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Income Tax - Case Laws
Showing 21 to 40 of 10077 Records
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2019 (12) TMI 1633
Unexplained cash credits u/s 68 - undisclosed loan taken - creditworthiness of share applicants not proved - HELD THAT:- As come on record that the learned coordinate bench has already applied its mind in assessee’s appeal [2019 (9) TMI 146 - ITAT KOLKATA] whilst deleting the impugned addition in case of the very parties by holding that it had proved identity, creditworthiness and genuineness of all four related parties (supra). We therefore adopt the above detailed reasoning mutatis mutandis and affirm the CIT(A)’s findings under challenge deleting the balance addition in issue. Revenue’s appeal is dismissed.
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2019 (12) TMI 1631
Depreciation on goodwill arising on demerger - whether additional ground could be raised in a cross objection filed by the assessee u/s 253(4)? - HELD THAT:- The issue is squarely covered by the judgment passed by the Co-ordinate Bench [2019 (7) TMI 1547 - ITAT AHMEDABAD] AO has simply disputed the quantification of eligible depreciation spanning over various financial years on the ground that depreciation is eligible from the appointed date as sanctioned by the Hon’ble Gujarat High Court . Thus, on account of such reworking, the assessee has presented a new claim towards depreciation on goodwill in the impugned AY 2009-10 on the ground that al l the relevant facts are available on record which are duly admitted by the Revenue. Therefore, the assessee cannot be deprived of the eligible depreciation as computed by the AO himself concerning AY 2009-10.
Additional ground could be raised in a cross objection filed by the assessee u/s 253(4) - We find ourselves in agreement with the propositions made on behalf of the assessee that in a cross objection, there is no bar to raise legal issues for the first time before ITAT. A cross object ion is like an appeal. It has al l the trappings of an appeal It is filed in the form of memorandum and it is required to be disposed in same manner as an appeal. Even where the appeal is withdrawn or dismissed for default, cross object ion may nevertheless be heard and determined. Cross object ion is nothing but an appeal, a cross appeal at that. This apart, raising of additional ground would only enable the authority concern to correctly assess the tax liability of the assessee. Simi lar view has been expressed in the case of ITO vs. Jasjit Singh [2014 (9) TMI 1166 - ITAT DELHI]. We thus do not see any impediment in entertaining the additional grounds. The relevant facts are available on
Additional ground is concerned, we observe that where the AO has readjusted the quantum of depreciation in the subsequent assessment year, the assessee is within its legitimate rights to be granted depreciation in AY 2009-10 as per the figures worked by the AO himself . We do not see any perceptible reason for not admitting such claim of the assessee. We also find bonafides in the plea of the assessee for raising new claim on account of depreciation by way of additional ground at this belated stage.
The order for the AY 2012-13 was passed on 29.03.2015. By virtue of this order, the assessee came to know about the revision in the claim of depreciat ion concerning AY 2012- 13. By that time, the order of the CIT(A) dated 13.12.2013 was already passed. Therefore, the assessee was incapacitated to put forward such new claim towards depreciation on goodwill amounting for which relevant facts are duly available on record in the light of the decision of Hon’ble Supreme court in the case of Goetze ( India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] & NTPC [1996 (12) TMI 7 - SUPREME COURT]
Disallowance under section 14A Rule 8D - HELD THAT:- Disallowance made u/s. 14A r.w.r 8D is pertained to disallowance of administrative expenditure incurred towards earning exempt income. CIT(A) has restricted the disallowance - After perusal of the material on record we observe that it is not possible to earn huge volume of exempt income without incurring administrative expenses, therefore, we do not find any unreasonableness and infirmity in the decision of Ld. CIT(A). Accordingly, the appeal of the assessee on this issue is dismissed
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2019 (12) TMI 1630
TP Adjustment - MAM selection - TNMM Method OR CUP Method - HELD THAT:- The conclusion of the ITAT could not be faulted as the same was inconsonance with the provisions of the Act and the Rules. The contention of the Counsel for the revenue cannot be accepted as the Tribunal while upholding the TNMM Method has observed that the other methods prescribed under the Act namely the CUP or Cost Plus Method being not applicable in the facts and circumstances of the case, the Respondent Assessee could only resort to TNMM as the most appropriate method to show that its profit margin from international transactions was at arm’s length.
