 (8) TMI 765 - DELHI HIGH COURT] cases. The proposed new plant is evidencing unity of control and interlacing of the units of the assessee for capacity building of production of Radial tyres. The horizontal expansion is to sustain/earn more profitability from the business, the assessee is already doing. The assessee, in accordance with the accounting standard practices has capitalised the expenditure in its books of accounts, it is not claiming depreciation on the value of the capitalised asset.
The expenses are in effect outflow for increasing the business of the assessee and, therefore, rightly treated and held as revenue expenditure by the Tribunal. The question, again, is not whether the assessee should be called upon to capitalise and claim depreciation; the question is whether the claim of the assessee conforms the deduction permissible under Section 37(1) of the Act. The preoperative expenses incurred by the assessee are revenue expenses, and are correctly so held by the Tribunal. The above view is fortified by a catena of decisions in favour of the assessee. We do not, as a matter of fact, see any reason distinguishable in the case on hand to accept the contest of the Revenue.
Loan processing fee and bank charges claimed as revenue expenditure relating to setting up of new unit at Chennai as expansion of assessee's business - HELD THAT:- The processing fee and bank charges are expenses incurred for getting the loan, and interest is always paid on the loan availed/sanctioned by the bank, as the case may be. The simple expenditure incurred by way of outflow from the books of account of the assessee cannot be again included in the loan borrowed by the assessee and give a complexion of interest only to attract the proviso of Section 36(1) of the Act. - Decided against revenue.
Weighted deduction u/s 35(2AB) - HELD THAT:- There is no need for liberal interpretation of a tax provision when the language is unambiguous and grant an incentive not provided by the Parliament to a set of cases. The incentive is admissible only when the expenditure is incurred on scientific research on in-house research and development facility. The object of incentive is to encourage indigenisation of technology and show up the know-how of the assessee/entrepreneurs. The Tribunal's conclusion is accepted the same opens a new eligibility facility without reference to approval by the prescribed authority for claiming incentive of weighted deduction.
The circumstances considered and the principle laid in Cadila Healthcare [2013 (3) TMI 539 - GUJARAT HIGH COURT] are completely distinguishable. He takes note of the circumstances that the claim of the assessee now encomposes revenue expenses said to have been incurred at assessee's subsidiary at Germany. The said expenditure allowed as weighted deduction then the words which have substantial meaning in Section 35(2AB) of the Act viz. that in-house research and development facility as approved by the prescribed authority would become otiose. The preference to liberal interpretation for literal construction is the correct principle. The meaning of words ought not to be stressed and strained while constructing the application of a provision in a statute. Tribunal fell in a serious error by accepting the claim of assessee for weighted deduction - assessee fails to establish essential requirements for claiming weighted deduction. Therefore the conclusion recorded by the Tribunal warrants interference u/s 260A of the Act and the question is answered in favour of the revenue and against the assessee.
Loss on transfer of 100% shareholding of assessee company in its AE - Assessee had shown a loss on sale of its share in ATAG in favour of ATC - The said amount is claimed as business expenditure and sale of shares is necessitated by business expediency - DRP recorded that ATAG Subsidiary, undertaking marketing related activities of the assessee in Singapore, is entirely malicious and not supported by evidence and loss on sale of subsidiary ATAG is a made-up affair contrived to enable the assessee to claim deduction from its taxable income - HELD THAT:- What is clear from the candid submissions made by both the counsel is that the reason that weighed with the Dispute Resolution Panel is not adverted to by the Tribunal while setting aside the dis-allowance.
Either we accept the case of the Revenue and restore the conclusion recorded by the DRP or accept the explanation of the assessee that the claim is part of business expenditure, in such consideration this Court would be entering into a simple fact by re-examining the case of both sides for the first time. We are of the view that the Tribunal reconsiders this issue after taking note of the entire circumstances, the tenability of the claim and records such finding commensurate to the material on record. Thereafter party aggrieved, certainly can approach this Court under Section 260A. Having regard to the above consideration, the question is answered in favour of the Revenue and against the assessee wit, i.e., matter remitted to Tribunal for disposal in accordance with law.
Allowance of foreign exchange loss on forward exchange contract - HELD THAT:- Tribunal, as a matter of fact, found in categorical terms, the error which was committed by the DRP/Assessing Officer. Now the revenue is commending the very same argument and such argument is untenable, unless and until the fallacy in the findings recorded by the Tribunal is established within the scope of Section 260A. The Revenue has not made up a ground for interfering with the findings recorded by the Tribunal. Suffice to note that the decision of the Supreme Court in Woodward Governor India P. Ltd. [2009 (4) TMI 4 - SUPREME COURT] and ONGC [2010 (3) TMI 81 - SUPREME COURT] are applicable to the case on hand. The correct proposition is applied and the Tribunal had recorded a finding in favour of the assessee. We do not, for brevity, propose to re-state the very reasons, we are in complete agreement in the order under appeal. On the contrary, the Revenue failed to make out a case warranting interference of this Court under Section 260A of the Act. We accept the findings recorded by the Tribunal.
Disallowance on account of prepaid expenses - HELD THAT:- There is no legal basis for entertaining the claim. The nature of payment since is advance, the said advance cannot be deducted from the net income of the assessee and corresponding benefit in tax liability could be given to the assessee. To merit the said ground, within the scope of Section 260A of the Act, the Standing Counsel invited our attention to the brief consideration of this aspect by the Tribunal in paragraphs 36 and 37. At this juncture, it is very apt to observe that the Tribunal has not actually appreciated the admissibility of the advance payment as an expenditure for this Assessment Year. The payment is an advance expenditure and is to be booked in the year in which the expenses are actually incurred. The deduction of advance payment expenditure is to be appreciated from the perspective of accounting standard followed by the assessee. The effect of said entries is limited to the accounts of the assessee but could not be extended for claiming deduction in the return filed in the Assessment Year 2010-11. The assessee is, as a matter of fact, entitled to claim deduction in the Financial Year in which the actual expenditure is incurred by the assessee. We are not convinced with the reasons assigned by the Tribunal for interfering with the orders of the Assessing Officer.
The question is answered in favour of the Revenue and against the assessee. The entitlement of assessee for claim is not accepted on the ground that the assessee is required to claim the deduction in the year in which the expenses are incurred/services received and the claim made has to be considered in the applicable Assessment Year by the Department. Hence the question is answered in favour of revenue and the findings of the Tribunal are set aside.
Difference between the conversion rate - HELD THAT:- A finding of fact by referring to the orders made by the competent authority is recorded. Firstly, it is not shown to us how those directives are incorrect or inapplicable to the case on hand, and, secondly, to interdict with a finding of fact, no reasons are stated with the directions issued by the Tribunal. Looked at it from either perspectives and the direction itself, we are of the view, the view taken by the Tribunal for the Assessment Year 2010-11 does not warrant interference of this Court. Decided against the Revenue.
