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Income Tax - Case Laws
Showing 61 to 80 of 10008 Records
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2018 (12) TMI 1868 - ITAT PUNE
TP Adjustment - assessee company was engaged in manufacturing and trading activity - TNMM method - HELD THAT:- The first aspect of the issue is that admittedly, the assessee is carrying on two separate divisions i.e. two separate activities; one is the manufacturing and second is trading. AO had considered the operations of assessee in entirety and held it to be one activity. In the preceding year, the assessee was held to be in carrying on two activities. There is no dispute to the same. Accordingly, we hold that the assessee is engaged in two separate activities; one is manufacturing and the second is trading.
Coming to the second step, wherein it is the duty of Assessing Officer / TPO to benchmark two activities separately. Accordingly, we direct the Assessing Officer / TPO to apply TNMM method and go through the comparables selected by assessee and determine the arm's length price of international transactions entered into by assessee with its associated enterprises under the umbrella of manufacturing activity and also as part of trading activities. The two activities have to be benchmarked separately and independently, for which reasonable opportunity of hearing shall be provided to the assessee. Accordingly, we remit the issue back to the file of Assessing Officer / TPO in this regard. The grounds of appeal raised by Revenue are thus, allowed for statistical purposes.
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2018 (12) TMI 1866 - MADRAS HIGH COURT
Recovery proceedings - Proceedings under Section 201(1) and 201(1-A) of the Income Tax Act being initiated for the alleged failure on the part of the petitioners to deduct the Tax Deducted at Source (TDS) on certain foreign remittances - petitioners have also initiated proceedings under Section 10 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporation Insolvency Resolution Process (CIRP) and sought for further time from the respondents - HELD THAT:- When the respondents are not going to take any coercive measures, and they are going to treat the impugned orders as only intimation of demand, without enforcing the demand and the impugned orders are only the orders passed under Section 201(1-A)(3) of the Income Tax Act, and since the financial year of the petitioners is 2010-2011, as per Section 201(1-A)(3) of the said Act, the respondents, before expiry of seven years, namely on or before 31.03.2018, should make an order under Section 201(1) of the said Income Tax Act and in default for failure to deduct the whole or any part of tax from a person who is resident in India, the second respondent, after giving notice, has passed the present impugned orders and since the impugned orders are passed under Section 201(1) and 201(1-A) of the Income Tax Act, it is to be treated only as an intimation of the existing demand sent to the assessee holding PIN, and hence, it cannot be construed as coercive measures being taken against the petitioner-Companies.
Once an order of moratorium is granted by the NCLT, the legal fiction under Section 14 of the IBC will come to the rescue of the corporate debtor. Therefore, taking into consideration all the abovesaid provisions of law and also the ratio laid down by the Apex Court [2018 (8) TMI 1775 - SC ORDER], as also the Delhi High Court [2017 (9) TMI 1907 - DELHI HIGH COURT] holding that when once the Moratorium is granted by the NCLT, it will continue till the completion of Corporate Insolvency Resolution Process or until it approves the resolution plan under Section 31(1) of the IBC or passes an order of liquidation of corporate debtor under Section 33 of the IBC, as the case may be, the present Writ Petitions shall stand disposed of, directing the respondents to keep the impugned orders in respect of both the petitioners, in abeyance, till the disposal of the proceedings pending before the NCLT, Mumbai and also the further appeal(s), if any that may be filed by any of the parties to these Writ Petitions.
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2018 (12) TMI 1863 - ITAT KOLKATA
Assessment u/s 153A - incriminating material found in search or not? - addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A - HELD THAT:- In the case on hand, the assessee filed its original return of income on 31/08/2008. The time limit for issual of notice u/s 143(2) of the Act, was 30/09/2009. The search and seizure operation was conducted in this case on 18/02/2013. The statutory period for issual of notice u/s 143(2) of the Act, in the case of the Assessment Years had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Year has not abated. Additions in question are not based on any incriminating material found during the course of search.
No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. The Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] had held that opportunity of cross-examination must be provided to the assessee.
Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation or whether the statements were recorded during the course of survey operations. It is well settled that a statement recorded during the course of survey operation cannot be used as an evidence under the Act.
Only a general statement has been made that the investigation wing had recorded some statements. There is no evidence whatsoever that cash has been routed from the assessee company or that any cash was deposited by the assessee company. There is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross-examine any these parties was provided to the assessee.
Thus, none of these material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Thus, we hold that the additions in question are not based on any incriminating material. - Decided in favour of assessee.
