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Income Tax - Case Laws
Showing 41 to 60 of 906 Records
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2019 (2) TMI 2029
Addition u/s 68 - assessee had filed fresh documentary evidence under Rule 46A of the Income Tax Rules, 1962 in lower appellate proceedings - CIT-A declined to admit assessee’s relevant additional evidence and affirmed the impugned addition - HELD THAT:- We see no reason to express my agreement with such a course of action. This tribunal’s decision in Shahrukh Khan’s case [2006 (7) TMI 532 - ITAT MUMBAI] holds that in case. The CIT(A) cannot refuse admission additional evidence after calling for Assessing Officer’s remand report, we therefore restore the instant lis back to the CIT(A) for afresh adjudication on merits as per law after admitting assessee’s additional evidence filed under Rule 46A of the Income Tax Rules. It is made clear that assessee shall be afforded three effective opportunities of hearing in consequential proceedings. Assessee’s appeal is allowed for statistical purposes
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2019 (2) TMI 2025
Unexplained income - huge deposits in bank account - Surplus money arising on sale of agricultural land - CIT-A deleted the addition as AO had not been able to point to any other source of income apart from sale of agricultural land and therefore, the deposits in the bank accounts were to be treated as proceed of sale of agricultural land and therefore, exempt from taxation - HELD THAT:- Assessee filed documents before the Assessing Officer. If the Assessing Officer chooses not to cause any enquiry from the parties concerned, he cannot simply reject the sale consideration shown in the sale agreement.
In this case the sale deed has been registered at a value which is below the amount actually received by the assessee and deposited in the Bank account. There was no material whatsoever or any circumstance, which could have suggested that the impugned amount was received by the assessee from any other source. The deposition of the purchaser by way of an affidavit filed with the authorities had shown a higher value which was sufficient to discharge the burden, which the AO had doubted the source of deposit.
There was a sale agreement which was entered into by the assessee with the purchaser for sale of 11 acres of rubber plantation in Kokkayar Village, Idukki District at the rate of Rs.55,750/- per cent. This was also brought on record by the assessee vide letter dated 29/02/2016. The Assessing Officer in disbelieving the evidence had not given any reasons whatsoever to discard the evidence placed by the assessee so as to explain the deposit of sale consideration into various Bank accounts It is also brought to our notice that there was no assessment in respect of the payment of the said on-money in the hands of the purchaser by the Department.
These evidences led by the assessee cannot be discarded without any reasons. In view of this, we are inclined to hold that the deposits made by the assessee in the Bank accounts were duly explained by the assessee and it is to be accepted as genuine source of deposits as there was no counter evidence brought on record by the Assessing Officer. - Decided against revenue.
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2019 (2) TMI 2024
Unexplained cash credits u/s.68 - As explained by the Ld.AR that the assessee had not actually introduced cash but the assessee’s accountant had wrongly passed such entries in the books of accounts. It was further explained that assessee had brought in to his books of accounts his family jewellery, property received out of family settlement, vacant land purchased in Sri Ram Nagar and the land & building in Sri Ram Nagar which were all assets not acquired during the relevant assessment year - HELD THAT:- Since the cash credit standing in the books of accounts of the assessee relates to all the assets discussed herein above, we are of the considered view that the addition made by theLd.AO is erroneous and warranted. From the facts of the case it also appears that the Ld.CIT(A) has also not considered the issue in the correct prospective. Therefore we hereby direct the Ld.AO to delete the addition made in the hands of the assessee by invoking the provision of Section 68 of the Act because the assessee has not actually introduced cash in his books of accounts during the relevant assessment year but it relates to all the assets owned by the assessee explained hereinabove. Appeal of assessee allowed.
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2019 (2) TMI 2023
TP adjustment made in respect of finished goods exported to the Associated Enterprises (AE) of the assessee - difference in the level of capacity utilization - assessee herein is a subsidiary of SKF Inc. US, which is a leading global supplier for products, sales and services for rolling bearing and seals business - Assessee had adopted TNMM method as most appropriate method and operating profit margin to sales ratio as PLI - HELD THAT:- We noticed that the Hon’ble Bombay High Court in the case of Petro Araldite (P.) Ltd. [2018 (6) TMI 452 - BOMBAY HIGH COURT] and the Delhi Bench of the Tribunal in the case of Claas India (P.) Ltd. [2015 (8) TMI 755 - ITAT DELHI] have held that the adjustment towards difference in capacity utilization is required to be made in terms of Rule 10B(1)(e)(iii) of the Income-tax Rules.
We find merit in the prayer of the assessee for the adjustment towards the difference in the level of capacity utilization. Since this issue has not been examined by the tax authorities and since the assessee has to furnish necessary details in order to support its claim, which in turn requires examination at the end of AO, we deem it proper to restore it to the file of the AO / TPO for examining the claim of the assessee.
Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the AO / TPO for examining the claim of the assessee, in accordance with law, by duly considering the decisions rendered by the High Court / Tribunal on capacity utilization adjustment. After affording adequate opportunity of being heard to the assessee, the A.O. may take appropriate decision in accordance with law. Appeal filed by the assessee is treated as allowed for statistical purposes.
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2019 (2) TMI 2022
TP Adjustment - adjustment to the value of international transactions pertaining to provision of software development services by the Appellant under Section 92CA(3) - Comparable selection - PERSISTENT SYSTEMS LTD. (PERSISTENT) - HELD THAT:- As on non-availability of segmental data. So, we are of the considered view that Persistent is not a valid comparable, hence ordered to be excluded.