Tribunal has concluded that the expenses paid to the employees of the A.E. were in the nature of reimbursement of their salaries without any mark up. Thus, the payment per se was to third party employees and not to any related party for services rendered. In light of the findings of the fact arrived at by the ITAT, the questions of law raised are answered against the revenue and in favour of the assessee.
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2019 (12) TMI 1628
TP Adjustment - Addition in respect of technical know-how fees - international transaction was benchmarked by using TNMM as the most appropriate method - HELD THAT:- We noted that the above issue has already been considered by Tribunal in assessee’s own case [2019 (11) TMI 705 - ITAT MUMBAI] and there is no distinguishable facts rather facts are exactly identical and the same agreement i.e. consultancy agreement dated 16.03.2008 was under consideration by virtue of which the assessee has made payment of technical know-how fee to its AE or group concerns Merck KGAA. In view of the above, we direct the AO to delete this addition. This issue of assessee’s appeal is allowed.
Disallowance of expenses relatable to exempt income u/s 14A read with Rule 8D(2)(ii) and under Rule 8D(2)(iii) - HELD THAT:- Assessee stated that the assessee has earned dividend income of ₹86,979/- and disallowance more than this cannot be made in view of the decision of the Hon’ble Delhi High Court in the case of Joint Investment Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT] wherein it is held that the window for disallowance was indicated in section 14A of the Act and was only to the extent of disallowing expenditure incurred by the assessee in relation to the exempt income. This proportion or portion of the exempt income surely cannot swallow the entire amount. In view of the above Delhi High Court decision, the learned Counsel for the assessee fairly conceded that the disallowance under Rule 8D(2) can be retained only to ₹ 86,979/- to the extent of dividend income.
As the issue is covered by Hon’ble Delhi High Court (supra), respectfully following the said decision, we direct the AO to restrict the disallowance of expenses qua the exempt income at ₹86,979/-. We direct the AO accordingly. This issue of assessee’s appeal is partly allowed.
Disallowing depreciation in respect of intangible assets purchased by the assessee - HELD THAT:- This issue is also covered by Tribunals decision in assessee’s own case, wherein the same set off of intangible assets purchased was under consideration and Tribunal [2017 (1) TMI 1692 - ITAT MUMBAI] opined that in the interest of justice matter should be restored back to the file of the FAA for fresh adjudication. He is directed to decide the issue afresh after affording a reasonable opportunity of hearing to the assessee.
AO disallowing the merger expenses and allowing only 20% of the total amount - HELD THAT:- We remit this issue to the file of the AO/ DRP for re-adjudication the same. This issue of assessee’s appeal allowed for statistical purposes.
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2019 (12) TMI 1626
TP Adjustment - selection of MAM - assessee has benchmarked its transaction by applying TNMM method that has been changed by the TPO and he determined ALP by following CUP method - HELD THAT:- Since there is no disparity on facts, more particularly, when the ld.CIT(A) has not made any detailed analysis except putting reliance upon the order of his predecessor in the Asstt.Year 2007-08 and 2008-09, therefore, we are of the view that the issue is squarely covered in favour of the assessee by the order of the Tribunal passed in the Asstt.Year 2008-09[2019 (5) TMI 174 - ITAT AHMEDABAD]
Respectfully following the order of Co-ordinate Bench, we delete the impugned ALP adjustment - Since we have upheld the computation of ALP of international transaction of sale of finished goods according to TNMM method, consequently, ground no.1 and 2 of the Revenue’s appeal would be redundant.
ALP adjustment - payment made for availing of sales promotion and marketing services - TPO worked out ALV of this expenditure at NIL. He has assigned three reasons for taking ALP of this transaction as NIL - HELD THAT:- We find that the assessee has produced evidence in the shape of agreement between it and the AE showing that AE would charge commission at the rate of 5% on non-AE export sales for rendering these services. The assessee has not debited other expenditure for marketing and sales with regard sales made to non-AE. It is also pertinent to note that turnover of the assessee has increased with regard to non-AE sales also. Its export sales to non-AE have increased from ₹ 9 crores approx. in F.Y.2005- 06 to ₹ 44.56 crores in the F.Y.2008-09.