-
2021 (9) TMI 1431 - ITAT DELHI
Income deemed to accrue or arise in India - action of the AO in treating the BTIN as fixed place PE of the assessee under Article 5(1) of the Indo-Sweden DTAA - HELD THAT:- This issue is squarely covered by the order of the Co-ordinate Bench of ITAT in the assessee’s own case [2020 (10) TMI 1205 - ITAT DELHI] held that the entire findings of the DRP are based on erroneous appreciation of wrong facts and on such erroneous appreciation of wrong facts, the DRP held that BTIN is the PE of the appellant in India without appreciating the true facts that the appellant has no place of disposal in India in the office of BTIN from where the appellant could have conducted its business in India.
TPO has examined the international transactions and has accepted the same to be at ALP, we do not find any merit the additions made by the DRP. We accordingly, direct the AO to delete the addition of income attributable to PE - Decided in favour of assessee.
Non-treatment of the managerial services as “Fee for Technical Services” - HELD THAT:- As decided in own case [2020 (10) TMI 1205 - ITAT DELHI] intermediary services rendered by the appellant do not make available any technical knowledge, skill etc to BTIN and BTIN is not a equipped to apply technology contained in services rendered by the appellant. The intermediary services provided by the appellant to BTIN do not tantamount to FTS and accordingly, shall not be taxable in India.
Appeals of the assessee are allowed.
-
2021 (9) TMI 1428 - ITAT SURAT
Addition u/s. 69A for the alleged unexplained jewellery - HELD THAT:- We note that gold seized was only 636.790 grams embedded with diamonds of 7.95 carats, and in the assessee's family there are three married ladies, three married males and two minors. Three married ladies may hold the gold up to 1500 grams, which need not to be explained by the assessee, as per said CBDT instruction, therefore it seems to us clearly that gold seized was only 636.790 grams embedded with diamonds of 7.95 carats, which is below the limit prescribed by the CBDT, therefore, the Department ought not to have seized such gold. It is a settled law that the Circulars issued by CBDT are binding on the Revenue.
This position was confirmed in the case of Commissioner of Customs v. Indian Oil Corpn. Ltd. [2004 (2) TMI 66 - SUPREME COURT] wherein Their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute.
At the cost of repetition, we state that in assessee's case, the family contains three married ladies, three married male members and two minors, therefore considering the number of family members as mentioned above, no addition is warranted in the hands of the assessee, therefore, we delete the addition. Appeal of assessee allowed.
-
2021 (9) TMI 1422 - ITAT DLEHI
TP Adjustment - Enhancement of income of the assessee on account of interest on receivables from the AEs - assessee contending that the authorities below failed to appreciate the fact that the assessee has not been charging any interest from third-party customers as an outstanding receivable and pricing/profitability is more than the working capital adjusted margin HELD THAT:- In Kusum Healthcare Private Limited [2017 (4) TMI 1254 - DELHI HIGH COURT] held that no additional imputation of interest on the outstanding receivables is warranted if the pricing/profitability is more than the working capital adjusted margin of the comparables
Once the working capital adjustment is given, it subsumes the interest on receivables and no separate benchmark for it has to be made. Respectfully following the view taken by the Hon’ble jurisdictional High Court in the case of Kusum Healthcare (supra), we hold that the addition made on account of interest on receivables cannot be sustained. - Decided in favour of assessee.
Non-grant of credit of entire TDS - HELD THAT:- Both the counsel agreed on the point that it would be suffice if the learned Assessing Officer is required to verify and grant the credit of TDS as per law. We direct the learned Assessing Officer to verify and grant the TDS under law.
-
2021 (9) TMI 1420 - ITAT DELHI
TP Adjustment - MAM - specified domestic transaction has been with regard to sale of electricity units to the other unit for manufacturing process of pharma and phyto-chemical products - whether the sale of electricity unit rate by the eligible unit to its non eligible unit is as per the market rate or not i.e., whether it is an Arms’ Length Price? - HELD THAT:- What is required to be seen here is, whether in the open market what is the rate of power or electricity is available to the consumer. If in open market the power is available to a customer from State Electricity Board at the rate charged by it then it is to be reckoned as market rate.
Once there was a direct internal CUP, i.e., the assessee company had purchased electricity from Punjab State Power Corporation at Rs.7.57, then it represents the market rate on which any industry undertaking or consumer is getting the electricity. Thus, we do not find any reason as to why such market rate or CUP should be rejected. Nowhere, it has been brought by the TPO as to why the average trading rate in Indian Energy Exchange should be applied as external CUP. Accordingly, we hold that the sale of electricity @ 6.72 per unit is at Arms’ Length and no adjustment is required in this segment/unit.
Adjustment in the transfer of steam, it is an undisputed fact that steam has been used for generation of electricity unit and for manufacturing process purely for captive consumption by the assessee, and therefore, it is fully eligible for deduction u/s.80IA. In the transfer pricing study report, the assessee had justified the price of transfer; firstly, by taking CUP in the manner specified hereinabove
The cost plus method was adopted and also the ld. TPO has required the assessee to furnish the cost of the steam produced. In response, the assessee has filed a report from approved senior chartered engineer who has given his report and the details of working. TPO without any cogent material or any expert report has rejected the working. Even if the cost plus method is adopted as held by the TPO, then how can he take the cost of steam at Nil and held that it is biomass which is byproduct therefore there is no cost.
Such an observation of the TPO is de hors any proper reasoning because from a bare perusal of the calculation as given in the report as incorporated we find that formula has been given as to how one ton rice husk has generated 3.96 MT of steam and also the basis for working of steam based on various factors including the steam from boiler sent to turbine at 100%. It has been demonstrated before the authorities below that the total steam generated in turbines was 232,688,432 M Kcal, out of which 46,526,053 M Kcal steam (20%) has been used for generating electricity units and balance (80%) steam was used for generating steam for transferring to manufacturing processes. Thus, there was a clearly cost for steam generation as per the report approved by chartered engineer and the steam unit taken for the purpose of captive power plant in profit ratio has been shown at 22.58%, and therefore, the transfer pricing of Rs. 2,160/- per MT was taken at Arms’ Length Price.
TPO has erroneously treated the assessee’s power plant as Biomass Gasifier Power Plant in which no steam is generated, instead of Biomass Steam Power Plants has wrongly came to conclusion that the cost of Steam generation is “Nil” as against Rs. 2160/ MT. Ld. TPO has failed to understand the operational working of Husk based power plants in which total expenditure is incurred first on generation of steam and thereafter part of steam is used for generation of electricity units and majority of steam is transferred to manufacturing processes of Pharma units of the assessee.