TATA ELXSI LTD. (TATA ELXSI) - The taxpayer is not the owner of IP which is a captive software development service provider whereas, on the other hand, Tata Elxsi is the owner of IP design of it. Moreover, business unit of taxpayer is very diverse having four business segments as discussed in the preceding paras, whereas only segmental of two of its unit are available. Moreover, there are un-allocable expenses (Net) of ₹ 937.66 lakhs, as is evident from Schedule to the Financial Statements from the year ending March 31, 2010, available at page 526 of the paper book. So far as segmental reporting given at page 526 of the paper book (Annual Report) is concerned, it shows that the company’s operations predominantly relate to providing systems integration and software development services in the information technology field. So, all these facts go to prove that Tata Elxsi is functionally dissimilar vis-à-vis the taxpayer being engaged in the development of specialized/niche product, hence ordered to be excluded being not a valid comparable.
E-INFOCHIPS BANGALORE LTD. (E-INFOCHIPS) - We are of the considered view that E-Infochips being a product and semiconductor engineering services having 500 products for key verticals like aerospace and defence, security and surveillance, etc., having huge intangibles which increases its brand value and its segmental financials are not available, is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded.
INFINITE DATA SYSTEMS PVT. LTD. (INFINITE) - We are of the considered view that Infinite is functionally dissimilar vis-à-vis taxpayer having been into providing solutions that encompass technical consulting, design and development of software maintenance, systems integration, implementation, testing and infrastructure management services. Furthermore, Infinite has entered into Build, Operate and Transfer (BOT) agreement with Fujitsu Services Limited to set up global delivery centers in India to provide offshore capabilities to Fujitsu and Fujitsu’s associated companies. It has also shown exceptional growth in business operation in the last four years i.e. 908% growth rate over the previous year. So, Infinite cannot be a valid comparable vis-à-vis the taxpayer, hence ordered to be excluded.
ZYLOG SYSTEMS LTD. (ZYLOG) - On account of diversified operation, substantial brand value and huge intangible assets having significant AMP spent and R & D expenses, Zylog cannot be a valid comparable vis-à-vis taxpayer which is a captive software development service provider to its AE only, so we order to exclude the same.
Addition on account of overdue receivables from its AE by applying the ad hoc interest rate of 14.88% - HELD THAT:- It is the case of the taxpayer that as per para 5.7 of the Agreement, interest, if any, is to be charged on receivables which has been followed in the earlier years and subsequent years. So, TPO/AO is directed to compute the interest, if any, following the rule of consistency, in view of para 5.7 of the Agreement by taking into account the findings returned in earlier years and subsequent years. So, this issue is remanded back to TPO/AO to decide afresh after providing an opportunity of being heard to the taxpayer.
Disallowance of severance cost incurred by the taxpayer - HELD THAT:- In view of the matter, this issue being of subsequent year is required to be decided by the AO along with AY 2009-10. Consequently, this issue is set aside to AO to decide afresh after providing an opportunity of being heard to the taxpayer.
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2019 (2) TMI 2020
Revision u/s 263 by CIT - income generated out of the assessee's investment funds in fixed deposits - As per CIT AO had not undertaken proper inquiries and had not examined the issue whether the interest income was to be assessed under the head “Income from business income or of other source” - Tribunal by the impugned judgment allowed the assesssee's appeal and set aside the order of the Commissioner of Income Tax - HELD THAT:- Tribunal noted that the assessee was previously engaged in the business primary dealing of securities. The assessee was in the process of switching over to the new business of stock broking. The assessee had liquidated its investment from the past business and parked the surplus fund in fixed deposit awaiting commencement of activities in the new business. It was on account of such facts that the assessee had claimed the interest income as arising out of its business activity. The Tribunal was of the opinion that this was entirely plausible view.
We see no reason to interfere with the view of the Tribunal. The question whether the income should be taxed as business income or as arising from the other source was a debatable issue. The Assessing Officer has taken a plausible view. More importantly, if the Commissioner was of the opinion that on the available facts from record it could be conclusively held that income arose from other sources, he could and ought to have so held in the order of revision. There was simply no necessity to remand the proceedings to the Assessing Officer when no further inquiries were called for or directed. - Decided in favour of assessee.
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2019 (2) TMI 2019
Interest on the borrowed money - funds were utilized by the assessee to subscribe to the equity capital of the subsidiary company - subsidiary company used the said funds for the purpose of acquiring the Centaur Hotel, Juhu Beach, Mumbai, which is now functioning as "The Tulip Star, Mumbai" - tribunal has also held that this expenditure would be allowed even under section 57(iii) - As held by HC though there may be some controversy as to whether the aforesaid expenditure is allowable under section 57(iii) of the Act or not, we have no doubt, in our mind, that the expenditure incurred under the aforesaid circumstances would be treated as expenditure incurred for business purposes and was thus allowable under section 36 - HELD THAT:- Special Leave Petitions are dismissed for non-prosecution.