We are of the view that no adjustment could have been made at the recommendation of the TPO on this issue because it was not in the jurisdiction of the TPO to question requirement of services, and also ascertain rendition of services, and on these two reasoning, he cannot benchmark the ALP of these services at NIL. It is also pertinent to observe that in A.Y.2010-11, assessee has paid ₹ 160,16,780/- to its AE for these services and that transaction was referred to the TPO. The ld.TPO did not recommend any adjustment in A.Y.2010-11. Therefore, no adjustment is required in the Asstt.Year 2009-10. We allow this ground also, and delete adjustment recommended at ₹ 2,24,01,998/-. Accordingly, ground no.2 of the assessee’s appeal in the Asstt.Year 2009-10 is allowed.
Disallowance of depreciation - HELD THAT:- As expenditure was allowed to be capitalized in the cost of plant & machinery and depreciation was granted. In view of the above Tribunal’s order in the Asstt.Years 2007-08 and 2008-09, we are of the view that no interference is called for in the finding of the ld.CIT(A). This ground of appeal is rejected. Appeal of the Revenue is rejected.
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2019 (12) TMI 1625
Revision u/s 263 - As per CIT AO failed to examine the liabilities and accounting of TCS method - whether the AO has made enquiries about issue under consideration? - HELD THAT:- Merely just because the view taken by the AO was not found acceptable does not mean that the AO has failed to make requisite enquiries. If the answer is affirmative then second question arises whether the acceptance of the claim by the AO was a plausible view or on the facts of the finding on the facts that the said finding of the AO can be termed as sustainable in law. We find that vide questionnaire, the assessee regarding current liabilities and details of TCS were asked for. The assessee had furnished his reply, which is placed found placed in Paper Book Pages as referred above. The assessee has explained that the TCS is being accounted separately and no deduction of the same has been claimed in the Profit & Loss Account.
Therefore, it the method of accounting, which does not mean that income has escaped assessment or order being erroneous, because if TCS are considered as part of sale then corresponding debit of TCS was to be claimed in the Profit & Loss Account. There is no revenue loss. In view of these facts and circumstances, we find that the AO has made due enquiries and had taken a plausible view, hence, same, cannot be disturbed by Pr.CIT in the name of verification. Since the AO has made during enquiry and examined the issues, hence, invocation of Expln 2 of section 263 is not justified as same is applicable where the AO had not made enquiry and applied his mind which should have been done in the opinion of Pr.CIT. However, the Pr. CIT has not done any enquiry and not suggested what enquiries were to be carried out, therefore, Explanation 2 of section 263 is not applicable. Appeal of the assessee stands allowed.
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2019 (12) TMI 1621
Validity of order passed u/s 143(3) pursuance to the direction passed by DRP u/s 144C(5) - TP Adjustment on AMP expenditure - DRP power to confirm, reduce or enhance the variations proposed in the draft order - arm’s length value of international transactions on account of AMP expenditure by the taxpayer by applying BLT - HELD THAT:- DRP is not empowered to set aside any proposed variation or issue any direction under sub-section (5) for further enquiry for passing of the assessment order. So, in the instant case, the ld. DRP has indirectly remanded the case back to the AO by observing that these (AMP) expenses are to be disallowed u/s 37(1) and directed the AO to allow the taxpayer an opportunity to file its submissions and thereafter to pass final assessment order, which certainly amounts to remand of the case as there was no such observations made by TPO or AO, as the case may be.
AO is not empowered to make fresh determination while passing final assessment order which was not proposed by him in his draft assessment order. So, on these grounds also, disallowance made by the AO u/s 37(1) is not sustainable.
Coordinate Bench of the Tribunal while deciding the identical issue in case of PGS Geophysical as (Successor of PGS Exploration (Norway) AS) v [2014 (10) TMI 143 - ITAT DELHI] held that, “DRP has no authority either to direct the AO/TPO to make further enquiry and to decide the matter and at the best, the DRP can call for the remand report from the Income-tax authority.” Also “in terms of section 144C (8), DRP does not have power to set aside any proposed variation or issue for further enquiry to the AO”.
So, we are of the considered view that disallowance made by the AO u/s 37(1) of the Act pursuant to the directions issued by the DRP is not sustainable in the eyes of law. So, question framed is answered in affirmative.