Steam is a form of power eligible for deduction u/s.80IA and same cannot be denied by taking its steam cost at Nil. Further. He has grossly erred in ignoring the audited certificate by Senior Chartered Engineer who is an approved valuer by Income Tax Department and the Cost Accountant appointed by the Central Government without any accounts report, without any agency or expert. Accordingly, for this unit also, we hold that no transfer pricing adjustment is required. Appeal of assessee allowed.
-
2021 (9) TMI 1419 - ITAT MUMBAI
TP Adjustment - Disallowance of availing of intra-group services, i.e. Administrative and Managerial Services by the Appellant from its Associated Enterprises (AE) - application of benefit test - AO made addition of management support services u/s. 37(1) and /or/u/s. 40A(2)(b) - HELD THAT:- As decided in assessee's own case [2020 (2) TMI 1608 - ITAT MUMBAI] ITAT has inter alia held that TPO has erred in applying the benefit test. That the AO has contradicted himself that he is not applying the benefit test. We find that the proposition of ITAT in the above order are applicable to the facts in the present case to the extent ITAT has inter alia set aside the order, DRP observation that the agreement should have been entered into by the parties in a particular manner by incorporating several other clauses. This observation is duly applicable to this year also. However, since the AO has noted that assessee has not supplied the relevant documentary evidence and Ld. Counsel of the assessee has agreed that documents may be examined by the AO, we remit the issue to the file of AO only to examine the documents in this regard. Thereafter, AO shall decide as per law keeping in mind ITAT order in assessee’s own case as above and our observations hereinabove.
-
2021 (9) TMI 1418 - ITAT BANGALORE
TP Adjustment - Comparable selection - turnover limits - HELD THAT:- Persistent Systems Ltd., Larsen and Toubro Infotech Ltd., Infosys Ltd., Thirdware Solutions Ltd. - There is nothing on record brought by the Ld. CIT. DR in order to establish that these are comparable with assessee that is a captive service provider which functions at the strict supervision and instructions by the AE's - we note that turnover criteria has to be applied with an upper limit which is not been considered by the Ld. TPO. The TPO has applied less than 1 crore turnover limit to eliminate the comparables however it failed to apply upper limit considering the functions performed assets owned and risk assumed by assessee under this segment for the year under consideration.
Respectfully following the view taken by coordinate benches in respect of the turnover limits that needs to be applied, we direct Ld. AO/TPO to reject the comparable accordingly from the finalist.
Insofar as Aspire systems (India) Ltd., Nihileant Technologies Ltd. And Cybage Software Pvt. Ltd. is concerned, it is also been submitted by Ld. AR that direction may be given to the Ld. AO to consider correct margins of the comparables that is finally retained in the final list. Accordingly we direct the Ld. AO/TPO to adopt correct margins of the comparables in accordance with law.
-
2021 (9) TMI 1417 - ITAT DELHI
Reopening of assessment u/s 147 - service of notice issued u/s 148 - assessee has submitted that the approval granted by the Pr. CIT as well as ACIT is not valid as only the Competent Authority can grant an approval after recording the satisfaction on the reasons recorded by the AO before issuing the notice u/s 148 - HELD THAT:- The assessee did not raise any objection before the Assessing Officer and particularly before the assessment order was passed regarding non receipt of notice or disputing the service of notice issued u/s 148 - Once the assessee has not raised any objection against the service of notice issued u/s 148 and participated in the proceedings then after the completion of the assessment order the assessee is not allowed to dispute the service when the issuance of notice u/s 148 is not in dispute. Accordingly, in the absence of any argument on this issue as well as the facts as discussed above, we do not find any substance or merits in ground no. 1.1 on the assessee’s appeal. The same is dismissed.
Validity of notice issued u/s 148 due to invalid approval granted u/s 151 -satisfaction recorded by the Pr. CIT is separate and independent not having any influence. Hence, even if there is a satisfaction recorded by the Addl. CIT who is not a Competent Authority for granting sanction for issuing notice u/s 148 in this case the said satisfaction of Addl. CIT would not vitiate the satisfaction recorded by the Pr. CIT. Therefore, the satisfaction as recorded by the Pr. CIT at the time of granting the approval/sanction u/s 151 of the Income Tax Act manifests that it was an independent satisfaction based on the reasons recorded by the Assessing Officer. Even otherwise, the reasons recorded by the Assessing Officer prima facie makes out the case to form a belief that income assessable to tax as reflected in Form 26AS has escaped assessment because the assessee did not file any return of income u/s 139 of the Income Tax Act. From the Paper Book of the assessee, we further note that the sanction accorded by the Pr. CIT was communicated to the Assessing Officer through Addl. CIT vide letter dated 31.03.2017. Thus, it appears that the movement of the file from the ITO to Pr. CIT is rooted through Addl. CIT. Hence, we do not find any error or illegality in the sanction granted u/s 151 by the Pr. CIT.
Validity of the reassessment order for want of valid notice u/s 143(2) - Where the assessment was reopened due to the reasons that the assessee has not filed any returned income u/s 139 and Form No. 26AS shows the receipt of Rs. 65,02,171/- as contract receipt subjected to TDS u/s 194C of the Act from M/s E-X Seed Technologies & Device P. Ltd. which is a party to a contract dated 6th August, 2009 entered into for having business/contract transactions then the details available in Form 26AS would constitute an incriminating material disclosing an income escaped assessment. Therefore, the notice issued by the Assessing Officer u/s 143(2) cannot be said to be without verification of the return of income filed by the assessee because the AO had to examine the issue which is subject matter of the reasons recorded for reopening of the assessment. Hence, we do not find any merit or substance in the additional ground no. 3 & 4 raised by the assessee. The same are dismissed.
Addition based on the details of payment reflected in the Form 26AS - assessee has contended before the AO as well as CIT(A) that the payment shown in Form 26AS was not received by the assessee from M/s E-X Seed Technologies & Device P. .Ltd. as the cheque issued by the said company got dishonored and assessee has filed a police complaint - Complete facts reflecting the true state-of-affairs between the parties have not come on record. AO has not conducted a proper enquiry during the assessment proceedings to ascertain the correct facts regarding the amount reflected in Form 26AS even, during the remand proceedings as directed by the CIT(A) nothing has come out conclusively. Therefore, it is apparent that the addition made by the AO is solely based on the details of Form 26AS and not on the basis of any facts detected as a result of an enquiry conducted by the AO. Hence, in the facts and circumstances of the case and in the interest of justice, we are of the considered view that this matter requires a proper verification and enquiry to ascertain the correct facts regarding the actual amount received by the assessee from the other contracting party namely E-X Seed Technologies & Device P. Ltd. Accordingly, in the interest of justice, we set aside this issue to the record of the Assessing Officer for deciding the same afresh after conducting a proper enquiry on this point. Needless to say the assessee be granted and appropriate opportunity of hearing before passing the fresh order.