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2018 (12) TMI 1861 - ITAT MUMBAI
Estimation of income - Bogus purchases - HELD THAT:- AO had specific information in his possession to indicate that certain purchases made by the assessee in the impugned assessment years are not genuine. It is also evident, the assessee could not conclusively prove that the purchases claimed to have been made from the declared source are genuine. However, the departmental authorities have not disputed the sales effected by the assessee, meaning thereby, the assessee might have purchased the goods from some unknown parties/source.
For this reason alone the assessing officer has estimated the profit at 12.5% of the non genuine purchases. Therefore, the dispute now is only with regard to the profit rate to be applied for estimating the income on non genuine purchases. After considering the overall facts and circumstances of this particular case we are of the considered opinion that estimation of profit @ 5% of the alleged non genuine purchases would be reasonable. We direct the assessing officer to restrict the addition in both the Assessment Years under appeal to 5% of the non genuine purchases. We make it clear, our aforesaid decision is purely on the basis of facts involved in the present appeals.
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2018 (12) TMI 1855 - GUJARAT HIGH COURT
Disallowance of interest expense made u/s 14A in respect of exempt income u/s 80P(2)(d) - Tribunal directing the A.O. to compute the deduction u/s 80P(2)(d) (on gross receipt) after considering the provisions of section 80AB - HELD THAT:- It is an admitted position that the controversy raised vide the said questions is no longer res integra as the same stands concluded by a judgment and order passed by this court in the assessee's own case [2014 (6) TMI 977 - GUJARAT HIGH COURT] whereby the questions have been answered in favour of the assessee and against the revenue. Under the circumstances, no question of law can be stated to arise out of the said questions.
Disallowance on account of additional depreciation on Milk Cans - milk cans are for collecting and storage purposes and being movable assets are not installed and, therefore, cannot be treated as plants in view of the provisions of section 32(1)(iia) -Tribunal after considering the definition of “plant” as contemplated under section 43(3) of the Act, has found that milk cans are plant as per the said definition and has, accordingly, deleted the disallowance - HELD THAT:- Having regard to the fact that the Assessing Officer has himself considered milk cans as plant for the purpose of normal depreciation, he was not justified in disallowing the claim for additional depreciation by holding that such milk cans cannot be treated as plant. The Tribunal, therefore, did not commit any error. Question (C), therefore, does not raise any substantial question of law.
Disallowance on account of additional depreciation on Plant & Machinery - HELD THAT:- Existing provisions of section 32 of the Act and more particularly to the third proviso thereto was introduced with effect from 1.4.2016 whereas in the present case, we are concerned with the assessment year 2012-13. As submitted that in the absence of any such provision in the Act at the relevant time, the Tribunal was not justified in holding that the assessee was entitled to additional depreciation on the new machinery or plant even in the succeeding year.
The following substantial question of law arises for consideration:-
“Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in deleting the disallowance claimed on account of additional depreciation on plant and machinery?”
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2018 (12) TMI 1853 - ITAT MUMBAI
TP Adjustment - comparable selection - Cyber Media Research Ltd; and ICRA Online Ltd. were accepted by the TPO as comparables in the immediately last two preceding years i.e. A.Ys 2009-10 and 2010-11, then on what premise or reason the same had been rejected as comparables for the year under consideration - HELD THAT:- It is not the claim of the TPO/DRP that the functional profile of either of the aforementioned comparables or that of the assessee company had witnessed a change during the year under consideration as against that of the aforementioned preceding years, which would have justified the rejection of the said companies as comparables for the year under consideration. We are of the considered view that in the absence of any change in the circumstances a company which has been accepted as a good comparable by the revenue in the earlier years cannot be whimsically rejected in a subsequent year.
In the backdrop of the aforesaid observations and the settled position of law, the whimsical rejection of the aforementioned companies viz (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. by the TPO for benchmarking the ALP of the international transactions of the assessee with its AEs during the year under consideration not being justified, thus cannot be sustained and is liable to be vacated. We direct the AO/TPO to re-workout the ALP in the hands of the assessee after including the aforementioned companies i.e. (i) Cyber Media Research Ltd; and (ii) ICRA Online Ltd. as comparables in the final list of comparables. In case, the claim of the assessee that after including the aforementioned companies its ALP would fall within the range of is found to be in order then no adjustment to the ALP would be called for in the hands of the assessee.