Allowability of AMP expenditure - Assessee has undisputedly incurred advertisement and sales promotion expenses periodically, and not at once just to refresh the product and quality to be sold in the memory of its customers. So, it cannot be held to be in the nature of enduring benefit for a trader - Advertisement and sales promotion expenses have been incurred by the assessee just to enhance its sales and profit and cannot be treated as capital in nature. Consequently, advertisement and sales promotion expenses debited by the assessee are ordered to be treated as revenue in nature and addition made/confirmed by the ld. AO/CIT (A) on this score is ordered to be deleted.
Thus we are of the considered view that AMP expenditure cannot be considered as capital expenditure by any stretch of imagination, hence the same are revenue in nature having been incurred for commercial expediency.
When undisputedly identical AMP expenses have been incurred by the taxpayer since 2009-10 and has been allowed by the Tribunal in AYs 2009-10 & 2010-11, converse stand taken by the taxpayer in AY 2011-12 is not sustainable being hit by rule of consistency as has been hel in Radhasoami Satsang [1991 (11) TMI 2 - SUPREME COURT] and Municipal Corporation of City of Thane vs. Vidyut Mettalics Ltd. [2007 (9) TMI 399 - SUPREME COURT]
In view of what has been discussed above, disallowance made by the AO/DRP on account of AMP expenses is not sustainable, hence ordered to be deleted. - Decided in favour of assessee.
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2019 (12) TMI 1620
Nature of land sold - agricultural land as exempted u/s 2(14)(iii)(b) despite the fact that the said land was falling within 8 kms of the municipal limit - HELD THAT:- As remanded the matter for considering the distance from the Municipal limits to the land in question as on 06.01.1994. The adjudication of the issue requires a proper verification and supporting evidence which has not been provided by the parties before us. Accordingly, we cannot decide this issue conclusively in the absence of the necessary evidence on this point. Hence this matter is set aside to the record of the AO to conduct a proper enquiry and also consider the evidence, if any, to be filed by the assessee in support of his claim that the distance from the Municipal limits to the area in which the land is situated is less than 8 kms as on 06.01.1994.
When the land in question is treated as capital asset and not as agricultural land excluded from the definition of capital asset as per the provisions of section 2(14)(iii)(b) - Once the main issue involved in the assessee’s appeal is set aside to the record of the AO, this issue is also consequently set aside to the record of the AO for deciding afresh after giving an opportunity of hearing to the assessee.
We may clarify that the Hon’ble High Court has specifically made it clear that no opinion has been expressed on the merits of the case and it is open for the Tribunal to consider the same and take an independent view after taking into account new facts after verification and it will not being influenced by the decision of the High Court. AO is also directed to decide the issue afresh as per the law and facts emerging from the investigation and enquiry to be conducted on this point. Appeals are allowed for statistical purposes.
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2019 (12) TMI 1618
Validity of reopening of asst. u/s 148 - Disallowance made u/s 40(a)(ia) - TDS u/s 194C - assessee has not deducted tax at source from transport payments and hence addition u/s 40(a)(ia) is warranted - HELD THAT:- There is no dispute with regard to the fact that the assessee is an individual. The provisions of sec.194C shall not apply to individual except in a situation mentioned in sec.194C of the Act. We notice that the provision of sec.194C has undergone change w.e.f 1/10/2009 and it will apply to individual, if he falls under the category of “specified invididual”.
A reading of amended provisions as well as pre-amended provisions would show that the provision of 194C shall apply in respect of an “individual” in a particular year, only if he is liable to get his accounts audited u/s 44AB of the Act for the financial year immediately preceding that year in question.
Assessee shall not be liable for deducting tax at source from transport payment, if his accounts of the immediately preceding financial year i.e FY 2008-09 (A.Y 2009- 10) are not be liable for audit u/s 44AB of the Act. In the letter furnished by the assessee before the AO, the assessee has claimed that he was not liable for getting his accounts audited u/s 44AB of eh Act in the immediately preceding financial year.
For the limited purpose of examining the above said claim of the assessee, we restore this issue to the file of the AO. If the assessee has maintained books of account for the immediately preceding year and he was not liable for getting his accounts audited u/s 44AB then the impugned disallowance is not warranted. If the AO was satisfied that the assessee has not maintained books of accounts, then the claim of the assessee needs to be accepted that the provisions of sec.44AB shall not apply in the immediately preceding year. In that case also, the impugned disallowance is not warranted. If the assessee has maintained books of accounts for the immediately preceding year and the same is liable to audit u/s 44AB of the Act, then the impugned disallowance needs to be sustained.