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2019 (2) TMI 2018
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As assessee submits that in the light of Special Bench decision in the case of ACIT Vs Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] the computation of 0.5% of investments must remain confined to only such investments which have yielded tax exempt income during the relevant previous year. DR, on the other hand, relies on the judgment of Hon’ble Supreme Court in the case of Maxopp Investments [2018 (3) TMI 805 - SUPREME COURT] in support of the proposition that a reasonable disallowance in relation to exempt income must be made. That does not however dilute the principle laid down by the Special Bench in the case of Vireet Investments (supra). To this extent, we uphold the plea of the assessee and modify the orders of the authorities below by directing the Assessing Officer to compute the 0.5% of the investments yielding tax exempt income during the relevant previous year.
Deduction of bad debts u/s 36(2) - HELD THAT:- As the claim of bad debt itself has been allowed in principle and the matter has been remitted to the file of the Assessing Officer only for a factual verification, the claim for business loss is infructuous at this stage and does not need to be adjudicated upon. Similarly, we are unable to see any merits in the grievance of the Assessing Officer for CIT(A)’s directing a factual verification which is so fundamental to the claim being denied as the claim for deduction was declined primarily on the ground that the assessee had not offered related income to tax. Grievances of both the parties, therefore, lack legally sustainable merits. We confirm the action of the CIT(A) on this issue as well and decline to interfere in the matter.
Disallowance of 'marking to market' foreign currency forward contracts outstanding as at the end of the year - HELD THAT:- The assessee is consistently following the mercantile method of accounting, the same accounting treatment for the foreign exchange losses and gains has been given by the assessee all along, the assessee is making entries in respect of such losses and gains, and the treatment is consistent with the Accounting Standards. As a matter of fact, the AO has not even raised any issues with respect to the above. His case is confined to the loss being notional in nature and contrary to the CBDT guidelines. As for the CBDT instructions, it is only elementary that any instructions issued by the CBDT cannot bind the assessee even though the assessee is entitled to, and can legitimately ask for, any benefits granted to the assessee by such instructions or circulars. Nothing, therefore, turns on the CBDT instruction even if it is actually contrary to the claim of the assessee.
As per the details filed by the assessee, the foreign exchange contracts have been entered into for genuinely restricting its bonafide risk exposure of the assessee in respect of its exports and imports transactions. These contracts cannot, therefore, be viewed on a standalone basis as speculative transactions. These transactions are integral part of the business transactions and any loss or gains arising from these transactions, for the detailed reasons set out above, are deductible in computation of profits and gains of business.
We uphold the action of the CIT (A) so far as this relief in respect of deleting the disallowance on account of loss, at the end of the year, on foreign exchange contracts. We confirm the same and decline to interfere in the matter. - Decided in favour of assessee.
TPA - upward adjustment on account of guarantee given by the assessee to its Associate Enterprise located at Singapore without any consideration - HELD THAT:- TPO made the addition on the ground that loans were taken from ICICI bank Limited, Singapore whereas RBI's permission refusing pledge of shares was In the case of IDBI trusteeship Ltd. TPO considered these two transactions separate and held that appellant provided guarantee to AE by pledging its Investment in shares. However after considering these letters referred earlier, it is clear that IDBI trusteeship Ltd is security trustee of ICICI bank limited, Singapore and RBI's letter refusing the permission for pledge of shares is in respect of same shares which were provided for guarantee to ICICI bank Limited, Singapore. Thus, it is clear that entire addition is based on the misconception that these two entities represented separate transactions. In view of this it is clear that appellant did not provide guarantee services by pledging shares of MPSEZ for which any adjustment of guarantee commission can be made. The addition made by the assessing officer is therefore not sustainable on facts. See ADANI ENTERPRISES LTD [2016 (8) TMI 163 - GUJARAT HIGH COURT]
Addition u/s 14A despite the fact that the company had claimed an expenditure on its Treasury department which mainly dealt with investments related to earning exempt income - CIT-A deleted the addition - HELD THAT:- As adhoc allocation of expenses of treasury department, in addition to the disallowance under rule 8D(iii) for such indirect expenses, computed @ .5% of related investments earning tax exempt income, will indeed amount to double deduction of expenses under rule 8D. What can be disallowed under rule 8D(i) is only direct expenses and clearly the expenses on treasury function are not direct expenses to earn the tax exempt income. Even going by the stand of the Assessing Officer, treasury function includes many functions including, to some extent, investment function. The understanding of the Assessing Officer is clearly incorrect. There is no basis for allocation of 50% of expenses, on purely adhoc basis, either. There is nothing on record to even show that the expenses disallowed under rule 8D(iii) are lower than a reasonable share of common expenses incurred on earning the tax exempt income. In these circumstances, and bearing in mind entirety of the case, we approve the stand of the CIT(A) and decline to interfere in the matter.
Disallowance of interest expense u/s 36(1)(iii) - comprehensible findings in the assessment order that the funds were diverted for non business purposes - CIT-A deleted the addition - HELD THAT:- As there was a trade relationship between the assessee and the entities to which the payments in question were made. The assessee had made huge purchases from these entities, and the fact that the amounts were not payable is not really relevant because the case of the assessee is that the payments were in the nature of business advances. What happens to these monies subsequently is not relevant so far as the treatment of advances in the hands of the assessee is concerned. That aspect is wholly irrelevant for our purposes. As long as the payments are made in the course of assessee’s business, it does not really matter, so far as interest disallowance in the hands of the assessee is concerned, as to where these monies ultimately find its way. That’s not in the control of the assessee anyway. Nothing really turns on these monies ultimately finding its way to another entity, admittedly unrelated to the assessee. The reason for making the interest disallowance is thus not sustainable in law. In any event, the availability of interest free funds is far more than interest free funds advanced to these entities. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
Disallowance of depreciation claimed on shares - As per AO shares are not depreciable assets - CIT-A deleted the addition - HELD THAT:-Learned representatives fairly agree that this issue is squarely covered, in favour of the assessee, by a decision in assessee’s own case for the assessment year 2007-08 [2016 (1) TMI 459 - ITAT AHMEDABAD]. A copy of the said decision was placed before us as well.. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we confirm the relief granted by the CIT(A) and decline to interfere in the matter.
