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Income Tax - Case Laws
Showing 41 to 60 of 934 Records
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2019 (3) TMI 1967 - ITAT NAGPUR
Maintainability of appeal - low tax effect - HELD THAT:- Revenue is in appeal against the order of CIT (Appeal) in deleting the addition made by the AO to the returned income being a non genuine speculative loss. Prima-facie, the tax effect involved in appeal is less than the monetary limit prescribed by the recent CBDT Circular for filing of appeals before the Tribunal by the Department. CBDT vide Circular No. 3/2018, dated 11-07-2018 has raised the monetary limit of tax effect for filing of appeals by the Department before the Tribunal to ₹ 20 lakhs. Circular applies to the appeals to be filed by the Department in future as well as the appeals pending before the Tribunal. Without going into merit of the issues raised in the appeal, in view of the CBDT Circular the present appeal of the Revenue is dismissed on account of low tax effect.
We clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeal, with the requisite material to show that the appeal is protected by the exceptions mentioned in Para 10 of the Circular - Appeal of the Revenue is dismissed.
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2019 (3) TMI 1966 - ITAT NAGPUR
Disallowance of expenditure under various heads - Addition on the ground that the assessee has claimed huge and exorbitant expenses and the genuineness of the same were not established - as per CIT-A expenditure claimed by the assessee are incurred as well as directly relatable for the purpose of earning profit on the activities carried out by the assessee and therefore the disallowance made by the AO is unjustified - HELD THAT:- DR has not been able to controvert the findings of First Appellate Authority. In the absence of any contrary material, we find no reason to interfere with the reasoned findings of Commissioner of Income Tax (Appeals). The same are upheld, accordingly and the appeal of Revenue is dismissed being devoid of any merit. - Decided against revenue.
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2019 (3) TMI 1963 - ITAT PUNE
Revision u/s 263 - addition u/s 69 in respect of land purchased from Pingle family - HELD THAT:- In the present case, it cannot be said that no enquiry was carried out by the AO, at the most it is a case of inadequate enquiry. Even in that case, the provisions of section 263 cannot be invoked. The Explanation 2(1) to Section 263 inserted by the Finance Act 2015 w.e.f. 01-04-2015 would not change the matrix of case as the amendment would not apply retrospectively. Thus, in the facts of the case, impugned order is set aside and the appeal of assessee is allowed.
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2019 (3) TMI 1960 - ITAT CHANDIGARH
Addition u/s 68 - unexplained share premium received - Onus to prove - CIT-A deleted addition - HELD THAT:- No hesitation in agreeing with the Ld.CIT(A) that the genuineness of the transaction stood established and we do not see any reason to doubt the same. Even the Ld. DR has been unable to point out from the order of the A.O. as to why the impugned transactions were to be looked at with suspicion. The assessee had established the genuineness of the transactions by filing relevant documents and the same was confirmed by the investor companies also, no infirmity in the documents filed either by the assessee or by the investor companies has been pointed out by the Revenue. We fail to understand, therefore, why the impugned transaction should be treated as unexplained/ingenuine.
Also having established the genuineness of the transaction with necessary documents, as above, the onus shifted to the Department, and having not pointed out any infirmity in the documents submitted by the assessee, the assessee was not any more required to file further evidences or even produce the directors of the companies. We agree therefore with the Ld.CIT(A) that the share premiums could not be said to be ingenuine merely because the directors of the companies were not produced for examination.
Revenue challenge to the deletion of the addition on the ground that the assessee did not discharge its onus during assessment proceedings and adequate opportunity was not given to the AO to complete his inquiry vis a vis the investor companies and further that the CIT(A) admitted the additional evidences without following the procedure laid down in Rule 46A of the Income Tax Rules,1962 for the same is not acceptable since as held above by us the assessee had duly discharged its onus of proving the genuineness of the transaction and the A.O. had been given sufficient opportunity to conduct all inquiries vis a vis the said investors in remand proceedings. Further we find that the CIT(A) had noted the fact that though the assessee had sought time to produce the investors, the AO without giving any further opportunity finalized the assessment. In this backdrop the CIT(A) admitted the evidences filed by the assessee collected from the investors and forwarded them to the AO for his comments. The CIT(A) therefore, we hold, had duly admitted the additional evidences in the circumstances enumerated in Rule 46A of the Rules, which allows the CIT(A) to admit such evidences where the assessee was not given sufficient opportunity to adduce the same earlier. - Decided against revenue.