Unexplained credit - Difference between the “closing stock‟ and “opening stock" -A submitted by the assessee before the DRP that the difference in the valuation of stock had arisen only due to software system while preparing the stock statement as per the format that was required during the course of the assessment proceedings - HELD THAT:- In the course of proceedings before the DRP, it was claim of the assessee that the variance in the valuation of stock was on account of the software system while preparing the statement of stock in the format as was required during the assessment proceedings. However, in sharp contradiction of its earlier stand, it is now submitted before us that the said variance had arisen on account of loss of stock. Be that as it may, in the absence of any plausible explanation as regards the difference of ₹ 3,53,550/- in the valuation of the stock, we find no reason to dislodge the observations of the lower authorities that the assessee had failed to reconcile the variance in the stock. However, we find ourselves to be in agreement with the contention of the Ld. A.R that in case the explanation of the assessee as regards the discrepancy in stock of ₹ 3,53,550/- was not to be accepted, then the addition to the said effect could only have been made by increasing the value of the “closing stock‟ in the hands of the assessee. We thus in terms of our aforesaid observations uphold the addition.
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2018 (12) TMI 1852 - ITAT DELHI
TP Adjustment - existence of international transactions qua AMP expenses - HELD THAT:- We are of the considered view that since the taxpayer is a full-fledged manufacturer as 87% of its turnover is from the sale of its manufactured goods in India and the entire AMP expenses have been incurred by it to enhance its sale in India and not for promoting the brand of its AE and for creating intangibles for its AE, the alleged excess AMP expenditure does not fall in the category of international transactions. Moreover, the Revenue has not brought on record any cogent evidence to prove these facts. So, following the law laid down by the Hon’ble Delhi High Court in case cited as Maruti Suzuki India Ltd. v. CIT [2010 (7) TMI 84 - DELHI HIGH COURT] we are of the considered view that adjustment made by the Revenue on account of incurrence of AMP expenses are not sustainable in the eyes of law. ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/AO is not sustainable in the eyes of law.
Comparable selection - functional dissimilarity - HELD THAT:- The taxpayer during the year under assessment entered into international transactions qua provision of Information Technology Enabled Services (ITES) in the form of provisions of services in the nature of payroll processes, account processes, etc. thus companies functionally dissimilar with that of assessee need to be deselected.
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2018 (12) TMI 1844 - ITAT MUMBAI
Deduction of ex-gratia payment made by assessee to its employees - HELD THAT:- Issue decided in own case [2017 (7) TMI 1372 - BOMBAY HIGH COURT] Section 63 of the Act empowers the Board of Directors to approve payment of ex-gratia amount to its employees. It is also observed by the Tribunal that the assessee has been extending incentives to employees for the proceeding years and the subsequent years also and the same is accepted by the Revenue. Thus been held that ex-gratia payment made by the employer to its employees is on account of commercial expediency and hence allowable. Appeal filed by the Revenue is dismissed.
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2018 (12) TMI 1843 - ITAT CHENNAI
Disallowance of expenditure for providing modern kitchen in the flat as cost of acquisition - assessee, submitted that the cost of modern kitchen has to be considered as cost of asset, therefore, the CIT(Appeals) is not justified in confirming the order of the AO - HELD THAT:- Both the authorities below rejected the claim of the assessee on the ground that there was no evidence available on record for providing modern kitchen. Even before this Tribunal, no evidence is produced for providing modern kitchen after purchase of flat. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against assessee.
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2018 (12) TMI 1836 - ITAT MUMBAI
Method of computation of interest on refund u/s 244A - interest on the unpaid refunds - CIT-A had merely directed the ld AO to calculate the interest u/s 244A of the Act correctly as per law without really getting into the dispute - HELD THAT:- Full amount of refund as determined by the ld AO was not actually granted to the assessee, thereby making the assessee eligible for further interest for the future periods. We find that this aspect had been duly dealt with by the co-ordinate bench of this tribunal elaborately in the case of Union Bank of India vs ACIT [2016 (8) TMI 688 - ITAT MUMBAI wherein the solitary ground taken up by the assessee before this tribunal was with regard to granting lesser amount of interest u/s 244A while computing refund arising as a result of passing impugned order for giving effect to CIT(A)’s order (i.e appeal effect order) was decided in favour of assessee.
We are inclined to accept the plea of the assessee. Hence we hold that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Mumbai Tribunal in the case of Union Bank of India supra. The ld AO is hereby directed to compute the interest on refund u/s 244A of the Act as per the plea of the assessee. Accordingly, the grounds raised by the assessee are allowed and that of the revenue are dismissed.
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2018 (12) TMI 1835 - ITAT MUMBAI
Estimation of income of capital work in progress - HELD THAT:- Assessee was having difficulty in realizing the dues from the aforesaid contractee which is evident from consent terms dated 21/02/2009 as approved by Hon’ble Bombay High Court and contempt petition filed by the assessee against the aforesaid entity for not honouring the terms of the consent terms by the contractee.