Accordingly we direct the AO to examine all these aspects after affording adequate opportunity of being heard. The order passed by the ld CIT(A) on this issue is accordingly set aside.
Validity of reopening of assessment, the assessee did not furnish the copy of reasons recorded by the AO. In the absence of the same we are unable to express any view on this issue. In the result, the appeal of the assessee is treated as allowed for statistical purposes.
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2019 (12) TMI 1617
Estimation of income - Bogus purchases - A.O. made addition by estimating GP on such alleged bogus purchases - HELD THAT:- As in case of bogus purchases where sales are accepted and assessee has filed quantitative details of purchases and also stock register reflecting goods received, the addition is required to be made only to the extent of difference between the GP declared by the assessee on normal purchases vis a vis bogus purchases.
We restore the matter back to the file of the A.O. to restrict the addition to the extent of lower GP declared by the assessee in respect of bogus purchases as compared to GP on normal purchases. The assessee is also directed to give full details to the A.O. with regard to GP earned on normal purchases and also GP earned on alleged bogus purchases. Appeals of the assessee are allowed in part for statistical purposes only.
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2019 (12) TMI 1616
Disallowance of claim of exemption u/s 54/54F - HELD THAT:- The undisputed fact is that by selling the property situated in India, the assessee has purchased a residential property in Auckland, New Zealand. It is equally true that the amendment has been brought in section 54 vide Finance Act, 2014 w.e.f 01.04.2015. We are of the considered opinion that the Legislature, in its wisdom, has given effect to the amended provision from 01.04.2015 and, therefore, there is no ambiguity as the said provisions are effective from A.Y 2015-16.
Similar view was taken by the Authority for Advance Rulings, New Delhi in the case of Dipankar Mohan Ghosh [2018 (1) TMI 947 - AUTHORITY FOR ADVANCE RULINGS, NEW DELHI]. Moreover, we find that the decision heavily relied upon by the first appellate authority has been reversed by the Hon'ble High Court of Gujarat [2016 (12) TMI 351 - GUJARAT HIGH COURT]. We find that the Hon'ble High Court has held “We are of the opinion that benefit of section 54F before its amendment can be extended to a residential house purchased outside India” - Appeal of assessee allowed.
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2019 (12) TMI 1615
TP adjustment - AMP expenses - International transaction - HELD THAT:- We find that all the decisions which have been claimed by the learned counsel of the assessee to be in his favour are based on the premise that there was no agreement between the parties to incur the AMP expense. It was also found that there was no arrangement or obligation between the parties to incur those expenditure. However in the present case we find that this plank miserably fails. Even the decision of ITAT in assessee’s own case for earlier year doesn’t help the assessee as subsequently there was an amendment in the agreement between the parties. These amendment have already been mentioned in the above said submissions.
In the present case there is a mutual agreement in existence between the assessee and its AE to incur AMP expenses and further that agreement is also existing to allocate or apportion or to contribute the AMP cost or expense. The agreement also clarifies that the level of AMP expense allocation or apportionment contribution is based on the benefit received. Thus when there is an agreement that the overseas associated enterprise will share the AMP expense of the assessee when benefitted, undoubtedly the AMP expense becomes an international transaction and the TPO cannot be debarred from examining the said international transaction with respect to the arms length price.
This becomes amply clear from the fact that the overseas associated enterprise has also contributed a sum towards its contribution to the AMP expense incurred by the assessee. The contention of the learned counsel of the assessee that the sum has been paid not by way of any expense having been incurred by the assessee towards AMP expense of the overseas associated enterprise but to enable the assessee to meet certain rate of return of income. The submission is not at all acceptable. Firstly this is not emanating out of the agreement. It is only an explanation carved out by the assessee. The claim of the learned counsel of the assessee that the contribution is meant to ensure that the assessee has a margin of 5% income in the manufacturing segment and 3% margin in the distribution segment is at best a self-serving statement.
As pointed out by the learned department representative this claim itself shows that assessee is having scant regard to the Transfer Pricing mechanism. It shows that assessee has a predetermined margin and thereafter went around finding comparables to justify the same. This is totally in constraint of the Transfer Pricing laws and jurisprudence. On this plank itself this explanation fails. Further it defies logic that overseas AE will pay gratuitous sum to the assessee, without any benefit to itself.