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2019 (3) TMI 1958 - ITAT MUMBAI
Estimation of income - Bogus purchases - CIT(A) for restricting the disallowance to 3% of the total value of the purchases - HELD THAT:- This Tribunal passed in assessee’s own case for the A.Y.2009-10, 2010-11, 2012-13 & 2013-14 [2019 (1) TMI 1961 - MADRAS HIGH COURT] wherein, the aspect of purchases made from suppliers belonging to Rajendra Jain Group have been the subject matter of adjudication as held assessee has explained that all its sales are by way of exports. The books of account maintained by the assessee show payment for effecting such purchases by account payee cheques and also the vouchers for sale and purchase of goods, etc. Notably, no independent enquiries have been conducted by the AO. AO was not justified in making additions merely on the basis of information obtained from the Sales Tax Department of the Government of Maharashtra without conducting any independent enquiries. Before the CIT(Appeals), one of the points raised by the assessee was with respect to an opportunity to cross examine the four parties, but we find that no such opportunity have been allowed.
Assessing Officer in the instant case has stated that Mr. Rajendra Jain, Mr. Dharmichand Jain and Mr. Anoop Jain have appeared before him. However, it is not made clear as to whether the above said three persons were partners/directors, all the suppliers belonging to Rajendra Jain. The purchases made from companies, where these three persons are either partner/director, shall be aware by the above said decision rendered by Coordinate Bench. The purchases made from other companies, however requires fresh examination.
The aforesaid decisions rendered would apply mutatis mutandis to the case before us. Accordingly, we restore the issue relating to addition on account of bogus purchases made during the year under consideration to the file of the Ld. AO with a direction to delete the addition relating to purchases made from companies, in which above said three persons are partners / Directors. Appeals of the assessee as well as the revenue are allowed for statistical purposes
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2019 (3) TMI 1956 - ITAT AMRITSAR
Penalty imposed u/s 271(1)(c) - diversified views - HELD THAT:- Members constituting the co-ordinate Bench passed the divergent orders qua imposition and affirmation of penalty u/s 271(1)(c), therefore reference u/s 255(4) of the Act was made to the Hon’ble President of ITAT for adjudication of the issues under consideration by Ld. Third Member [2019 (6) TMI 1283 - ITAT AMRITSAR] who decided the issues in favour of the assessee and directed the registry to list these appeals before the Division Bench for passing an order in confirmity with the majority view (kindly refer para no. 9 to 12 of the order) . As per section 255(4) of the Act, the majority view is final and consequential order is required to be passed and hence as per majority view, the penalty imposed by the Assessing Officer and sustained by the ld. CIT(A) is liable to be deleted. Consequently, the penalty stands deleted.
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2019 (3) TMI 1952 - ITAT KOLKATA
Cessation of liability towards creditors u/s 41(1) - HELD THAT:- Evidence in the form of confirmations of the concerned two creditors were filed by the assessee before the AO to establish the existence of the said creditors, but the Assessing Officer still treated the said creditors as bogus or non-existent and made addition u/s 41(1) on the ground that assessee’s liability towards the said creditors had ceased to exist. As rightly contended by the learned counsel for the assessee, onus was on the AO to establish that the liability towards the said creditors had ceased to exist in the year under consideration and since the said onus was not discharged by the AO, we are of the view that the Ld. CIT(A) was fully justified in deleting the addition made by the AO u/s 41(1) - Decided against revenue.