These facts give credence to the arguments of Ld. AR that there was significant uncertainty as to the recovery of the final amount and the income, under the circumstances, could not be recognized with reasonable certainty. No defects have been found in the books and therefore, the action of the assessee in estimating the income @10% of capital work in progress could not be said to be without strong foundation. No infirmity in the order of Ld. first appellate authority in deleting the estimated additions as made by Ld. AO. - Decided in favour of assessee.
Deemed dividend u/s 2(22)(e) - CIT(A) deleted the addition holding that deemed dividend would be attracted in the hands of the Directors being the shareholders and not in the hands of the assessee company, who is not a shareholder - HELD THAT:- Both the entities i.e. lender and the assessee company has certain individuals shareholders who hold threshold shareholding in the two entities within the meaning of Section 2(22)(e).- assessee itself does not hold any shareholding in the lender company either as registered shareholder or as a beneficial shareholder. This being the case, the ratio of decision of Special Bench of Mumbai Tribunal rendered in ACIT Vs Bhaumik Color (P) Ltd.. [2008 (11) TMI 273 - ITAT BOMBAY-E]as relied upon by first appellate authority becomes squarely applicable.
Section 2(22)(e) does not extend the meaning of the term ‘shareholders’ and that the loan so granted could not be taxed as dividend income in the hands of the recipient company who was not the shareholder of the lender company.- Decided in favour of assessee.
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2018 (12) TMI 1831 - ITAT CHENNAI
Reopening of assessment u/s 147 - change of opinion - sale of agricultural land - Claim of deduction u/s.54F denied - HELD THAT:- A perusal of the letter of assessee addressed to AO explaining the sale of the property at Uthandi village in the course of original assessment proceedings, which culminated in the assessment order dated 21.01.2014 clearly show that the issue has been considered by AO in the course of original assessment proceedings. Re-opening of the same done by AO by issue of notice u/s.148 of the Act dated 27.11.2015 on the basis of the Gazettee Notification dated 09.11.2010, is nothing but a change of opinion.
Gazettee Notification dated 09.11.2010 was very much available when the original assessment order was passed u/s.143(3) of the Act on 21.01.2014. Therefore, this is not new evidence, which has come to light. The benefit available to the Department under Explanation -2 to Section 147 of the Act also would not help to the Department in so far as the claim of agricultural land is not falling under any exemptions provided in the said Explanations.
Assessment order in the case of assessee’s wife Smt Seema Shroff and the coowner passed u/s.143(3) of the Act on 14.03.2014 accepting the claim on sale of agricultural land remains undisturbed. This being so, clearly the reopening being on change of opinion, the same is unsustainable and consequently quashed.
Deduction u/s.54F - What has been sold by assessee is only agricultural land in so far as the sale deed was executed on 18.01.2011 whereas the said Uthandi village has come within the Corporation limit by virtue of the Government Order No.97 dated 19.07.2011 as has already been held by the Co-ordinate Bench of the Tribunal in the case Shri N. K. V. Krishna referred to supra. In respect of an alternate claim of assessee that the assessee has also alternatively eligible of deduction u/s.54F. Admittedly, the certificate issued by Executive Engineer, Greater Chennai Corporation clearly shows that the location of the building is in primary residential zone as per CMDA land use map and the building plan has been sanctioned for residential purpose only. Obviously, the Executive Engineer, Zonal Office, Greater Chennai Corporation is a competent person to decide on the location map in respect of the building as also the plan approval and the Executive Engineer having given a finding and being the competent authority, obviously assessee would be entitled to claim of deduction u/s.54F, though the same is liable to be restricted to the residential portion only. - Decided in favour of assessee.
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2018 (12) TMI 1830 - ITAT MUMBAI
Estimation of income - Bogus purchases - HELD THAT:- The assessee was in possession of primary purchase documents and was able to reconcile the quantitative details. At the same time, the stated purchases were under grave doubt since the assessee could not produce any of the party to confirm the transactions and the information received from investigation wing revealed that all the suppliers were engaged in carrying out only paper transactions without actual delivery of material. The complete onus to prove the purchases conclusively was on assessee, which has remained un-discharged.
In such a scenario, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against alleged bogus purchases, which lower authorities have rightly done.
Considering GP rate of 10.59% already reflected by the assessee as well as VAT rate applicable to the goods being dealt with by the assessee, we find the estimation to be on the higher side and therefore, we restrict the same to 3% of alleged bogus purchases of ₹ 1,87,08,961/-. The same comes to ₹ 5,61,269/-. - AO is directed to re-compute the income of the assessee in terms of our above order.
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2018 (12) TMI 1829 - ITAT MUMBAI
Disallowance of interest expenditure - HELD THAT:- As decided in own case [2017 (12) TMI 1668 - ITAT MUMBAI] direct the AO to allow deduction to the assessee in respect of interest expenditure out of interest earned on term deposit - The revenue has not brought on any order passed by the courts of law, contrary to the decision of the coordinate Bench. Hence, respectfully following the decision of the coordinate Bench, we allow this ground of appeal of the assessee and set aside the findings of the Ld. CIT(A). We accordingly direct the AO to delete the addition.