Disallowance of deduction u/s 80IA - receipts represents miscellaneous income which was not derived from the undertaking itself - CIT-A deleted the addition - HELD THAT:- We have noted that the eligible business activity of the assessee is operations and maintenance of the port, and that the miscellaneous receipts represents receipts on account of activities which pertain to operations and maintenance of port. The receipts for weighment charges and token charges, and the allied activities in question, cannot be considered in isolation with the operations and maintenance of port. In view of these discussions, and in the light of well reasoned findings of the CIT(A) with which we are in considered agreement, we uphold the relief granted by the CIT(A) and decline to interfere in the matter.
TP Adjustment - whether issuance of corporate guarantees does not constitute an international transaction with the meanings of section 92B? - HELD THAT:- As for the observations of the authorities below that the assessee has not produced any evidence of not incurring any costs, this observation is incorrect inasmuch as none can be expected to prove a negative. The onus of demonstrating that the costs have been incurred can only be on the revenue authorities, and that onus has not been discharged. Even during the course of hearing when it was asked as to what are the costs incurred by the assessee, learned Departmental Representative did not have anything to say. Respectfully following the views of the coordinate benches on the issue, in the case of Micro Ink [2015 (12) TMI 143 - ITAT AHMEDABAD] we hold that issuance of guarantees, without incurring any specific costs, does not constitute an international transaction, and, accordingly, no arm’s length price adjustment can be made in respect of issuance of corporate guarantees. Once we hold so, the ALP adjustment sustained by the CIT(A) must stand deleted.
Disallowance u/s 14A - HELD THAT:- One has to proceed on the basis that such interest free funds in making these investments, and no part of interest can thus be disallowed under section 14A read with rule 8D. We see no reasons to take any other view of the matter for this assessment year as well.
TDS u/s 195 - Disallowance of interest expenditure invoking the provisions of section 40(a)(i) - HELD THAT:- We find that the payment has indeed been made to a non-resident and no tax has been deducted at source. The payment being in the nature of interest income which is separately covered under the respective tax treaties and, beyond any dispute or controversy, these payments have an element of income taxable in India. As regards learned counsel’s contention that the payment having been made to a bank which are specifically excluded from the scope of tax withholding obligations under section 194A, this argument overlooks the fact that this exclusion relates only to a resident taxpayer and the recipients in this case are non residents. In our considered view, the authorities below were right in holding that the payments were made to the foreign companies, and, therefore, section 195 came into play, and that section 194A was applicable only with respect to payment to residents and will not accordingly come to the rescue of the assessee. We uphold the reasoning of the authorities below, and decline to interfere in the matter.
Disallowance on account of loss from foreign currency swaps - HELD THAT:- The issue is covered, in favour of the assessee, by decisions of the coordinate benches of this Tribunal, including in the case of Cadila Pharmaceuticals Ltd Vs ACIT [2017 (9) TMI 727 - ITAT AHMEDABAD] as hold inter alia that hedging contracts; in order to be out of speculative transactions, must be in respect of raw materials only in manufacturers' cases though they could be both with regard to sales and purchases, such hedging contracts need not succeed the contract for sale and actual delivery of goods manufactured, but the latter could be subsequently entered into within reasonable time not exceeding the relevant assessment year in normal circumstances and such transactions should not exceed the total stock of the raw material or merchandise on hand including existing stocks as well as that acquired under the firms contract of purchases in order to be genuine and valid hedging contract of sales; respectively.
Upward adjustment on the basis of the TPO's order passed u/s.92CA(3) determining the A.L.P. in respect of transaction of export of Maize - HELD THAT:- We are not inclined to interfere in the matter. We agree with the authorities below that such an independent third party quotation, on standalone basis and without any material to establish its bonafides and without anything to show that it’s contemporaneous nature and sufficient parity with actual transaction, cannot be accepted as a valid CUP input. The plea regarding back to back transaction was also not proved before us. In view of these discussions, and bearing in mind entirety of the case, we uphold the stand of the authorities below and decline to interfere in the matter.
Disallowance of business loss in respect of balances being advances for business purposes to suppliers, written off in the books of account as irrecoverable, in spite of the fact that such writing off was in the nature of legitimate business loss allowable u/s.28 - HELD THAT:- We find that as long as a loss is incurred in the course of a business, and in legitimate furtherance of its bonafide interests, the loss is deductible in computation of business income. What, therefore, needs to be examined is whether or not these advances were made in the course of the business and whether these advances have actually become bad. If the answer to both these questions are in positive, there cannot normally be a good reason to reject the claim. We, therefore, deem it fit and proper to remit the matter to the file of the Assessing Officer with a direction to decide the matter afresh by way of a speaking order in accordance, in the light of the above observations and after giving yet another opportunity of hearing to the assessee. We order accordingly.