Disallowance u/s 14A - CIT-A deleted the addition HELD THAT:- As decided in the case of CIT vs Hero Cycles (P) Ltd. [2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT] as well as REI Agro Ltd. [2013 (9) TMI 156 - ITAT KOLKATA] wherein it was held that no disallowance u/s 14A could be made if there was no exempt income actually earned by the assessee during the relevant year. In the present case, no exempt income was earned by the company during the year under consideration and this being the undisputed position, we find no infirmity in the impugned order of the Ld. CIT(A) deleting the disallowance made by the A.O. u/s 14A - Ground No. 2 of Revenue’s appeal is accordingly dismissed.
Claim of the assessee for set off of loss recorded under the head “profits and gains of business or profession” against the addition made by the A.O. u/s 68 - HELD THAT:- the issue involved in the present case is relating to the claim of the assessee for set off of business loss of the current year against the income assessee u/s 68 in the same year. It is observed that this issue as involved in the assessee’s case is squarely covered in favour of the assessee by the various judicial pronouncements cited by the learned counsel for the assessee. In one of such decisions rendered in the case of ITO vs M/s. Prism Share Trading Pvt. Ltd [2018 (12) TMI 212 - ITAT MUMBAI] allowing the claim of the assessee for set off of loss under the head “Profits and Gains of business or profession” against the income assessed u/s 68. Ground No. 3 of the Revenue’s appeal is accordingly dismissed.
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2019 (3) TMI 1951 - ITAT MUMBAI
Allowance of business loss - assessing the commencement of the business of the assessee by which the claim of the assessee was allowed - Whether CIT(A) admitted additional evidence without giving opportunity to the Assessing Officer under Rule 46A of Income Tax Rule - HELD THAT:- CIT(A) has considered the incorporation certificate which was obtained w.e.f. 16.12.2011. The CIT(A) has considered the expenses from pre-incorporation period and post of incorporation period. CIT(A) has considered the invoices for the payment to interior designer and invoices to purchase the computer in the month of January which shows about the activities business. The payment was also made to Microsoft as License fee. The assessee incurred expenses upon the employees in the shape of Salary, Professional Fees, travelling for Work, Office Expenses, Telephone Expenses etc. w.e.f. January, 2012 onwards. The assessee has also entered into an Investment Management Agreement with IL &FS on 1st February, 2012 and also applied for Credit Alpha Alternative Fund’s as Venture Capital Fund with SEBI on 07.02.2012. All these facts speak about the initiation of the business.
On appraisal of the order, we nowhere found that the additional evidence if any was admitted by CIT(A) without giving an opportunity of being heard to the AO in view of the provisions u/s 46A of the Act. The documents which has been considered by the CIT(A) were already on record which were not considered by the AO. Nothing came into noticed that the new documents were considered by the CIT(A) while allowing the claim of the assessee.
As relying ON M/S. AXIS PVT. EQUITY LTD. [2017 (2) TMI 340 - BOMBAY HIGH COURT] we noticed that the factual position in connection engaged of legal and financial advisors and incurred expenditure to decide appropriate tax efficient structure for funds and employment to the personnel for the purpose of running its business has been considered for the establishment and commencement of the business and accordingly allowed the business loss. Since, no new evidence was considered by CIT(A), therefore, the plea taken by revenue on account of giving an opportunity u/s 46A of the Act has no force. Taking into account of all the facts and circumstances, we are of the view that the CIT(A) has rightly allowed the claim of the Assessee. Finding no reason to interfere with the finding of the CIT(A), we affirm the finding of the CIT(A) on all the issues and decide these issues in favour of the assessee
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2019 (3) TMI 1948 - ITAT DELHI
Reopening of assessment u/s 147 - Reliance on information of investigation wing - addition u/s 68 - entry providers during the proceedings u/s 132 have admitted that the assessee company had taken accommodation entries - notice after expiry of four years from the relevant assessment year - HELD THAT:- AO has acted mechanically on the information of investigation wing about the alleged accommodation entries and has drawn his conclusions without applying his mind or making any enquiry in the matter before forming the belief of escapement.