As relying on case of BMW Ltd. [2017 (11) TMI 715 - ITAT DELHI] we remit the issue to file of the assessing officer to follow the direction of the ITAT as above and determine the arm length price in this regard. As regards to the other adjustment in this regard being claimed by the assessee, the same are consequential. The AO shall consider the same afresh and decide as per law. The ld. Counsel of the assessee claimed that the TPO should not be given second innings. We find the same is not tenable in light of facts and case laws referred hereinabove.
Disallowance of royalty - We find that it is the claim of the assessee that payment of royalty is an international transaction and assessee has submitted the benchmarking report and the Transfer Pricing Officer has not made any adjustment. In this view of the matter, the Transfer Pricing officer has not made any adjustment. Hence, it was not open to the AO to apply the benefit test and make the disallowance u/s.37(1) of the Act, without proper examination of all aspects of the claim. We find that assessee’s submission in this regard have not been properly appreciated by the Assessing Officer, hence, in our considered opinion, the aforesaid issue deserves to be remitted to the AO for fresh consideration. We direct accordingly.
Royalty payment claimed on payment basis u/s.40(a)(ia) - Claim which is now being claimed to be allowable on payment basis u/s.40(a)(ia) of the Act, we find that the same was disallowed in the earlier year by applying the Section 37(1) of the Act holding the same that it is not for the purpose of the business. Once it was held that the said payment was not allowable for A.Y.2009-10, the same cannot be claimed to be allowable in A.Y.2010-11 on payment basis u/s.40(a)(ia). Hence, this claim of the assessee is not sustainable, hence, we uphold the orders of the authorities below, disallowing the royalty payment paid to Diageo North America pertaining to A.Y.2009-10 which has been claimed on payment basis u/s.40(a)(ia) in the present assessment year.
Disallowance of expenses incurred for liason office at Sri Lanka - AO disallowed the same on the ground that assessee had not carried out any business activity in Sri lanka Or received any income from Sri Lanka - HELD THAT:- We find that assessee was incurring expenses in respect of liason office expenses at Sri lanka. It is undisputed that during the current year as well as previous year no income was received on account of activities of the liason office. No detail for the activities conducted by the liason office is also on record. In the earlier year also this claim was rejected. Accordingly, we do not find any infirmity in the order of the assessing officer in this regard.
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2019 (12) TMI 1614
Rejection of books of account u/s. 145(3) - Addition on Account of low GP - CIT(A) observed that the assessee has explained the reason in fall of GP due to increasing in turnover from the previous year. Accordingly, the addition made by the AO on account of GP was also deleted - HELD THAT:- We find that ld.CIT(A) has given his finding that the books of account are duly maintained and presented before the AO during the course of assessment proceedings. Therefore, provisions of Section 145(3) are not applicable. Similarly, the fall in GP was explained as turnover during the year also had increased from Rs.14 crore to Rs.38 crore. Similarly, the A.Y. 2012-13, the GP dropped from 2.19% to 1.41% as the turnover increased from 10 crore to 41 crore. Further, the AO has not found any defects in the maintenance of the books of account, hence the GP of addition made by the AO was rightly deleted by the ld. CIT(A). In the light of above discussion of the finding of the ld. CIT(A), we find no infirmity in the order of the ld. CIT(A). Hence, the appeal of the Revenue is accordingly dismissed.
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2019 (12) TMI 1613
Nature of expenditure - Disallowance of Trademark License Utilization fees - maintainability of expenditure incurred by way of license fees to the licensor of the trademark as revenue expenditure - HELD THAT:- The claim of the assessee for payment of user license fees based on turnover is deductible as revenue expenditure. In our view, where the licensor continues to be owner of the capital asset i.e. trademark ‘Vimal’, the assessee cannot be said to have acquired any capital asset by making payment of user license fee. The interpretation of certain restrictive covenants by the AO is totally misplaced. The contractual obligations are ordinary in commercial parlance and does not grant any valuable right to the licensee. The advantage earned by the assessee by use of the license is neither permanent nor ephemeral but is linked to the use of the trademark owned by the licensor.