Disallowance made of depreciation on office equipment after treating the same as furniture and fittings - HELD THAT:- We find that this issue is also covered, in favour of the assessee, by a decision of the coordinate bench in the case of Cera Sanitaryware Ltd [2015 (7) TMI 174 - ITAT AHMEDABAD] - Respectfully following the same, we confirm the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
Disallowance of depreciation on UPS - HELD THAT:-This issue is also covered, in favour of the assessee, by Hon’ble Delhi High Court’s judgment in the case of CIT Vs BSES Yamuna Power Ltd [2010 (8) TMI 58 - DELHI HIGH COURT] even as learned Departmental Representative vehemently relied upon the stand of the Assessing Officer. There is non contrary judicial precedent pointed out to us. In this view of the matter, and respectfully following the esteemed views of Hon’ble Delhi High Court in the case of BSES Yamuna Power (supra), we confirm the order of the CIT(A) on this point as well, and decline to interfere in the matter.
Disallowance being 10% of aircraft hire charges - HELD THAT:- We find that, in view of Hon’ble jurisdictional High Court’s judgment in the case of Sayaji Engg [2001 (7) TMI 70 - GUJARAT HIGH COURT] no disallowance can be made in the hands of a corporate entity for personal use of cars, and, by the same logic, of the aircrafts as well, by the directors. The CIT(A) was thus indeed quite justified in deleting the impugned disallowance. We uphold the action of the CIT(A) and decline to interfere in the matter on this count as well.
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2019 (2) TMI 2011
Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT:- Tribunal being the first appellate authority, the assessee in the present appeal has raised this issue, therefore, this Tribunal is expected to adjudicate the same. This Tribunal being the second appellate authority cannot ignore the fact that the Assessing Officer failed to struck down the relevant plea indicating whether he initiated penalty proceeding for concealing any part of income or furnishing inaccurate particulars of such income. In view of the above, by respectfully following the judgment of Kerala Jewellers [2019 (2) TMI 127 - MADRAS HIGH COURT] the orders of both the authorities below are set aside and the penalty levied by the Assessing Officer as confirmed by the CIT(Appeals) is deleted.- Decided in favour of assessee.
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2019 (2) TMI 2008
Disallowance u/s 40(a)(ia) - Non deduction of TDS on head ‘LFR rent’ - AO noted that assessee has not filed any evidence of TDS deducted on such rent - HELD THAT:- This issue had come up for consideration in the earlier years also, wherein the Tribunal had deleted the said disallowance held that second proviso to section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1.4.2005. On a conjoint reading of second proviso to section 40(a)(ia) and first proviso to section 201(1), it becomes graphically clear that if the payee has furnished his return of income under section 139 and has taken into account such sum paid by the payer for computing income in such return of income and has paid income tax thereon, then the payer cannot be treated as assessee in default. A fortiori, no disallowance under section 40(a)(ia) can be made in such circumstances.
Adverting to the facts of the instant case, it is seen that the assessee paid a sum to Bharat Petroleum Corporation Limited. There can be question of suspecting that the BPCL did not include such rental income from the assessee in its return of income. It is, therefore, held that the case of the assessee is covered by second proviso to section 40(a)(ia) and hence the disallowance made cannot be sustained. - Decided in favour of assessee.
Disallowance on account of cash handling expenses - HELD THAT:- Reasoning given by the Assessing Officer that handling of cash is responsible and risky work for which he should have engaged professionals, then he was required to deduct TDS. Such a reasoning for making the disallowance cannot be held to be valid ground, because in the nature of business carried out by the assessee which is selling of petrol and petroleum product from its petrol pump, huge cash is generated throughout the working hours and if assessee is paying cash handling charges to two persons which is in the form of salary, then disallowance cannot be made especially when vouchers for such payment have been produced. Accordingly, respectfully following the order of the Tribunal for the earlier years, we delete the same.
Disallowance on account of remuneration paid to the partners - HELD THAT:- We remit the issue back to the file of the Assessing Officer to see whether similar remuneration paid to the partners have been allowed in the earlier years or in subsequent year or not; and secondly, he should examine the partners’ salary and remuneration are paid in accordance with provision contained in Section 40(b) or not. AO will give opportunity of hearing to the assessee to substantiate is case.
Disallowance of claim of bad debt - AO has disallowed the same on the ground that no documentary evidences have been filed for claim of such and bad debt remained not genuine - HELD THAT:- We find that, nowhere Assessing Officer has disputed the fact that assessee has not written off the bad debts as irrecoverable in the books of account, albeit the case of the Assessing Officer is that Assessee has not produced any documentary evidences that debt has become bad. As stated by the ld. counsel now there is no requirement under the law for the assessee to establish that debt has become irrecoverable and it is enough that the same is written off as irrecoverable in the books of account of the assessee. This has been also clarified by the CBDT Circular dated 30.05.2016 being Circular No.12/2016 [F.No.279/Misc/140/2015-ITJ], wherein the CBDT has clarified that now in the wake of judgment in the case of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] no appeal should be filed by the Revenue before any Court or Tribunal. Thus, this clarification by CBDT also supports the case of the assessee. Hence, this ground is allowed.