In the case of CIT vs. Meenakshi Overseas Pvt. Ltd. [2017 (5) TMI 1428 - DELHI HIGH COURT] in the identical facts, similar reasons were recorded by the AO on the basis of information of Investigation Wing where there was no independent application of mind to any tangible material which formed the basis of belief of escapement. In that case also, the information received contained (i) the names of beneficiaries (ii) bank name & branch of beneficiaries banks and entry giving banks, (iii) value of entries taken (iv) name of account holder of entry giving account and the Assessing Officer after going through the said information straightway derived its conclusion without application of his mind.
In the instant case also, similar reasons along with similar wordings have been recorded and the AO while concluding the accommodation entries in the garb of share capital, has failed to apply its mind in support of its belief. Here in this case, the reasons recorded do not refer any evidence or any confession /statements of entry operator, cash payment by assessee, payment of commission etc. so as to support its belief that the assessee was beneficiary of the entry operating racket. There is also no whisper in the reassessment order against the contention of the assessee that the Income-tax authorities themselves have assessed the alleged entry operator u/s. 153C of the Act and the Income-tax Return filed by these group companies have been accepted in March, 2013.
Assessee has submitted copies of assessment orders in the case of Mani Malal Delhi Properties (P) Ltd. for the assessment year 2007-08 u/s. 153C/153A where the ITR filed by this company stands accepted by ITO Central Circle 23 New Delhi resulting into no addition. Similar is the position with respect to other companies M/s. Hill Ridge Investment Ltd. and M/s. Mega Top Promoters (P) Ltd.
Thus in view the fact that there was reference in the notice of any satisfaction of competent authority as contemplated u/s. 151 even after issuance of notice after four years from the end of assessment year; that there is no reference of any evidence such as statement or confession of the alleged entry operator against the assessee; that there is absence of any particular fact which the assessee failed to disclose fully and truly regarding the share capital at the time of original assessment; that the satisfaction note of the Assessing Officer is solely based on information of investigation Wing; and that in the assessments of alleged entry operator group u/s. 153C, the returns filed by them stood accepted by the department itself and after considering various Authorities cited by the ld. AR and the ld. CIT(A), we find no infirmity in the decision of the ld. CIT(A) while holding the reopening proceedings as void and illegal. - Decided in favour of assessee.
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2019 (3) TMI 1945 - ITAT DELHI
Disallowance of business expenses and depreciation and interest - HELD THAT:- We find every force in the observation of the learned CIT(A) that till such time the company has to maintain its status as company and also has to be discharged certain legal obligations for which it requires the support of the clerical staff and the secretary or the accountant, as the case may be, and also to incur certain incidental expenses in that pursuit. It is, therefore, clear that when the possibility of the revival of the business activities or operation of the assessee are not ruled out once for all, it cannot be said that the assessee company had closed down its operations permanently so as to disallow the business expenditure. The temporary lull in the business during the lean period of transaction cannot be mistaken to be the permanent close down of the business. The clear indication is that the assessee has to maintain its status as company till the end comes and it has to perform certain legal obligations by incurring certain expenditure and more particularly to pursue the litigation as a result of which it has to receive ₹ 460 crores approximately which shall form part of the income of the assessee in the year in which it will be received.
While recording the fact that no manufacturing activity had taken place by the assessee during the year, learned CIT(A) disallowed the depreciation on plant and machinery but he rightly thought it fit to allow depreciation on furniture and building. We endorse the same view so also CIT(A) rightly deleted the addition of ₹ 3384/- by recording a fact that during the year the assessee had not received any amount by way of income-tax refund.
We are of the considered opinion that the impugned order does not suffer any illegality or irregularity and on the other hand, the appeal of the revenue is devoid of merit.
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2019 (3) TMI 1942 - ITAT MUMBAI
Revision u/s 263 by CIT - non recognition of revenue - Method of accounting - Non booking of sale of TDRs (Transferable Development Rights) received against the SRA Project - as per AO has failed to examine and conducted inquiries as regards the nature of TDRs and sale proceeds of TDRs vis-a-vis the agreement with SRA - credit of the receipt from sale of TDR to current liability awaiting the discharge of assessee’s total obligations under the slum rehabilitation project - HELD THAT:- The issue of income and receipt arising out of sale of TDR, the detailed thereof and the method of accounting for profit recognition adopted by the assessee were duly available before the AO. Hence from the above it is evident that Ld. CIT is totally incorrect in observing that the sale of TDR and the profit method of the assessee was not examined by the AO.