Appeal is partly allowed for statistical purposes.
-
2021 (9) TMI 1415 - ITAT AHMEDABAD
Nature of expenditure - Trademark License Utilization fees - AO has not agreed with the submission of the assessee and treated the trademark license utilization fees as payment made for acquisition of trademark and licneses within the meaning of capital asset as defined in section 32(1)(ii) and allowed 25% of depreciation - HELD THAT:- As decided in M/s. Vishnu Pouch Packaging Pvt. Ltd . [2019 (12) TMI 1613 - ITAT AHMEDABAD] contractual obligations are ordinary in commercial parlance and does not grant any valuable right to the licensee. The advantage earned by the assessee by use of the license is neither permanent nor ephemeral but is linked to the use of the trademark owned by the licensor. The expense towards use of trademark was clearly laid out for the purpose of ongoing business carried on by the assessee and fee paid for use of such trademark is clearly deductible as revenue expenditure. The assessee herein has been merely granted a license to use trademark on payment of license fee determined on the basis of a formula laid down in the agreement. The right to use can neither be assigned at the wishes of licensee nor is the licensor prohibited to terminate the user license agreement executed with licensee. Thus, licensor retains the inherent control over the manner of use of trademark. Thus license fee paid for mere use of capital asset which continues to belong to someone else thus cannot be regarded to be in the capital field in the hands of licensee. - Decided against revenue.
-
2021 (9) TMI 1413 - ITAT ALLAHABAD
Multiple appeals against one CIT order - duplicate appeals - 12 appeals by the assessee all directed against the order of Pr. CIT (Central), Allahabad passed under section 12AA(3) and 80G (5) of the Income Tax Act - HELD THAT:- It seems that the assessee has filed total 13 appeals purportedly each for assessment years 2007-08 to 2019-20 without having any order relating to these assessment years to be challenged. Therefore, the assessee has mis-represented the basic information and facts required in Form No. 36 as well as abused the process of law by filing 13 appeals instead of one appeal against one impugned order. Accordingly, one appeal was taken as a lead case for the purpose of hearing and disposal which we are deciding vide separate order and the remaining 12 appeals are nothing but invalid duplicate appeals and are nonest. Accordingly, in view of the fact that these 12 appeals are duplicate and therefore, these are liable to be dismissed as invalid appeals being nonest. We order accordingly.
-
2021 (9) TMI 1411 - ITAT MUMBAI
TP Adjustment - corporate guarantee to its overseas Associate Enterprise - Commissioner (Appeals) reducing the corporate guarantee fee to 0.5% as against 1.5% determined by the Transfer Pricing Officer - HELD THAT:- No infirmity in the aforesaid decision of learned Commissioner (Appeals). The Hon’ble jurisdictional High Court in case of CIT vs Everest Kento Cylinders Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT] has upheld the decision of the Tribunal in charging guarantee commission on corporate guarantee at 0.5%. The same view was expressed by the Hon’ble jurisdictional High Court in case of CIT vs M/s GlennmarkPharmceuticals Ltd [2017 (2) TMI 1305 - BOMBAY HIGH COURT] The aforesaid decision of the jurisdictional High Court was upheld by the Hon’ble Supreme Court while deciding the appeal of the revenue [2018 (12) TMI 608 - SUPREME COURT]. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on this issue. Grounds are dismissed.
Disallowance of deduction claimed on employee stock option (ESOP) expenditure - whether ESOP expenditure is allowable u/s 37(1) ? - HELD THAT:- We find, while deciding identical issue in assessee’s own case in Assessment Year 2012-13 learned Commissioner (Appeals), following the decision of ITAT, Bengaluru Special Bench in case of M/s Biocon Ltd [2013 (8) TMI 629 - ITAT BANGALORE] allowed assessee’s claim of deduction by holding that ESOP expenditure is not a contingent liability; hence, is an allowable deduction under section 37(1) of the Act. We have also noted, identical issue has been decided in favour of the assessee in Assessment Year 2008-09 - Thus we uphold the decision of learned Commissioner (Appeals) while dismissing the ground raised.
Disallowance u/s 14A r.w.r. 8D - suo motu disallowance made by assessee - HELD THAT:- As could be seen from the summary of average value of exempt income yielding investments, interest free fund available and disallowance computed under section 14A filed before us by the learned Counsel for the assessee, the assessee had sufficient interest free fund available with it. Therefore, no disallowance of interest expenditure can be made. Further, we also agree with assessee that disallowance under rule 8D(2)(iii) can only be made on the average value of assets yielding exempt income during the year. It is the case of the assessee that if disallowance under rule 8D(2)(iii) is computed on the average value of exempt income yielding investments, it will work out to Rs.64,24,889/– only. Whereas, assessee, suo motu, has disallowed Rs.11,68,95,186. We find substantial force in the aforesaid submissions of the assessee. Further, the contention of the assessee that the shares of DEN Network has no cost to the assessee as it was received by gift/voluntary contribution is acceptable. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals). This ground is dismissed.
Disallowance u/s 14A r.w.s. rule 8D while computing book profit u/s 115JB - HELD THAT:- We are in agreement with learned Commissioner (Appeals) that while computing books profit under section 115JB of the Act, the assessing officer cannot invoke the provisions of section 14A r.w.r. 8D for making adjustment to the book profit. This legal proposition has been laid down in case of ACIT vs Vireet Investments (P) Ltd [2017 (6) TMI 1124 - ITAT DELHI].Though, the assessing officer is empowered to disallow expenditure incurred for earning exempt income in terms of Explanation 1(f) of section 115JB; however, such expenditure must have a direct nexus with the earning of exempt income and not something which is computed under rule 8D r.w.s. 14A of the Act. Therefore, we do not see any reason to interfere with the decision of learned Commissioner (Appeals) on the issue. Ground is dismissed.
-
2021 (9) TMI 1409 - ITAT DELHI
Addition on account of revenue recognition from construction project as per Percentage of Completion Method (POCM) - AO has considered the addition on the basis of observation of Special Auditor in AY 2009-10 wherein it was pointed out that appellant company has changed the method for apportionment of internal development charges from FY 2008-09 - HELD THAT:- As the basis of addition in the year under reference is identical to that in preceding years. In fact, the assessing officer himself has followed the observation of Special Auditor in AY 2009-10 and finding recorded in the assessment order for AY 2011-12. As the issue of reworking of profit under POCM on the basis of re-apportionment of IDC has been decided by the Coordinate bench in preceding years, the same is decided as per the table given.