The expense towards use of trademark was clearly laid out for the purpose of ongoing business carried on by the assessee and fee paid for use of such trademark is clearly deductible as revenue expenditure. The assessee herein has been merely granted a license to use trademark on payment of license fee determined on the basis of a formula laid down in the agreement.
The right to use can neither be assigned at the wishes of licensee nor is the licensor prohibited to terminate the user license agreement executed with licensee. Thus, licensor retains the inherent control over the manner of use of trademark. Thus license fee paid for mere use of capital asset which continues to belong to someone else thus cannot be regarded to be in the capital field in the hands of licensee. We thus see no error in the conclusion drawn by the CIT(A) in favour of the assessee.
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2019 (12) TMI 1612
Reopening of assessment u/s 147 - case was reopened for assessment u/s 147 in respect of assessment year 2010- 2011 since the assessee had not filed return of income for the assessment year 2010-2011 - HELD THAT:- The records of the case, however, reveals that the assessee, in fact, had filed return of income for the assessment year 2010-2011. As such non - filing of return by the assessee could not possibly have been the reason for re - opening of assessment under section 147 of the Income Tax Act, 1961.
If the assessee had not disclosed income or concealed income, the reason for re - opening of assessment ought to have reflected otherwise, in the notice dated 30th March, 2017.
In that view of the matter – on a very short and narrow compass – we are of the view that the notice dated 30th March, 2017, issued under section 148 of the Income Tax Act read with order dated 05th September, 2017, issued by Income Tax Officer-3 (4), Kanpur, cannot be sustained in law and is liable to be set aside and is accordingly, set aside.
Setting aside of the notice dated 30th March, 2017, read with the consequential order dated 05th September, 2017, however, shall not, in any manner, stand in the way of the Income Tax authorities to proceed further in the matter in accordance with law.
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2019 (12) TMI 1611
Revision u/s 263 - Deduction u/s 80P - as per CIT AO has erroneously allowed the deduction under section 80P(2)(d) on the interest received of M/s Vadasinor Pragati Samaj Co-operative Credit Society Ltd. resulting into under assessment of tax - HELD THAT:- Assessee is entitled for deduction on interest earned from Co-operative Bank which are primarily a Co-operative Society, thus, in our view, the deduction allowed by AO are in accordance with various judicial pronouncement, which cannot be branded as erroneous. The jurisdictional High court in Gabriel India Ltd [1993 (4) TMI 55 - BOMBAY HIGH COURT] held that power of suo-moto revision under section 263 of the Act, is in the nature of supervisory jurisdiction and can be exercised, if the circumstances specified therein exist.
Two circumstances must exist to enable the Commissioner to exercise the power of revision under this sub-section viz. (i) The order should be erroneous; and (ii) by virtue of the order being erroneous and prejudicial must have been caused to the interest of revenue. Further, the order cannot be termed as erroneous unless it is not in accordance with law, if the Assessing Officer acting in accordance with law make certain assessment, the same cannot be branded as erroneous by Commissioner simply because, according to him, he order should have been written more elaborately.
As we have noted above, the order passed by AO though not speaking, however, is in accordance with law, so far as deduction under section 80P is concerned. Therefore, in our consider view, the twin condition as enunciated under section 263 are not furnished in the present case. Therefore, the ld. PCIT was not justified in treating the assessment order for revising it by exercising power under section 263.
As we have noted earlier that ld. PCIT while issuing show-cause notice himself has recorded in the show-cause notice itself that Assessing Officer has erroneously allowed the deduction under section 80P(2)(d) on interest received from a Credit Co-operative Society. Hence, we are not convinced with the submission that issue was not examined by Assessing Officer as the language of show-cause notice itself suggest that Assessing Officer erroneously allowed the deduction. Hence, the grounds of appeal raised by assessee are allowed, resultantly, the revision order passed by ld. PCIT is quashed
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2019 (12) TMI 1608
Revision u/s 263 - Addition u/s 14A r.w.r. 8D - HELD THAT:- Assessee has taken unsecured loans, which have been utilized for the purpose of investment in shares of private limited companies controlled by the family members and investment in partnership firm. Such investment was at Rs.26.55 crores as on 31.03.2013 and Rs.27.17 crores as on 31.03.2014. The assessee has paid interest of Rs.2,91,18,343/- on unsecured loans and claimed deduction out of income, which has been during allowed by the AO. CIT viewed that such interest is not allowable under section 14A and under section 57(iii) as investment made was related to exempt income and interest expenses were incurred for earning income from other source. However, it is noticed that there was negative income from partnership firm and no dividend income has been earned during the year under consideration, therefore, no expenditure has been incurred for earning exempt income, hence, disallowance under section 14A read with Rule 8D cannot be made as held by the Hon’ble Gujarat High Court in the case of CIT v. Corrtech Energy Pvt. Ltd [2014 (3) TMI 856 - GUJARAT HIGH COURT]
Hon`ble Supreme Court in CIT v. Max India Ltd. [2007 (11) TMI 12 - SUPREME COURT] reiterated that the phrase "prejudicial to the interests of the Revenue" as used in section 263(1) of the Act must be read in conjunction with the expression "erroneous" and unless the view taken by the Assessing Officer is found to be unsustainable in law, the powers under section 263 of the Act cannot be invoked.