Whether the method of accounting adopted by the assessee and accepted by the AO is a legally permissible one not? - We note that the observations of the revenue authority on the incorrectness of the method of accounting adopted by the assessee are not by reference to any Accounting Standards or any provision of the Act - AO has noted that the method of accounting adopted by the assessee cannot over ride the Income tax Act. Here we note that there is no specifications as to which provision of income tax provides that the method of accounting adopted by the assessee is incorrect. We find that the percentage completion method for revenue recognition in case of assessee engaged in real estate development is well recognized as per the ICAI guidelines as well as case laws in this regard. In this regard, we may refer that the Hon’ble Supreme Court explained the 'Project Completion Method or Completed Contract Method' and 'Percentage of Completion Method' in the case of C.I.T. Vs. Bilahari Investment Pvt. Ltd. [2008 (2) TMI 23 - SUPREME COURT] - Thus, we note that the adverse comments passed on the assessee’s method of accounting is in contravention to settled accounting principle and case laws.
Assessee submission is quite germane that the sale of TDR cannot be considered in isolation of the assessee obligation under the SRA agreement to complete the slum rehabilitation project.
The reading of the agreement in this regard clearly shows that assessee was under obligation to complete the slum rehabilitation project as per the agreement. The said agreement has to be considered on an overall basis and the construction of the parts of the agreement has to be done in a harmonious manner. As rightly contended by the Ld. Counsel of the assessee TDRs were meant to provide finance to the assessee company to complete the project. In such circumstances the assessee has credited the amount received on sale of TDR to current liability which is utilized in the development of the project - this treatment by the assessee finds support from ITAT decision in the case of Skylark Build [2012 (6) TMI 440 - ITAT, MUMBAI]
The method adopted by the assessee and accepted by the assessing officer is legally permissible one. Once it is held that the method adopted is a legally permissible one, it has been held in the Catena of case laws that learned Commissioner of income tax cannot exercise of jurisdiction under section 263 of the act if he is of a different opinion.
Thus the view adopted by the assessing officer is a permissible one. Hence, we are of the considered opinion that exercise of jurisdiction under section 263 of the IT Act by the learned Commissioner of income is liable to be quashed. - Decided in favour of assessee.
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2019 (3) TMI 1941 - ITAT AMRITSAR
Reopening of assessment u/s 147 - ITO Phagwara jurisdiction to issue notice - HELD THAT:- As the term “Assessing Officer” used in Sec. 147 of the IT Act cannot be accorded any other meaning except that envisaged in Sec. 2(7A) as per which the same has to be construed as the AO vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) of subsection (2) of Sec. 120 or any other provision of the IT Act.
There is neither anything borne from the records nor any material has been produced before us during the course of hearing of the appeal, which would reveal that the ITO, Ward-4, Phagwara was at the time of issuing the notice under Sec. 148 of the IT Act was exercising either exclusive or concurrent jurisdiction over the case of the assessee. On the basis of our aforesaid observations, it can safely be concluded that the notice issued under Sec. 148, dated 27.03.2015 by the ITO, Ward- 4, Phagwara who was not vested any jurisdiction over the case of the assessee would have no existence in the eyes of law. We thus in the backdrop of the aforesaid facts are constrained to observe that the assessment framed by the ITO, Ward-3, Phagwara under Sec. 147 r.w.s 143(3) of the IT Act, dated 29.03.2016 in the absence of a valid notice issued under Sec. 148 cannot be sustained and is liable to be quashed.
As we have quashed the assessment framed by the A.O under Sec. 147 r.w.s. 143(3), dated 29.03.2016 for want of jurisdiction, therefore, we refrain from adverting to and therein adjudicating the merits of the addition made in the hands of the assessee. - Decided in favour of assessee.