Disallowance of interest expenses on account of capitalization - AO capitalized part claim of interest on the reasoning that interest expenses on fixed period loans cannot be fully allowed and is allowable in proportion to revenue recognized from various projects - disallowance and capitalization of interest was computed as per formula suggested by Special Auditor in preceding years - HELD THAT:- It is noted that the issue of capitalization of interest is a recurring issue and has been extensively dealt with first appellate authority and Coordinate bench in favour of assessee in preceding years wherein it has been held that notional capitalization of interest is not permissible particularly when the assessee has already capitalized interest pertaining to projects under execution. There is nothing on record to show that facts and the basis of disallowance in the year under consideration is different from that in preceding years. As the issue of capitalization of interest has been decided by the Coordinate bench in preceding years.
Disallowance of brokerage expense - HELD THAT:- The action of assessing officer in treating brokerage as part of cost under POCM method has been deprecated by the Coordinate bench in orders passed for AY 2006-07 to 2011-12 wherein it has been held that brokerage expenses are allowable in the year of incurring and same cannot be associated with construction cost. It has been stated by Ld. AR that the deletion of disallowance in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has accepted the claim in AY 2016-17.
Addition on account of net interest free maintenance security deposits - AO was of the opinion that maintenance charges collected by the assessee is in the nature of income - HELD THAT:- It is noted that the assessee is collecting interest free maintenance security deposit from customers for meeting out future liabilities such as insurance premium and maintenance charges of the buildings. The amount so collected is handed over to resident association/Condominium association upon formation and are shown as liability in the books of account. Further, it is noted that the issue of maintenance and security deposit is a recurring issue where the assessing officer is making addition year after year and the matter has travelled before Coordinate bench in successive preceding years wherein the addition stood deleted. It has been stated by Ld. AR that the deletion of identical disallowance in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has accepted the claim in AY 2016-17. As this issue is covered in favour of assessee by orders of Coordinate bench, the same is decided as per the table given.
Disallowance of expenses towards allocation of overheads to other group entities - HELD THAT:- As we find that the basis adopted by the assessing office while making disallowance of expenses in the hands of the assessee on account of allocation of overheads to group concerns is static and borrowed from earlier years assessment orders. Further, as this issue has already been decided by Coordinate bench in AY 2006-07 to 2011-12 wherein the disallowance was deleted. On parity of facts, this ground is also decided as per table given
Reclassifying income offered to tax under the head Income from House Property to Income under head Business and Profession - HELD THAT:- We find that this issue has been dealt with by Coordinate bench in AY 2005-06 to 2011-12 wherein the addition was deleted by holding that lease income from asset lying under current asset is also assessable under the head Income from House Property.
Addition on account of rent on properties lying vacant during the year under reference - HELD THAT:- It is not in dispute that addition in the year under reference is based on assessment order for AY 2006-07 to 2011-12 and has come up for consideration before Coordinate bench. Further, the Ld. Counsel for the assessee has submitted that that the deletion of identical addition in AY 2006-07 by Coordinate Bench has been accepted by the revenue and no further appeal has been filed before High Court on this issue. In fact, the assessing officer has not made any addition on this issue in AY 2016-17.
Disallowance of depreciation of building DLF Centre - HELD THAT:- As the issue of depreciation is recurring issue based on recalculated WDV and same having been decided by Coordinate bench in preceding years, disallowance of depreciation was deleted as per finding recorded .
Disallowance of expense on ground of prior period expenses - HELD THAT:- On perusal of assessment order, it is observed that expenses disallowed are of routine nature for example advertisement, insurance, travelling and conveyance, legal & professional, sales promotion, repair and maintenance etc.. The genuineness of these expenses is not in dispute. Further, the CIT(A) has given a clear finding that liability to pay expenses has accrued/arose during the year and as such the same are allowable. Moreover, these expenses are settled in the year under consideration. In these circumstances, we find no convincing reasons to interfere with the order of CIT(A) setting-aside the disallowance. In fact, on similar facts, the coordinate bench has considered similar issue and deleted the disallowance in AY 2006-07 to 2011-12.
Expenses towards running and maintenance of Helicopter and aircraft - AO made disallowance on the ground that aircraft and helicopter have been used for personal purposes and accordingly estimated ad-hoc disallowance @ 66.67% of the total expenses relating to aircraft and helicopter including depreciation - HELD THAT:- We find that this issue came for up consideration before Coordinate bench in AY 2010-11 and 2011-12 wherein the disallowance of expenses relating to aircraft and helicopter on the ground of personal expense was deleted.
Addition of interest - interest short charged - rate of interest charged by the assessee company on loans advanced to group concerns is less than that paid to financial institutions and banks - AO worked out the interest short charged from the group concerns on proportionate basis and accordingly made addition in the hands of the assessee - HELD THAT:- We find that there is no provision in the Income tax Act which warrants addition of interest on notional basis and as such the order of CIT(A) deleting the addition is well reasoned. In fact, it is not the case of the assessing office that money borrowed from the banks and its subsequent utilization is not for the purpose of business and as such we see no rationale behind charging of additional interest on notional basis on money advanced to group concerns. Thus we uphold the order of CIT(A) deleting the addition.
Nature of receipts - addition on account of income from sale of carbon credits by treating the same is revenue receipt - HELD THAT: - CIT(A) deleted the addition coorectly by placing reliance on the decision of Hon’ble Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] wherein it was held the income from sale of carbon credits is a capital receipt.
Addition of notional rent in respect of kiosks let out to tenants - assessee is not recognizing the rental in its hand on the basis of mutual arrangement with maintenance company M/s. DLF Services ltd. which is providing maintenance and upkeep services in the Mall - HELD THAT:- We find that this very issue came up before the Coordinate bench while deciding the appeal for AY 2007-08 [2017 (11) TMI 381 - ITAT DELHI] wherein it was held that mutual arrangement created an overriding title resulting in diversion of rental income in favour of M/s. DLF Services Ltd. and as such the same cannot be taxed again in the hands of the assessee.
Disallowance u/s 14A r.w.r. 8D - assessee has made suo moto disallowance being salary to an employee looking after the work of investment which are mainly continuing from earlier years - HELD THAT:- As decided in own case [2020 (10) TMI 77 - ITAT DELHI] AO has nowhere recorded its dissatisfaction regarding suo moto disallowance made by the assessee and the entire discussion revolves around quantum of investment appearing in the balance sheet. Moreover, the assessing officer has overlooked the availability of interest free own funds and so-called observation regarding claim of interest expenses is unsubstantiated and not based on books of account of the assessee. The CIT(A) has given a specific finding that no part of interest bearing funds were used for making investment yielding exempt income. In these circumstances, we are constrained to observe the satisfaction recorded by the assessing officer fails to pass the test laid down by Supreme Court and does not provide valid basis for invocation of rule 8D.