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2019 (2) TMI 2006
Reopening of assessment u/s 147 - Deduction u/s 10A - failure on part of the assessee in claiming wrongful claim of set off of business loss of ineligible business unit from profits of eligible business units before claiming deduction u/s 10A - HELD THAT:- CIT(A) has held that reopening is not justified. In this view of the matter when the CIT(A) has held that reopening is not justified it is amply evident that if revenue was aggrieved, it should have raised a ground in this regard. A reading of the grounds of appeal mentioned above shows that no ground challenging the ld. CIT(A)’s order on the issue of lack of jurisdiction has been raised before the ITAT.
The adjudication on the merits of the issue is only of academic interest. Hence, holding that ld. CIT(A) has held the assessment to be without jurisdiction and the revenue has not challenged the same, in our considered opinion, the adjudication on merits is infructuous. Accordingly, this appeal by the revenue stands dismissed being infructuous.
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2019 (2) TMI 2004
Disallowance u/s. 36(i)(iii) - money advanced to the sister concerns - Assessee had diverted the interest bearing borrowing towards interest free loan and advances - Whether assessee had sufficient interest free funds to cover advances given to its associate concerns and no interest bearing fund was advanced to its associate concerns.? - counsel has submitted that the assessee was having total interest free funds and pleaded that no disallowance u/s.36(i)(iii) is called for - HELD THAT:- As counsel has submitted that such fact was categorically pointed out before the assessing officer and the same has not been denied by either of the lower authorities. During the course of appellate proceedings before us these contentions of the ld. counsel was not controverted by the Revenue Therefore, we are of the view that it would be appropriate to restore this issue to the file of the assessing officer to decide de-novo on the points (i) and (ii) as above after affording adequate opportunity to the assessee. Accordingly this ground of the appeal is restored to the file of the assessing officer for deciding afresh as directed above. Therefore this ground of appeal of the assessee is allowed for statistical purpose.
Addition made on account of exchange rate of difference - HELD THAT:- We noticed that the assessee had not filed the impugned ground of appeal before the ld. CIT(A). We have also gone through the form No. 35 filed before the ld. CIT(A) and noticed that neither such ground of appeal reflected in the form No. 35 nor such ground of appeal was adjudicated by the Ld.CIT(A). In the light of the above fact and circumstances this ground of appeal of the assessee stands dismissed.
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2019 (2) TMI 2003
Unexplained Cash deposit in Catholic Syrian Bank - HELD THAT:- The assessee claims that he advanced a sum for purchase and installation of pollution control plant during the assessment year 2008-09. The fact remains that the cheque said to be issued by the assessee was a cash cheque and money was withdrawn on the same day. Therefore, it is not known how Shri S.K. Pandian was able to return the amount in cash as claimed by the assessee. In the absence of any details, the confirmation letter which is now available at page 9, is only an afterthought. When the assessee claimed before the AO that due to death of Shri S.K. Pandian, he could not get any confirmation letter from Shri S.K. Pandian, it is not known how the assessee was able to get the confirmation letter.The entries made in the ledger and other cash book are all afterthought. It is not supporting the case of the assessee. The assessee has no satisfactory explanation for deposit in the bank account. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Unexplained Cash deposit - HELD THAT:- The fact remains that what was paid by the assessee is through cash cheque and money was received across the counter in Catholic Syrian Bank. There is no evidence of making payment to Erode party as claimed by Shri Nagarajan. There is no evidence of return of money by Erode party to Shri Nagarajan. Moreover, whether Shri Nagarajan was able to repay the money to the assessee as claimed? These facts were not established by the assessee. For cash credit, the assessee has to establish the identity of party, creditworthiness of party and genuineness of transaction. In this case, even though the assessee claims that money was paid to Shri Nagarajan, the genuineness of transaction of repayment and creditworthiness of Shri Nagarajan to repay the amount was not established. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Cash deposit - HELD THAT:- It is not in dispute that the assessee claimed before the Assessing Officer that he received a sum from one Shri D. Palanisamy. However, the assessee failed to establish the identity of Shri Palanisamy, creditworthiness of Shri Palanisamy and the genuineness of transaction. In the absence of any details and failure of the assessee to establish the identity of party which is required to be established in respect of cash credit, the CIT(Appeals) has rightly confirmed the addition. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Denial of exemption under Section 54F - HELD THAT:- The sale of property to the extent of ₹ 59,27,500/- is not in dispute. The assessee claimed exemption in respect of the property standing in the name of the assessee’s wife. Now AO found that the assessee’s wife is an independent assessee. She herself claimed exemption under Section 54F in respect of the very same property for investing the capital gain. Therefore, it is not known how the assessee was able to claim exemption under Section 54F for the second time. The matter would stand differently in case the assessee’s wife had not claimed any exemption under Section 54F of the Act for investing her own capital gain. Since the assessee’s wife already claimed exemption under Section 54F of the Act for investing her own capital gain, this Tribunal is of the considered opinion that the Assessing Officer has rightly confirmed the disallowance. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
Appeal filed by the assessee is dismissed.
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2019 (2) TMI 1998
Addition u/s.68 towards unexplained cash credit - case of the assessee was selected for scrutiny under CASS and statutory notices were duly served upon the assessee - HELD THAT:- The undisputed facts are that the assessee filed copies of confirmations, ledger accounts, bank statements, ITRs, PANs and audited balance sheets and profit and loss accounts in respect of these three parties who lent money to the assessee. The authorities below have only relied on statement of Shri Pravin Kumar Jain that said he and related entities were engaged in providing accommodation entries of which the assessee was one of the beneficiaries without having brought anything to disbelieve and disprove various documents filed by the assessee.