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2019 (3) TMI 1932 - ITAT JAIPUR
Validity of reopening of assessment - reasons recorded by the AO based on incorrect fact - mistake in the reasons recorded - HELD THAT:- In the case in hand, the AO himself as admitted the mistake in the reasons recorded and we find that it is not only mistake in the reasons recorded but the AO has also made the addition while passing the impugned assessment order on account of credit card bills U/s 69C .
Subsequent explanation of the AO that this amount represents the cash deposit in the bank account will not remove the defects in the reasons recorded. Assessing Officer in the reasons recorded for reopening of the assessment was proposed to assess the income on account of unexplained expenditure incurred by the assessee which was also assessed to tax at the time of passing the reassessment order. Subsequently, the AO has come out with the explanation in the remand report that the amount represents the income on account of cash deposited in the bank account therefore, it is re-categorization of transaction from unexplained expenditure to cash deposit in the bank account
CIT(A) has stated that in the notice issued U/s 142(1) of the I.T. Act the AO has mentioned the cash deposit in the bank account however, the AO finally made the addition on account of payment of credit card bills then the notices issued U/s 142(1) itself was not considered by the AO while making the addition. Even otherwise the notice issued U/s 142(1) would not substitute the reasons recorded by the AO. Accordingly,the amount which was proposed to assess the income by the AO in the reasons recorded is not actually represents the payment of credit card bills then, reopening based on the incorrect facts and non application of mind is not sustainable in law. - Decided in favour of assessee.
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2019 (3) TMI 1931 - BOMBAY HIGH COURT
Constitutionality of the Black Money (Undisclosed Foreign Income & Assets) and Imposition of Tax Act, 2015 - HELD THAT:- Having heard the learned counsel for the petitioner, however, we do not find any reason to either stay any of the provisions of the Act or prevent the Competent Authority under the said Act from passing appropriate orders on pending proceedings. Interim reliefs prayed in the petition are therefore, refused.
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2019 (3) TMI 1930 - ITAT LUCKNOW
Exemption u/s 11 Denied - AO denied by holding that the assessee had charged excess fees then approved by the statutory body - CIT(A) allowed relief to the assessee u/s 11 - HELD THAT:- CIT(A) held that assessee is a deemed university to which special ordinance of U.P. Government 04.07.2012 was applicable and after becoming deemed university the provision of fee fixation committee of State Government is not applicable. Clause 29 of Extra Ordinarily Gazette of U.P. State Government clearly defines that ordinance shall be made by the Executive Council for the purpose of fee to be charged for courses being studied in the university and for admission to the examination degrees, diploma and certificate of the university. The ld. CIT(A) has appreciated the entire facts and has given a categorical finding that the assessee was a deemed university established by Special Ordinance of U.P. Government dated 04.07.2012. The above finding do not require any interference as we do not find any infirmity in the same, therefore, the Ground No.1 of appeal of the Revenue is dismissed
Disallowance of depreciation - assessee claimed depreciation which was rejected by the AO on the ground that the capital expenditure incurred during the accounting year was allowed as deduction form the income of the assessee, the deduction of depreciation was not allowed on the ground that full deduction had been allowed in respect of capital cost of the asset and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction - HELD THAT:- On a reference, the Hon'ble Bombay High Court confirmed the view taken by the Tribunal by holding that the Tribunal was right in law in directing the AO to allow depreciation on the assets, the cost of which had been fully allowed as application of income under section 11 in the past year. We, therefore, keeping in view the ratio laid down in the aforesaid referred to case of Institute of Banking [2003 (7) TMI 52 - BOMBAY HIGH COURT] set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow the depreciation on the written Dawn Value of the assets.
Anonymous donation - As per sub Section (3) of 115BBC, ‘anonymous donation’ mean voluntary contribution where a person receiving such contribution does not maintain a record of identity indicating the name and address of the person making such contribution - HELD THAT:- We find that only requirement u/s 115BBC of the Act is the name and address of the donor has to be maintained which the assessee had maintained. We further find that the assessee had declared entire receipt of donations in the total income as is apparent for computation which had already been made part of this order and had utilized the entire amount for charitable purposes as the total application of funds is more than fee receipt and voluntarily contribution.