Addition on account of personal household expenses - assessee submitted that the ITAT, Mumbai has dealt with this issue and partly allowed this ground of appeal and allowed 50% of expenditure claimed in the assessee’s own case for the A.Y. 2006-07 - HELD THAT:- Since, the coordinate Bench has dealt with the identical issue in assessee’s own case for the A.Y. 2006-07 [2016 (4) TMI 1348 - ITAT MUMBAI] and restricted the disallowance to 50%, we respectfully following the decision of the coordinate Bench and restrict the addition confirmed by the Ld. CIT (A) to 50% i.e. ₹ 3,00,000/-. Hence, this ground of appeal of the assessee is partly allowed.
Levy of interest u/s 234A, 234B and 234C - Whether as the income assessed in the hands of the appellant was subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s 234B and 234C of the Act ? - HELD THAT:- Since, the coordinate Bench has set aside the identical issue to the file of the AO with the direction to re-compute the interest u/s 234B and 234C of the Act, in assessee’s own cases for the earlier years, we respectfully following the decision of the coordinate Bench set aside this issue to the file of the AO to re-compute the interest liability after reducing the amount of tax deductible at source on the income earned.
Direct the AO to bring to tax the correct interest income in the hands of the assessee and add the same in the income of the assessee.
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2018 (12) TMI 1828 - ITAT KOLKATA
Disallowance of Rural Employment Cess (RE Cess) and Primary Education Cess (PE Cess) - HELD THAT:- As decided in own case [2015 (12) TMI 1326 - ITAT KOLKATA] we hold that the cess collected from customers in the sale invoices shall not be chargeable to tax in the year of collection and accordingly, the grounds raised by the assessee in this regard are allowed.
Disallowance u/s 14A read with Rule 8D - HELD THAT:- As decided in own case [2015 (12) TMI 1326 - ITAT KOLKATA] no disallowance u/s 14A of the Act would operate in the facts and circumstances of the case. Unless an item is debited in the profit and loss account, the same cannot be the subject matter of addition to book profits under clause (f) of Explanation to section 115JB of the Act. The disallowance made u/s 14A of the Act read with Rule 8D is only artificial disallowance and obviously the same is not debited in the profit and loss account and the same cannot be imported into clause (f) of Explanation to Section 115JB - Decided against revenue.
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2018 (12) TMI 1825 - ITAT PUNE
Deemed dividend u/s 2(22)(e) - loans/advances given by the company to the assessee, when the assessee mortgaged his property as a guarantee for the company to take loan of higher amount from the banks - HELD THAT:- It is evident that in case of non-gratuitous advances, the provisions of section 2(22)(e) of the Act has no application. It is not the case of the Revenue that the loan taken by the assessee from the company constitutes gratuitous advances. The facts of the company taking loan from the Bank against the guarantee of property of the assessee and given loan of ₹ 2.35 crore to the assessee are undisputed. Therefore, we are of the opinion that the decision given by the CIT(A) in his order is fair and reasonable and does not call for any interference. - Decided against revenue.
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2018 (12) TMI 1823 - ITAT MUMBAI
Disallowance u/s 80IB - project "Mayuresh Residency" at Bhandup which was not completed within the stipulated time - HELD THAT:- Executive Engineer in the office of MCGM has clarified that the Occupation certificates and the Building completion certificates have been issued in the present case, after following the necessary procedure and in accordance with law.
From the record we found that the Occupation and the Building completion certificates have been issued in the present case by the MCGM after thorough application of mind and following the prescribed procedure. There is absolutely no basis for the observation that the said certificates have been issued in a casual manner. On the contrary, the assertions as made by the AO with respect to the construction of the said project being incomplete based on the photographs taken on 10th April, 2013 has no basis.
The fact relating to completion of the housing project is a fundamental one and such which cannot change based on year to year. In the present case, for A.Ys. 2010-11 and 2011-12 the Tribunal by its order dated 3rd November, 2016 has based on the Occupation and the Building completion certificates -accepted that the construction of the project was completed within the time as required by section 80-IB(10)(a)(iii). Once this factual position is accepted, then, a different view cannot be taken on the completion of the project for a later year. If this proposition is accepted, then, one is not required to go into the other propositions.