Disallowance was deleted by observing that satisfaction recorded by the assessing officer is invalid. The satisfaction recorded in present case is ad-verbatim that in AY 2010-11 and 2011-12 - we find no reasons to interfere with order of CIT(A) deleting the disallowance u/s 14A r.w.r 8D .
Exemption u/s 80IA - Disallowance of expenditure on account of short/non-allocation of proportionate overhead expenditure to windmill unit in Gujarat and Karnataka - HELD THAT:- We find that assessing officer has not given any basis for making impugned disallowance and the only reasoning behind the allocation of expense is that windmill units have not claimed any expenses on account of finance, establishment or general admin cost. The Ld. AR has drawn our attention to form 10CCB which contained complete working of profit and claim of various expenses incurred for running these units. It is self evident that separate set of books of account are maintained for respective windmill unit at Gujarat and Karnataka. In these circumstances, unless there is some material or conclusive finding on record that books of account of these units are not correct or expenses pertaining to these units have not been claimed, there could be no case of any notional allocation of expenses in the ratio of income. The assessment order is silent on this aspect and merely contains working of disallowance by allocation expenses in the ratio of income which in our view is not sustainable. At this juncture, it is pertinent to make reference to decision of CIT v. Translam Ltd. [2014 (10) TMI 544 - ALLAHABAD HIGH COURT] wherein it was held that assessing officer is bound to point out defect in separate books of account of units before disputing the correctness of income/loss declared therein.
TP adjustment u/s 92C on account of Corporate Guarantee fee - HELD THAT:- As it is unclear whether the assessee has provide corporate guarantee or letter of comfort. Ostensible both the terms are used in the said letter issued by the bank which is creating doubt over the real nature of the transaction. In fact, the order of TPO is silent on this aspect and TPO has proceeded on the ground that assessee has provided corporate guarantee.
We are of the considered view that the issue requires reconsideration at the level of TPO. Accordingly the adjustment made by the assessing officer is set-aside and the matter is restored to the file of TPO with the direction to examine the nature is assistance given to AE i.e. letter of comfort or corporate guarantee. Also, as noted above, in case the arrangement is in the nature of corporate guarantee, ALP, if any should be determined on the basis of FAR analysis and employing CUP method. Needless to say, that assessee should be afforded opportunity to furnish necessary explanation/clarification.
-
2021 (9) TMI 1408 - ITAT DELHI
Bogus job work expenses - HELD THAT:- Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O., are bald assertion. It would be enough for us to say that voluminous documentary evidences filed by the assessee as referred above and considered by us clearly establish the genuineness of the job work expenses covered by the grounds of appeal under consideration.
We have gone through the arguments of the assessee in respect of observations made by CIT(A) of the synopsis filed before us and we find that the evidences filed by the assessee to prove genuineness of the job work have not been found fault with by CIT(A) and there is no corroborative evidence produced against the assessee. We further find that CIT(A) misappreciated the nature of job work being done by this job worker and was not related to the assessee company or its directors. Statement of the wife of the proprietor cannot be used against the assessee. In the result grounds of appeal of the assessee in this regard are allowed & the addition is hereby deleted.
Addition of not-genuine purchases of fabric - HELD THAT:- The adverse observations made by the A.O. in the assessment order have been met by the assessee one by one and we have taken ourselves to these adverse observations and response of the assessee and we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O.
It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Jindal Fashion and M/s Akansha Fashion. We do not want to burden our order by repeating the whole hosts of documentary evidences filed in this case which establish that the purchases made by the assessee from the above said two suppliers are genuine purchases. We have gone through the observations made by CIT(A) in his appeal order and we do not agree with them. Opening of the bank account by the suppliers in the same bank in which assessee had bank account is not something which is unusual as it may be necessary for the smoothness of the banking and avoid the loss of time in collecting the cheques etc. We find that the burden to prove purchases was very well discharged by the assessee. We have deleted similar disallowance made in AY 2013-14 and 2014-15. Facts are identical in those years also. Assessee’s appeal of the assessee are allowed and the addition is deleted.
Bogus Purchases from vendors - HELD THAT:- we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O. It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Super Connection India P. Ltd. & other vendor companies. Other indicators such as percentage ratio of material to sale etc also establish the genuineness of the purchases. We do not agree with the observations made by the first appellate authority. In our considered opinion, assessee has been successful to discharge the burden of proving the purchase from M/s Super Connection India P Ltd. & other vendor companies.
Addition u/s 14A - HELD THAT:- It is seen that there is exempt income only to the extent of Rs. 72,740/- and for this reason also, disallowance under section 14A could not have exceeded this amount in view of the decision of Delhi High Court in the case of Joint Investment Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] and hence we uphold the order of CIT(A) to this extent. In the result, ground no. 11 of the assessee’s appeal is dismissed and grounds no. (iii) to (viii) of the departmental appeal are also dismissed.
Disallowance of treating the product development expense as deferred revenue expense - addition deleted by CIT-A - HELD THAT:- As decided in own case [2016 (9) TMI 1634 - DELHI HIGH COURT] appeal of assessee allowed.
Unexplained cash sales - HELD THAT:- It is seen that assessee has taken into account this sale in its profit and loss account and thus the sale of scrap has been considered while working out the result of this year. Separate addition of this very amount would lead to double addition. This was so held by CIT(A) also. We do not find any infirmity in the order of the first appellate authority in this regard and hence dismiss the ground of revenue’s appeal and uphold the deletion of the addition
-
2021 (9) TMI 1405 - ITAT DELHI
Corporate Social Responsibilities - nature of expenses - whether the same is allowable u/s 37(1)? - HELD THAT:- We find that there is no dispute that these CSR expenses which have been incurred for the purpose of business has not been disputed by the AO and Ld. CIT(A) except for that was treated it as capital expenditure. The amendment which has been brought in the Explanation 2 of section 37(1) is also not applicable either in the assessment year 2012-13 or 2013-14 as it has come with effect from assessment year 2015-16.
The allowability of expenditure section 37 (1) are otherwise fully applicable, once the Explanation 2 is not applicable for the impugned assessment year. Viewing from the nature of business activities of the assessee which is dealing in highly sensitive commodity i.e., currency, coins, security stationery, etc. Expenditure incurred is voluntarily as per board approval. Accordingly, such expenditure cannot be held to be capital as accepted by the authorities in the earlier years and it is not in the nature of personal expenditure or for any violation of law.