The assessee has filed necessary proofs and documents supporting the borrowings of money and repayment thereof. Under these circumstance, we are not in agreement with the conclusion given by learned CIT(A). Accordingly, by respectfully following the decision of Shreedham Builders [2018 (6) TMI 1282 - ITAT MUMBAI ] we allow the appeal of the assessee.
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2019 (2) TMI 1996
Disallowance u/s 14A r/w Rule 8D - assessee had claimed that since shares are held as stock-in-trade as well Free Reserves were utilised for investing in these securities and no interest was payable with respect to investments made in these securities, no disallowance of expenditure incurred in relation to earning of an exempt income is warranted u/s 14A - HELD THAT:- We are afraid that this contention of the assessee cannot be accepted in view of decision of Hon’ble Supreme Court in the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] wherein it has been held by Hon’ble Supreme Court that the dominant purpose/intention of parties of investing in securities from which exempt income is received, is irrelevant for the purpose of computing disallowance of expenditure incurred in relation to earning of an exempt income as is mandated u/s 14A and Section 14A of the 1961 Act will be applicable wherein expenditure is incurred in relation to earning of an exempt income and the same shall not be allowed while computing income even when investments are made in shares and securities as strategic investments or stock-in-trade.
Assessee has its own interest free funds available with it which are in excess of investments made in shares/securities from which dividend income was received/receivable - We agree with the contentions of the assessee that presumption will apply that assessee invested its own interest free funds for making investments in shares and securities from which exempt income was received and no disallowance of interest expenditure u/s. 14A r.w.r. 8D2(ii) of the 1962 Rules can be made. We have also observed that the assessee has received dividend of ₹ 7,20,212/- which was claimed as an exempt income and admittedly these are mixed use funds which were utilised by the assessee for making investments in shares and securities which yielded exempt income and the Revenue has not brought on record any adverse/incriminating material to rebut the aforesaid presumption or the assessee had borrowed interest bearing funds specifically to make investments in the shares and securities and hence relying on the decision of Hon’ble Bombay High Court in the case of Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Limited [2014 (8) TMI 119 - BOMBAY HIGH COURT] disallowance as was made by the AO u/s 14A of the 1961 Act r.w.r. 8D(2)(ii) of the 1962 Rules stood deleted.
AO erred in making disallowance by invoking provisions of Section 14A of the 1961 Act read with Rule 8D(2)(iii) of the 1962 Rules. The Revenue fails on this issue
Disallowance of indirect administrative expenses to the tune of 0.5% of the average investments held by the assessee -The assessee has not voluntarily made any disallowance of expenditure incurred in relation to earning of an exempt income. The assessee has earned an exempt income by way of dividend income which was claimed as an exempt income in the return of income filed with Revenue. It is admitted by the assessee that AO has recorded satisfaction while applying Rule 8D of the 1962 Rules read with Section 14A of the 1961 Act. Under these circumstances, disallowance of administrative expenses computed @ 0.5% of the average investments amounting to ₹ 2,28,396/- by invoking Section 14A of the 1961 Act read with Rule 8D(2)(iii) of the 1962 Rules cannot be faulted with, which we sustain/confirm by upholding the appellate order passed by learned CIT(A). The assessee fails on this issue. We order accordingly.
Grant of interest free loan and advances - AO was not satisfied with the contentions of the assessee that these interest free loans and advances granted by the assessee were for the purpose of business purposes and the AO was of the view that interest paid by the assessee is to be disallowed to the tune of 15% of the said amount granted by the assessee as interest free loans and advances - HELD THAT:- CIT(A) after relying on few Hon’ble Jurisdictional High Courts judgment correctly held that since interest free funds available with assessee are higher than the interest free loans and advances made by the assessee, presumption will apply that the assessee advanced interest free funds available with it for granting interest free loans and advances - See RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT].
Addition towards professional fees paid for arranging loans borrowed by the assessee - HELD THAT:- no evidences is produced to substantiate and justify genuineness of these expenses nor it is substantiated as to why these expenses be allowed in the current year while the loans were purportedly sanctioned in earlier years. The TDS certificates were also not produced before the authorities below and these TDS certificates are produced for the first time before us which have not stood the test of verification by lower authorities. In any case in our considered view merely production of TDS certificates is not sufficient justification to prove genuineness of the expense or to establish that the expenses were incurred wholly and exclusively for the purposes of the business of the assessee. No agreement entered into by the assessee with these two companies are brought on record neither any evidences has been brought on record to substantiate that the services were in fact rendered by these two companies to the assessee in connection with availing of loans by assessee from IIFL and ILFS - we are afraid that the assessee’s contentions cannot be accepted. The assessee fails on this ground.
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2019 (2) TMI 1993
TP Adjustment - allocation of certain common expenditure - Expenditure incurred as common for two different segments - applicability of head count principle - HELD THAT:- This Court notices that the principle of applying the headcount method has not been universally accepted and was in fact rejected in M/S Continental Carriers vs. Commissioner of Income Tax, New Delhi [2016 (4) TMI 1054 - DELHI HIGH COURT]. At the same time, the Court did say so on the basis that the assessee had not followed the consistent method; and that the issue of allocation of such expenditure was in the context of deduction claimed under Section 80(4).