As per Explanation below clause (a) of section 80-IB( 10), the date of completion of construction of the housing project shall be taken to be the date on which completion certificate in respect of such housing project is issued by the local authority. Therefore, according to the legislature, it is incumbent on the AO to regard the construction of the project being completed based on completion certificates issued by the local authority. There is no option which has been given to the Assessing Officer to go beyond the said certificate and express his dissent with the said certificate. No infirmity in the order of CIT(A) for allowing claim of deduction u/s.80IB (10) - Decided against revenue.
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2018 (12) TMI 1822 - ITAT JAIPUR
Validity of reopening of assessment u/s 147/148 - validity of reasons to believe - bogus claim of short term capital loss on sale of equity shares requirement to record the satisfaction - Non satisfaction statutory requirement U/s 151 - HELD THAT:- AO in the concluding para of reasons recorded, assumed that all the transactions are bogus to form the belief that the income assessable in tax has escaped assessment. There is a wide disconnect between the reasons recorded and formation of belief which shows that the AO has not applied his independent mind while recording the reasons for reopening of the assessment. It is discernable from the record and reasons recorded by the Assessing Officer that the reopening is based on borrowed satisfaction. Hence, we hold that the reopening of assessment is not valid and the same is liable to be quashed
Mechanical approval of reopening without application of mind - The satisfaction of the sanctioning authority may be in briefest manner but it shall reflect the application of mind of the authority. The requirement of recording the satisfaction is to reflect the mind of the authority and the same can be ascertained only from the reading of record and not from the reading of mind of the authority. Therefore, in absence of any satisfaction reflect from the record, the statutory requirement U/s 151 of the Act is not satisfied and consequently the notice issued U/s 148 of the Act is not valid for want of jurisdiction. Hence, in view of the peculiar facts of the case and binding precedent we hold that the approval granted U/s 151 of the Act is mechanical and without application of mind renders the notice issued U/s 148 of the Act as invalid and unsustainable in law. Accordingly, we quash the notice issued U/s 148 of the Act on this ground.
Lack of jurisdiction of AO u/s 124 at the time of recording the reasons - Jurisdiction of the assessee was shown as transferred from ITO Ward 7(2), Jaipur to ITO Ward 3(1), Jaipur on 30/3/2016 however, the ld CIT-DR has filed copies of order dated 06/01/2015 alongwith letter of the Assessing Officer whereby the jurisdiction of the assessee was transferred from ITO Ward 7(2), Jaipur to ITO Ward 3(1), Jaipur with immediate effect.
Order passed U/s 127 of the Act on 06/01/2015 was very much inexistence transferring the jurisdiction of the assessee from ACIT(OSD), Circle-7, Jaipur to ITO Ward 3(1), Jaipur, though, the same was not updated and reflected in the ITBA database maintained by the department. It is nothing but non-updating the information and data in the ITBA website of the department. There is another discrepancy in the record about the order passed U/s 127 of the Act dated 04/10/2016 which is shown in the ITBA database as the date of transfer on 17/10/2016. Therefore, the information available on ITBA database is not matching with the physical orders on record. However, once the physical orders are available on the record then the non-availability of same on the ITBA database would not change the fact of order passed U/s 127 of the Act. No substance or merit on this objection of the assessee and the same is dismissed.
Disallowance of short term capital loss on transfer of share - Hon'ble Supreme Court in the case of CIT Vs. Malayalam Plantations Ltd.[1964 (4) TMI 9 - SUPREME COURT] has held that it is prerogative of the businessman to organize its affairs in a manner best suited to it and the revenue authority cannot step into the shoes of business man. It is not for the revenue to attack the transaction on the ground that the same was imprudent. Once the transaction is treated as transfer of capital asset then the provisions of Section 40A(2) of the Act cannot be attracted due to the reason that the transaction is between the related parties. since the claim is short term capital loss and not the business loss suffered by the assessee, therefore, it would not attract the provisions of Section 40A(2) of the Act. Moreover, it is otherwise not a payment to the related party so as to fall in the category of transaction between the specified persons as per Section 40A(2) of the Act.
We hold that the transaction of transfer of shares in question cannot be treated as non-genuine merely because the assessee incurred loss and set off of the same against the capital gain. Hence, the orders of the authorities below qua this issue are set aside and the addition made by the Assessing Officer is deleted.
Disallowance of loss on sale of commercial space - understatement of the sale consideration - HELD THAT:- Though the transaction is between the related parties but once the AO has not given a finding that the sale consideration is suppressed or understated then the transaction between the related parties cannot be held as bogus. Even otherwise when it is a transaction of sale of capital asset, there is no provision in the Act to adopt a deemed consideration on the principle of transfer pricing. The provisions of domestic transfer pricing has been brought into statute by the Finance Act, 2012 w.e.f. 01/4/2013, therefore, the said provision U/s 92BA of the Act are not applicable for the year under consideration.