Disallowance u/s 14A - Mandation of recording satisfaction - HELD THAT:- As we find that while invoking the disallowance u/s 14A read with Rule 8D, nowhere the AO has recorded his satisfaction as to why the assessee ‘s explanation is not tenable - it is seen that nowhere AO has noticed the nature of expenditure debited nor he has examined the books of accounts as to what are the expenditure which can be said to be attributable for opening of the dividend income. The conditions laid down in u/s 14A (2) is not being satisfied and accordingly in view of the decision in the case of Godrej & Boyce Manufacturing [2010 (8) TMI 77 - BOMBAY HIGH COURT] disallowance made u/s 14A is allowed. Assessee appeal allowed.
-
2021 (9) TMI 1403 - SC ORDER
Exemption u/s 10B - denial of exemption as Assessee Company has expanded its existing processing capacity with the new plant and machinery installed in the factory - Approval from an official amounted to approval from the Central-Government appointed Board under section 14 of the Industrial (Development and Regulation) Act 1951 and the Rules made thereunder - Disallowance u/s 14A r.w.r. 8D - whether the Assessee incurred any expenditure while earning that exempted income and whether he included that expenditure in the common indirect expenditure of its own? - HELD THAT:- Issue notice.
Respondent, waives service. Counter affidavit be filed within four weeks.
-
2021 (9) TMI 1400 - ITAT DELHI
Nature of receipts - Credits received by the assessee from International Aero Engines and others, i. e., nature of credits received by the assessee from International Aero Engines - whether the agreement/ transactions are separate or composite? - purpose and nature of credits received by the assessee and their taxability - HELD THAT:- The findings of the learned Commissioner of Income-tax (Appeals), in our opinion, are based on con-jectures and surmises when he wrongly views the agreements with Inter-national Aero Engines, Airbus and lessors as an amalgamation. When the Commissioner of Income-tax (Appeals) himself noted that right to acquire aircraft has been assigned to lessor at "par value" then, there is no consideration received for such assignment.
Although right to acquire air-craft from International Aero Engines is a "capital asset", however, for applicability of provisions of section 48 which deals with computation of capital gains, there has to be a "Full value of consideration received or accruing" as a result of the transfer of the capital asset. Therefore, there should be a sale consideration flowing to the assessee from the lessors for transfer of a "capital asset" which in this case is the right to acquire an air-craft from Airbus.
We find merit in the submissions of the learned senior counsel for the assessee that under the purchase agreement the assessee was under an obligation to only take delivery of aircrafts. There was no compulsion on the assessee to mandatorily purchase the aircraft. The learned special counsel for the Revenue, in our opinion, has erroneously presumed that "amount paid by the lessors represents a consideration as the taking-over of a liability amounts to a consideration". We find in the year under consideration the lease agreements are in the nature of operating lease.
Assessing Officer in the order has also mentioned that the lessors are the owners and are claiming depreciation. Therefore, consideration paid by lessors to Airbus is not on account of the assessee. The transaction of payment of purchase price by lessors to Airbus is a separate transaction, under which, no right to the aircraft is flowing to the assessee. There is, therefore, no "sale consideration" received by the assessee which could be held assessable to "capital gains tax". We, therefore, hold that credits received by the assessee are not taxable as capital gains.
Disallowance of proportionate lease rental under section 37(1) - HELD THAT:- We find there is no connection between credits received and the payment of lease rentals. We have already adjudicated in the preceding paragraphs that credits received under agreement dated October 19, 2005 and payment of lease rentals under lease agreements executed much after are separate transactions not related to each other. Therefore, there cannot be any disallowance of proportionate lease rentals.
Disallowance u/s 40(a)(ia) of supplementary rent (SR) - HELD THAT:- It was held that supplementary rent is not a payment made for use of spares, facilities or any services, whereas basic rent is a fixed amount. Supplementary rent is determined taking into consideration the number of flying hours. Supplementary rent, in our opinion, is a payment made for lease of aircraft. The lease agreement defines "rent" as "means collectively base rent and supplementary rent". Therefore, respectfully following the decision of Tribunal for the assessment year 2007-08 which has also been followed in subsequent years, we hold that payment of supplementary rent is exempt from tax in hands of lessors as per provisions of section 10(15A) and hence, disallowance under section 40(a)(i) is not called for. However, the above figure is subject to verification by the Assessing Officer.
For lease agreements executed after 1st April, 2007, a claim was made by the assessee before the lower authorities that the income is not chargeable to tax in hands of lessor under article 12 of the Double Taxation Avoidance Agreement between India and Ireland.
It is an undisputed fact that the basic lease rent of Rs. 673.42 crores paid under the lease agreement is an allowable expenditure and its nature is that of "Rent". In our opinion, the nature of supplementary lease rent cannot be treated otherwise as both these expenses are payments made under the same agreement for use of aircraft. The learned special counsel for the Revenue has filed copies of three lease agreements before us in his paper book. However, from none of these agreements he has been able to demonstrate that the nature of lease is financial lease and not operating lease. We have already held above in the preceding paragraph that the nature of lease in the year under consideration is operating lease. Moreover, both the lower authorities have also accepted this fact. We are, therefore, not convinced by the arguments of the learned special counsel for the Revenue that the present leases are financial merely because lease rent is determinable using LIBOR rate or that delivery of aircraft is taken by the assessee from Airbus. We find that in the present case the aircrafts were leased for a period of six years. Therefore, the lease rent paid cannot be characterised as "interest". We, therefore, find no merit in the above submissions raised by the Revenue.
Thus for failure to non-deduction of tax on supplementary lease rent Rs. 61,81,04,551 is sent back to the Assessing Officer for considering the allowability in the light of the directions and Rs. 276,28,59,861 is deleted.
-
2021 (9) TMI 1399 - ITAT MUMBAI
TP Adjustment - time limit for TPO to pass the order - whether order passed under section 92CA(3) is barred by limitation as per section 153? - how the period of 60 days prior to the date of TP order computed? - HELD THAT:- As we find that as per sub-section 3 to section 92CA inserted with effect from 1.6.2007 time limit for TPO to pass the order is within the period of sixty days prior to the date of completion of the order as per section 153 of the Act. Since reference under section 92CA sub section (1) has been made to the TPO the time limit for passing the assessment order as per section 153(4) is extended by 12 months from the time limit as in section 153(1) - Hence, time limit to pass assessment order in this case is 31.12.2016. Since the TPO order is passed on 1.11.2016, on the touchstone of the aforesaid decisions it is clear that the TPO order passed is time barred as the due date in this case was 31.10.2016.
Following the same reasoning as Coordinate Bench decision [2021 (3) TMI 563 - ITAT DELHI] as above in which Hon'ble Madras High Court decision [2021 (2) TMI 1152 - MADRAS HIGH COURT] has been followed, we hold that the order passed by the TPO is time barred and hence, is not legally sustainable. We note that no contrary order of Hon'ble Jurisdictional High Court has been cited before us in this regard. - Decided in favour of assessee.