Disallowance of adhoc expenditure - HELD THAT:- We find that the percentage of expenditure during the year under consideration in respect to fee income was 31.73% as against 40.20% in the earlier year which was lower than the earlier year - Assessing Officer had made the disallowance only on adhoc basis without rejection of books of account and without pointing out any deficiency in the vouchers. We further find that the assessee had placed on record complete list of personal expenses and copy of which is also placed and therefore, there was no justification of the Assessing Officer to make the addition and therefore, the ld. CIT(A) has rightly deleted the same.
Disallowance of expenditure out of administrative expenses on adhoc basis - AO has disallowed expenses on adhoc basis without pinpointing any specific defect in bills/ vouchers produced - if an addition has been made in the case of charitable trust the same would be treated as application for charitable purpose - HELD THAT:- Since the registration u/s 12A of the Act of the appellant trust is restored by Hon'ble I.T.A.T. and as already discussed above that the appellant is eligible for exemption u/s 11 of I.T. Act. Accordingly, since the income of the appellant is exempt, the addition made on account of disallowance from expenses will also amount to application of Income and will have no sanctity.
Disallowance of interest paid on term loan - HELD THAT:- We find that the AO had disallowed the same holding the same to be as capital expenses where the fact remain that the expenditure was incurred for the building which was also put to use and assessee had claimed depreciation on the building also. We further find if expenditure was not allowable as revenue expenditure even then the same was allowable as utilization as capital expenditure is also allowed for the purpose of calculating exemption u/s 11 of the Act. The entire capital as well as revenue expenditure has to be taken into account as utilization of funds.
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2019 (3) TMI 1928 - ITAT PUNE
TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- Companies functionally dissimilar with that of assessee's IT Segment and ITes segment need to be deselected as comparable - difference in the business model brought out between assessee and selected comparable makes it uncomparable.
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2019 (3) TMI 1927 - ITAT MUMBAI
Reopening of assessment u/s 147 - No proper and valid service of notice issued u/s 148 - notice was served by way of affixture - mandation of serving officer to show that all due and reasonable diligent efforts were made to serve the assessee/defendant with the notice - whether the notice affixed on the door of the assessee on 31.3.2015 on the last day of limitation for service of notice under the provisions of section 151 of the Act is a valid service specially when no efforts were made by the revenue to serve the notice through the normal course and straightway affixed the notice? - HELD THAT:- The order V of CPC Rule 17 provides service of notice by way of affixture on the defendant on his residence or place of business on the outer door if defendant refuses to accept the service or can not be found. The serving officer can affix the notice on the out door of the house/residence where the defendant ordinarily resides or carries on business. The serving officer then report the circumstances under which the notice was affixed and name and address of the person by whom the house/place of business was identified and in whose presence the copy of the notice was affixed.
As is clear from the above that the inspector income tax stated in his report that only upon finding the door closed he has no option but to make affixture of the notice on the out door of the assessee. There is no doubt that the AO has not made any due effort or diligence to serve the notice and affixed the same on the date of issuance of the said notice. There is nothing on records that the assessee was hiding or avoiding the service of notice and there is also no evidence on records that the service could not be made through ordinary ways/means. In this the case the ordinary means of service of notice were not used or exhausted and the service was made directly through affixture at the last minutes on 31.3.2015 to avoid limitation expiring on 31.3.2015. Thus there is merit and force in the arguments of the ld AR that there is no valid service of notice and the proceedings are null and void as the notice issued u/s 148 was not served upon the assessee.
In the Hon’ble Delhi High Court in the case of CIT Vs Hotline International (P) Ltd [2007 (4) TMI 44 - DELHI HIGH COURT] held has that where the serving officer does not make any efforts to locate the assessee, the service by affixture in invalid and re-assessment proceedings are bad in law. The background facts in this case are that the serving officer visited the office of the assessee to serve the notice and security guard informed that the office is closed for holi festival. The serving officer made the affixture which was held to be invalid.
Service of notice issued u/s 148 dated 31.3.2015 through affixture on 31.3.2015 is not a valid service and accordingly the re-assessment proceedings and consequent order are quashed. - Decided in favour of assessee.