Since this is not a business transaction or sale of the stock in trade but it is a transaction falling under the provisions of Section 45 of the Act, therefore, the provisions of Section 40A(2)(b) of the Act are not applicable. There must be a consistency and uniformity of view while taking the decision by the Assessing Officer on the transaction arising and resulting from one common exercise of relinquishment of right by one party and acquisition of the same by another. Thus, the Assessing Officer is not permitted to take two opposite stance; one in the case of one party and another in the case of other party of the same transaction.
When the transaction of purchase and sale is real as evident from the record as well as from the facts of payment and receipt of the consideration then the action of the Assessing Officer treating the transaction as sham or bogus is without any tangible material rather contrary to the facts duly supported and substantiated by evidence. The ld. CIT(A) has confirmed the disallowance on the similar lines as it was disallowed by the AO hence in absence of any fact or finding given by the AO that either the purchase price was excessive or the sale price is suppressed the addition made by disallowing the short term capital loss is not justified and the same is deleted.
Profit on sale of shares - LTCG or STCG - HELD THAT:- Once the plain and simple fact is not in dispute that what is transferred by the assessee is the shares of M/s Advance Automation & Process Control Pvt. Ltd. and not the asset owned by the said company then the ownership of the asset held by the company does not effect by change of ownership of the company itself. The change in the shareholdings of the company shall not amount to change of the holding of asset by the company. It is settled proposition of law that the company is separate legal entity then its share holders. The asset owned by the company would remain the asset of the company irrespective of change of shareholding of such company. The changing hands of shares of company would amount the change of ownership of the company and not the change of ownership of the asset held by the company.
Tax planning may be legitimate provided its within the framework of law and every tax payer is entitled to arrange its affairs so that his taxes shall be as low as possible and not bound to chose that pattern which will replenish the treasury. We hold that the transaction of sale of shares is a real transaction of transfer of shares and nothing else when there is no allegation of any fraudulent intention behind the transaction and avoidance of tax but the assessee has offered the income as long term capital gain which was proposed by the Assessing Officer to assessee as short term capital gain.
Disallowance of short term capital loss on sale of shares invoking the provisions of Section 94(8) - HELD THAT:- As regards the applicability of the provisions of Section 94(8) of the Act we note that the said provision is applicable in the case of purchase and sale of units and in between the bonus units were issued and received by the unit holder. There is a distinction in the language employed in Section 94(7) and 94(8) of the Act. The provisions of Section 94(7) are applied to securities as well as units whereas the provisions of Section 94(8) of the Act stipulates the disallowance of loss on purchase and sale of units within the specific period to the record date subject to the condition that the additional units were also allotted without any payment. Thus, the provisions envisage disallowance of loss on purchase and sale of units (Mutual Funds) and not purchase and sale of shares or securities.
It is clear that it is not a case of dividend striping as provided in Section 94(7) but it is a case of bonus issue of shares, therefore, the provisions of Section 94(8) of the act cannot be applied in case of purchase and sale of shares/securities. Thus when the subject matter of purchase and sale of shares and not the units, therefore, the provisions of Section 94(8) of the Act are not applicable, accordingly we do not find any error or illegality in the order of the ld. CIT(A) qua this issue, the same is upheld.
Appeal of the assessee is partly allowed and the appeal of the revenue is dismissed.
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2018 (12) TMI 1820 - ITAT MUMBAI
Nature of expenses - Expenditure on account of Sponsorship Rights - revenue or capital expenditure - as per assessee 10% of the fees were attributed towards participation and promotional activities by the team members and accordingly 50% of 90% of the revenue has been offered during the year and remaining 10% has been offered on pro-rata basis over the term of respective Sponsorship Right Agreement and the same has been offered for tax accordingly - HELD THAT:- CIT- A observed that the methodology adopted is followed by the assessee is difficult to understand as the same is neither as per accounting standard nor as per any specified criteria, once the Sponsorship Right Agreement have been signed for particular supporting event, the amount received is already determined, therefore, the assessee on his own should have offered 50% of such income, if 100% is not offered within the taxing year. However, the assessee has adopted its own methodology by dividing the income into two parts. However, the ld. CIT(A) directed the Assessing Officer that if the amount is taxed in Assessment Year 2011-12, same should be deleted to avoid the double taxation. We have seen that ld. CIT(A) has given reasonable direction to the Assessing Officer, if the assessee has offered remaining receipt in subsequent Assessment Year then to reduce such income from assessee’s total income assessed for Assessment Year 2011-12. In our view, the direction given by ld. CIT(A) is quite reasonable and which does not require any interference.