-
2021 (9) TMI 1398 - BOMBAY HIGH COURT
Stay of demand - Respondent No.2 has rejected the prayer of petitioner for staying recovery of entire demand until final disposal of the appeal that petitioner has filed challenging the assessment order dated 23rd April, 2021 - Respondent No.2 has directed petitioner to deposit 20% of the amount payable under the assessment order - HELD THAT:- We see no reason to interfere in the order impugned.
Petitioner may make out their case in the appeal. Respondent No.3 is directed to dispose of the appeal expeditiously and in any event by 15th January, 2022.
-
2021 (9) TMI 1396 - ITAT MUMBAI
Addition u/s 68 - unsecured loans from Bhanwarlal Jain group by treating the same as unexplained cash credit - AO made the addition by doubting the genuineness of the loan transactions by citing the reason that a search on Bhanwarlal Jain and related parties has revealed that the entire group was engaged in advancing tax accommodation entries without doing any real business which has affirmed by Ld. CIT(A) by observing that retraction of statement recorded during the course under section 132(4) of the Act can not be sole basis to treat the transaction as genuine - HELD THAT:- Undisputedly, the assessee during the course of assessment proceedings filed copy of ITRs, balance sheet, profit and loss account, confirmations and proof of receipt of payment through banking channel along with the evidence of payment of interest at the rate of 12% after deduction of TDS at source.
We observe from the records before us that AO has not carried out any further verification and relied on the report of the DGIT(Inv.), Mumbai that assessee is beneficiary of accommodation entries without carrying on any further investigation. We note that the statement taken during the course of search has been retracted in which it has been admitted that Bhanwarlal Jain and related entities were engaged in accommodation entries in the form of unsecured loans of short term and long term capital gain and share capital etc. We also observe from the facts before us that the assessee has filed various evidences before the lower authorities however no further enquiries have been conducted by the AO or ld CIT(A) to dig out the truth or t disapprove the evidences filed. Both the authorities below have heavily relied on the statements recorded during search of Shri Bhanwar lal Lain and other persons without any corroborating evidences. - Decided in favour of assessee.
-
2021 (9) TMI 1394 - ITAT DELHI
Applicability of provisions Section 144C - draft of the proposed order of assessment forwarded or not? - HELD THAT:- As assessee’s contentions before the assessment proceedings were properly taken into account and there was no procedural lapse pointed out by the assessee or Ld. AR as prescribed u/s 144C as well as there was no lapse on substantive basis, as the assessee has availed the remedy prescribed under the Section before the Revenue Authorities. To clarify further, the Finance Act clearly mentions that the reference to Dispute Resolution Panel was inserted by the Finance(No.2) Act, 2009, w.r.e.f. 01.04.2009, Section 144C(1) clearly mentions that notwithstanding anything to the contrary contained in the Act, in the first instance, forward a draft of the proposed order of the assessment to the eligible assessee, if he proposes to make on or after 1st day of October 2009, any variation in the income or loss return which is prejudicial to the interest of such assessee.
In the instant case, the AO has rightly forwarded the draft of the proposed order of assessment on 03.01.2014 as per the provisions of Section 144C(1) and the assessee has also filed his objections to the variation with ld. DRP on 29.04.2014 in accordance with the Section 144C(2). The ld. DRP vide order dated 31.12.2014 has issued directions in accordance with the provisions of Section 144C(6). Subsequently, the assessee upon the receipt of the directions issued under sub-section (5) has completed the assessment on 08.01.2015. Thus, on going through the entire provisions of the law, the judgments quoted, the orders of the Tribunal, the procedure followed by the assessee, TPO, ld. DRP and the Assessing Officer has been found to be correct as per the provisions of the Act inserted by the Finance (No.2) Act, 2009, hence, the additional grounds filed on 8.7.2021 with regard to non-applicability of provisions Section 144C are hereby dismissed.
Jurisdiction of JCIT, Hisar Range - As argued that the Joint Commissioner is not competent to pass the order under the provisions of Section 143(3) - HELD THAT:- Board may assign the power to any Income Tax Authority to exercise powers of the A.O. having regard to territorial area etc., or the Board may authorise or empower Pr. Director General, Pr. Chief Commissioner etc., to issue order in writing to assign powers of the A.O. to other Authorities including Joint Commissioner of Income Tax as Assessing Officer.
Considering the provisions of Section 2(7A) of the I.T. Act, 1961, which defines the definition of the Assessing Officer would make it clear that Joint Commissioner of Income Tax could function as an Assessing Officer when jurisdiction have been assigned to him by virtue of the directions or orders issued under section 120(4)(b) of the I.T. Act, 1961.
On going through the entire events, we find that the order dated 29.07.2013 passed by the ld. CIT (A) invoking the powers conferred by Sub-Section (1), (2) and (5) of Section 120 would not confer any powers to the CIT to confer the concurrent exercise of powers to the Assessing Officers. Further, when concurrent powers are conferred both the officers namely Joint/Addl. Commissioner along with the ACIT or DCIT/ ITO would exercise the jurisdiction. Whereas the order dated 29.07.2013 of the CIT conferred concurrent exercise from ACIT, Hisar to JCIT, Hisar which effectively culminated in transfer of the assessment for the year 2011-12 from ACIT, Hisar to JCIT, Hisar. When the case is transferred from one Assessing Officer to the other Assessing Officer, JCIT in this case, it is legally mandated to pass order u/s 127 by the ld. CIT invoking the “power to transfer” u/s 127.
In the instant case, (1) there is no order by the ld. CIT invoking powers conferred u/s 120(4) wherein sub-Section (b) empowers the CIT to issue orders in writing that the powers and functions conferred on or as the case may be assigned to the Assessing Officer by or under the Act in respect of any specified areas or persons shall be exercised by the Joint Commissioner. In the absence of any order by the ld. CIT invoking the powers conferred by sub-Section (4) of Section 120, we hold that the order passed by the Assessing Officer lacks jurisdiction. (2) Further, we also find that the order of the ld. CIT in pursuance with the notification No.251/2001 also did not confer any jurisdiction to the CIT, Hisar. (3) In addition, no order has been issued by the Ld.CIT transferring the case from one AO to other AO u/s 127 is also wanting in the instant case.
We are of the view that JCIT, Hisar Range, do not have jurisdiction over the case of assessee and since he did not assume the jurisdiction legally and validly, therefore, the impugned assessment order framed by him is vitiated and illegal and without jurisdiction. In view of the above discussion, we set aside the order of the authorities below and quash the impugned order.
........
|