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2019 (3) TMI 1926 - ITAT DELHI
TDS u/s 195 - payments abroad of export commission to non-resident the foreign agent for the procurement of export orders - disallowance u/s 40(a)(i) - CIT-A said commission paid to foreign agent for procurement of export orders is in the nature of business income of the foreign agent and not FTS, thus not liable to TDS and deleted the addition - HELD THAT:- Issue is covered in favour of the assessee in case of DIT Vs. Panalfa Autoelektrik Ltd. [2014 (9) TMI 706 - DELHI HIGH COURT] wherein it is held that commission paid by the assessee to its foreign agent for arranging of export sales and recovery of payments could not be regarded as Fee for Technical Services u/s 9(1)(vii).
In the present case, the commission was paid to ACE Trading, a non-resident agent (payee) who is a tax resident of France. The payee was simply assisting inprocuring export orders for the Assessee in his ordinary course of business in France. The commission was paid for activities of the payee outside India and the amount is received by the payee outside India through normal banking channels.
Section 5(2) states that total income of a person, who is a non-resident, includes income from all sources which (a) is received or deemed to be received in India; (b) accrues or arises in India; or (c) is deemed to accrue or arise in India. In the present case, the commission income paid to the foreign agent neither accrued in India nor deemed to be accrued in India as per deeming provisions of section 9 and nor the same was received nor deemed to be received in India. Thus, there is no need to interfere with the findings of the CIT(A). The Appeal of the Revenue is dismissed.
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2019 (3) TMI 1923 - ITAT INDORE
Legality of the reassessment proceedings - notice u/s 143(2) of the Act was not issued - whether the impugned order can be held to be invalid merely for non issuance of notice u/s 143(2)? - HELD THAT:- As relying on Dimension Promoters Pvt. Ltd [2018 (1) TMI 393 - ITAT DELHI] the impugned reassessment order is liable to be quashed being invalid, bad in law and void abinitio as the revenue authorities post issuance of notice u/s 148 of the Act failed to issue statutory notice u/s 143(2) of the Act which is mandatory before commencing the assessment proceedings. - Decided in favour of assessee.
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2019 (3) TMI 1921 - ITAT HYDERABAD
Disallowance of interest u/s 36(i)(iii) - interest on the loans/advances made to subsidiary company should not be disallowed - HELD THAT:- As funds sanctioned by the bank were utilized in other group companies on the direction of the holding company. These funds were not utilized for any purpose of the object of the assessee company - exclusive utilisation of these funds were not for the purpose of the assessee’s business and the expenditure of interest is not for the purpose of assessee’s business and clearly for the purpose of other group companies.
Coming to the question of business expediency in this transaction, any act carried out for the purpose of its own business or carried out for the benefit of the subsidiary as a share holder can be referred to as business expediency. In the given case, the assessee is in the business of consultancy and no business commitment to fund other sister concern and the action of the assessee to fund step down subsidiary will not fit into representing any share holder commitment. The actual share holders are the holding company, any holding company diverting its own funds to the subsidiaries will fit into business expediency as held in the case of SA Builders [2006 (12) TMI 82 - SUPREME COURT] - The assessee company was used as a source for funding the step down subsidiaries and the cost should also be transferred to the subsidiary who has utilized the funds and the burden of cost of funds on the assessee is unwarranted, may be beneficial to the overall group but not on the assessee. It clearly indicates that the transaction of funding the sister companies are not exclusively for the purpose of assessee’s business. Therefore, the ground raised by the assessee is dismissed.
Disallowance u/s 14A - CIT(A) deleted the disallowance on the ground that no interest was incurred on the share capital invested and also assessee did not receive any dividend income - HELD THAT:- The Hon’ble Delhi High Court in the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] has held that section 14A will not apply where no exempt income is received or receivable during the relevant assessment year. Following the said decision, we find no infirmity in the order of CIT(A) in deleting the disallowance made by the AO u/s 14A of the Act. Accordingly, the ground raised by the revenue on this issue is dismissed.
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