Addition on account of Annual consideration paid to BCCI - HELD THAT:- As in 2009-10 in assessee’s own case [2018 (1) TMI 786 - ITAT MUMBAI] Tribunal is of the considered view that the payment of the Franchise fee for IPL Season-1 by the assessee can safely be held to be in the nature of a revenue expenditure, which was rightly claimed by the assessee as such while computing its income for the year under consideration - thus Franchise fee paid by the assessee to BCCI is a revenue expenditure.
Feasibility study expense - Allowable business expenses or not? - AO allowed only 1/5th of the expenses - HELD THAT:- There is no dispute that lower authorities have not disputed the cost of the expenses. We have noted that the lower authorities have failed to specify as to how the case of assessee is covered under section 35D, when no new stadium was made was assessee. The assessee has incurred the preliminary expenses for feasibility expenses. It is an undisputed fact that ultimately the assessee abundant the idea of construction of new Stadium. As neither the scheme nor the idea of assessee was materialized or no new unit/ stadium was made, therefore, the assessee is entitled for deduction of entire expenditure incurred on such feasibility report as revenue expenditure Similar view was express by Hon’ble Delhi High Court in CIT Vs Priya Village Roadshaw [2009 (8) TMI 765 - DELHI HIGH COURT] - Decided in favour of assessee.
Stamp duty expenses - Revenue or capital expenditure - HELD THAT:- We have noted that the stamp duty was paid by the assessee-company for the purpose of registration of new shareholder which cannot be treated as capital expenditure. Therefore, we direct the Assessing Officer to delete the disallowances.
Adhoc disallowance of airfare expense, travelling expense and vehicle hire charges - HELD THAT:- As in 2009-10 in assessee’s own case [2018 (1) TMI 786 - ITAT MUMBAI] grounds of appeal is also restored to the file of assessing officer with the similar directions to verify the documentary evidences and grant appropriate relief to the assessee in accordance with law. Needless to direct that before passing the order the assessing officer shall grant opportunity of hearing to the assessee. The contention of the ld. AR for the assessee that the assessee has placed sufficient evidences on record and appropriate relief be allowed to the assessee. We are not inclined to accept such prayer of assessee, let all the evidence be examined by the assessing officer in accordance with law. In the result these grounds of appeal are allowed for statistical purpose.
Disallowance of Lodging and Boarding and Food and Nutrition - HELD THAT:- As in 2009-10 in assessee’s own case [2018 (1) TMI 786 - ITAT MUMBAI] n the backdrop of the observations of the CIT(A) that either the assessee had failed to relate the aforesaid bills pertaining to hosting of dinners, tea parties etc., with the purpose for which the same had been incurred, or the same suffered from certain discrepancies as regards the amounts mentioned therein in comparison to those stated by the assessee during the course of the proceedings and had not been reconciled, therefore, in all fairness restore the matter to the file of the A.O for verifying as to whether the aforesaid bills,pertained to expenses incurred by the assessee in the course of its business, or not. We may however clarify that the A.O shall while readjudicating the aforesaid issue keep in view our aforesaid observations. We thus in the backdrop of our aforesaid observations restore the matter to the file of the A.O for carrying out necessary verifications.
Claim of the deduction of franchise fee /consideration - Admission of additional ground - HELD THAT:- We have noted that the assessee has raised this ground of appeal on the basis of decision of Tribunal for assessment year 2009-10. The assessee has raised this ground of appeal for the first time before the Tribunal; therefore, the additional ground of appeal is admitted and is restored to the file of assessing officer to decide the same in accordance with law. Needless to order that before passing the order the assessing officer shall grant the opportunity to the assessee to explain and substantiate its contention on the issue. In the result the additional ground of result is allowed for statistical purpose.
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2018 (12) TMI 1819 - ITAT JAIPUR
Reopening of assessment u/s 147 - Bogus purchases addition - information received from investigation wing of the department - borrowed satisfaction v/s independent application of mind - HELD THAT:- On the basis certain information received from the Investigation Wing Mumbai, the AO has not just formed an opinion but has finally concluded that the assessee has benefitted by obtaining accommodation entries from M/s New Planet Trading Co Ltd. - AO has stated that since the assessee has not filed the return of income as per AST system of the department, he has reasons to believe that income has escaped assessment.
Such an approach of the AO where, based on information received in context of a third party, even before issuance of notice u/s 148 has concluded that assessee has obtained accommodation entries and income to that extent has escaped assessment is not a correct approach in the eyes of law.
As held in case of M/s Shodiman Investments [2018 (4) TMI 1287 - BOMBAY HIGH COURT] the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment - unless the AO carries out the further examination after receipt of initial information from the Investigation wing, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed her return of income. AO should have examined her return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. - Decided in favour of assessee.
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