This Court is of the opinion that the two possible choices, i.e. turnover method as well as the headcount method in the present case was not justified. Concededly, the expenditure incurred by the assessee was common for two different segments. The tax authorities broadly agreed that expenditure could be allocated on the basis of proportionate turnover of the concerned segment. Having done so, the alternative was open to accept one or the other principle. Therefore, the choice of the assessee in relying upon the headcount principle per se could not have been rejected. The question of law, therefore, is answered against the Revenue and in favour of the assessee.
Comparability selection - ITAT has remitted the matter for consideration of one of the comparables i.e. for M/S Indus Technical and Financial Consultants Ltd - The reasoning of the ITAT was that the details on the website, could not be relied upon. It was argued and perhaps quite correctly that this comparable was included by the TPO relying upon the material available at that time from the internet. If such were the decision, the assessee could possibly also have relied upon material similar to such material. In any event, this Court does not propose to pass any final decision on the merits. Pursuant to the remand, it is open to the authorities to take into consideration all the relevant material including credible material available with respect to the comparables in question. The question of law number two is answered accordingly.
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2019 (2) TMI 1986
Revision u/s 263 by CIT - foreign contributions received during the year under consideration - application for charitable purpose out of corpus donation which is in violation of section 11(1)(d) - HELD THAT:- The setting aside of assessment order by ld. CIT(E) with the direction to ld. A.O to reconsider the corpus donation of ₹ 56,81,976 by treating them in violation of sec 11 (1 ) (d), will not result to fulfillment of dual statutory condition of AO's order being "erroneous" and ''prejudicial to the interest of the revenue". For an order to be prejudicial to the interest of revenue, some loss must have occurred to the revenue. Whereas in the present case, if at all, corpus donation is considered as violating the provisions of section 11(1)(d), even then, the said donation remains to be voluntary contribution and in accordance with the provisions of section 12(1) read with section 11(1)(a), are utilized for charitable purpose as the same is evident from the deficit of ₹ 50,08,844 (i.e excess of expenditure over income)
Adjustment of ₹ 56,81,976 with the deficit of ₹ 50,08,844 will result to surplus of ₹ 6,73,132 which is within the 15% stipulated amount allowed for accumulation. Interestingly this computation was made by the ld. A.O in her Pre-Assessment Order dated 14.03.2015 (page no 17 of paper book). Therefore, setting aside the order of A.O and denying the status of corpus donation has not resulted any loss to the revenue. Hence pertinent condition of section 263, of the order being ''prejudicial to the interest of the revenue" has not been fulfilled and therefore makes the order of ld.CIT(E) bad in law.
Provisions of section 11(1)(d) in no way have been violated by the assessee. There has been excess of expenditure over income for the year under consideration and the same has been carried forward to the general fund in the balance sheet accumulated over the years whereas Corpus donations are separately appearing in balance sheet. Therefore, the observations of the ld. CIT that the deficit for the year has been met out of the corpus donation, is not correct as is evident from the final accounts.
The assessee is also entitled to carry forward the deficit for the year and set off the same in the next year(s), in the view of dictum laid down by the Hon’ble Apex Court in as held in the case of CIT (E) Vs. Subros Educational Society [2018 (4) TMI 1622 - SC ORDER] Therefore, when carry forward of deficit is allowed, it implies that the said excess utilization has been spent out from sources other than the voluntary contributions received during the year and should be out of Corpus only - the CIT order passed u/s 263 of the I.T.Act is without jurisdiction and we quash the same.- Decided in favour of assessee.
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2019 (2) TMI 1985
Declarations of undisclosed income - Income Declaration Scheme, 2016 - extension of time for making payment of the third installment sought - HELD THAT:- Issue Notice. Dasti service, in addition, is permitted.
The petitioner is to deposit a sum of ₹ 9,02,476/- (Rupees Nine Lakhs, Two Thousand, Four Hundred and Seventy Six only) with interest at the rate of 12% per annum till date.
The said deposit to be made within a period of one week from today.
List the matter after two weeks.
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2019 (2) TMI 1984
Rectification of mistake u/s 154 - HELD THAT:- As in the said order some inadvertent mistakes had crept in, which were corrected by passing a corrigendum order dated 28.05.2019 - another mistake which was in the order of the Tribunal passed on 12.02.2019 in para 24 of the order wherein the name of the scrip was mentioned as KAFL instead of SRK Industries Ltd.
We find that there is an inadvertent typographical mistake which occurred 6th line wherein it was mentioned as “sale of shares of M/s. KAFL” which should be read as “sale of shares of M/s. SRK Industries Ltd.” We order accordingly. This Corrigendum order forms part of our order pronounced on 12.02.2019.
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2019 (2) TMI 1979
Stay of demand inclusive of interest - Whether petitioner has a prima facie good case and also it is having massive financial difficulty.? - HELD THAT:- We deem it appropriate to grant the stay of outstanding demand till the disposal of the appeal or a period of 180 days from the date of this order, whichever is earlier subject to payment of 15% of ₹ 6,38,99,650/- by 15.03.2019. This stay is subject to the condition that the assessee shall file an undertaking before the AO to the effect that it shall not alienate any of its immovable properties till the disposal of the present appeal. With these observations and subject to the above terms and conditions, the stay application of the assessee gets disposed of accordingly.
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