The order passed by the AO, in our opinion, shall be deemed to be erroneous in so far as it prejudicial to the interest of the Revenue, if the Pr. CIT would have specifically pointed out which of inquiries or verification should have been carried out by the AO in this regard and the AO failed to carry out those inquiries and verification as desired by the Pr. Commissioner of Income-tax. Since the Pr. CIT has not suggested the basis of inquiry or verification to be carried out by the AO, the order passed by the AO cannot be deemed to be erroneous in so as far as it is prejudicial to the interest of the Revenue.
We are of the opinion that the AO has adopted one possible legal view sustainable in law on the issue and mere invoking proviso based on revenue audit objection amounts non application of mind. Merely just because the view taken by the AO was not found acceptable does not mean that the AO has failed to make requisite enquiries. Thus, the view taken by the AO was plausible view, which cannot be disturbed by the Pr.CIT. Therefore, we find that twin condition were not satisfied for invoking the jurisdiction under section 263 of the Act. Therefore, in absence of the same the ld. Pr.CIT was not correct in exercise the jurisdiction under section 263 of the Act. In view of these facts and circumstances, we quash the impugned order passed under section 263 of the Act and allow the appeal of the assessee.
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2019 (12) TMI 1603
Validity of the order framed u/s 153A - as argued additions have been made without any reference to any incriminating material/evidence found during the course of search and seizure proceedings - HELD THAT:- It is true that the entire assessment is devoid of any reference to any incriminating material or evidence found during the course of search and seizure proceedings. We find that the AO has taken a leaf from the search operations conducted at the premises of Jain brothers and formed a belief that the assessee is one of the beneficiaries of the accommodation entries provided by the Jain brothers. However, the premises of the assessee were also searched and in the search proceedings, no incriminating material or evidence was found by the search party.
Share application money/premium received by the assessee has already been recorded in its books of account and return of income was already filed on 30.03.2007. No notice u/s 143(2) of the Act was issued and served upon the assessee and by necessary implication, return of income was accepted. The ratio laid down by the Hon'ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] squarely applies on the facts of the case in hand wherein the Hon'ble High Court has held that completed assessment can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search. - Decided in favour of assessee.
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2019 (12) TMI 1602
Addition u/s 271(1)(c) - Defective notice u/s 274 - whether the penalty is sustainable when the same has been initiated and levied without specifying the alleged guilt committed by the assessee either for “concealment of income” or furnishing of “inaccurate particulars of income”? - HELD THAT:- AO has not mentioned the specific charge in its penalty orders as to whether it was levied for concealment of income or for furnishing inaccurate particulars of income. No such definite finding is reflecting from the orders impugned before us. Therefore, in our considered view, the penalty levied by the AO and confirmed by the CIT (A) is not sustainable in the eye of law. The penalty is, thus, deleted. Hence, the ground of appeal of the assessee is allowed.
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2019 (12) TMI 1601
Disallowance u/s. 14A r.w.r. 8D - whether assessee has not earned any exempt income ? - HELD THAT:- It is an undisputed fact that assessee has not earned any exempt income during the year. Facts being identical respectfully following the said decision in assessee’s own case [2019 (6) TMI 1674 - ITAT MUMBAI] we do not find any infirmity in the order passed by the Ld.CIT(A) in deleting the disallowance on the ground that assessee has not earned any exempt income during the assessment year under consideration. - Decided against revenue.
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