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Income Tax - Case Laws
Showing 261 to 280 of 10077 Records
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2019 (12) TMI 1034
Deduction of interest incurred on zero coupon bonds u/s 36(1)(iii) OR u/s 57(iii) as claimed by the appellant - HELD THAT:- After perusing the order of the CIT(A), especially interest pertaining to advance made in earlier years we observe that the assessment for A.Y. 2011-12 has also been framed and the said claim of the assessee under Section 57(iii) of the Act has been allowed by the AO as is apparent from the copy of the assessment order filed at page Nos. 24 & 25 of the Paper Book. We further note that Revenue has not taken any step for reopening the assessment for A.Y. 2011-12. Further assessee’s own fund in the form of share capital is only ₹ 24.50 lakhs and thus there is merit in the contentions of the assessee that the entire amount of interest expenditure is to be allowed to the assessee considering the fact that the amounts advanced were out of loaned money Besides , once interest expenditure has been allowed in a particular year, the same cannot be disallowed in the subsequent year unless there is change in the facts.
Similarly, the case of the assessee is also supported by several cases, namely CIT vs. Sridev Enterprises [1991 (1) TMI 52 - KARNATAKA HIGH COURT] Escorts Ltd. vs. ACIT [2006 (1) TMI 186 - ITAT DELHI-G] , Malwa Cotton Spg. Mills vs. ACIT [2003 (12) TMI 274 - ITAT CHANDIGARH-A], ITO vs. J.M.P. Enterprises [2005 (12) TMI 209 - ITAT AMRITSAR] and other decisions referred to above wherein the common ratio is that once an expense is allowed in the earlier year some cannot be disallowed in the subsequent year unless there is a change of facts during the year vis-a-vis earlier years. Therefore after considering the facts of the case in the light of the decisions relied upon by the learned A.R., we are of the considered opinion that interest expenditure in respect of opening balance of amount advanced is to be allowed. Accordingly we set aside the order of the CIT(A) on this issue and direct the AO to allow interest relating to advance made in earlier years.
Interest relating to advances made during the year - Since the assessee’s own funds were only to the tune of ₹ 24.50 lakhs, which means that money advanced by the assessee has been out of the borrowings only and therefore where there is no direct nexus available, we are convinced with the arguments of the AR that interest should be allowed on proportionate basis.
We also find merit in the contentions of the assessee that interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. is to be allowed. We note that the total interest income during the year was ₹ 125.58 crores out of which interest received from Essar Oil Ltd. is ₹ 102.02 crores as observed by the learned CIT(A) on page No. 46, para 78 of the appellate order and therefore in our opinion assessee has to be allowed interest expenditure in respect of interest income other than interest received from Essar Oil Ltd. Needless to say that computation of corresponding interest expenditure has to be on proportionate basis, as observed earlier, wherever no direct nexus is available. Considering the facts in the light of the discussions given hereinabove we are restoring the issue of calculation of interest expenditure to the file of AO with the direction as contained hereinabove i.e (i) to calculate correct amount of interest in respect of advances given in earlier years,(ii) calculate the correct amount of interest pertaining to advances made during the year and (iii) to calculate interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. and allow the same. The issue is restored for the limited purpose of calculation. Ground is allowed for statistical purposes.
Disallowance u/s 14A under the normal provisions of the Act as well u/s 115JB - HELD THAT:- CIT(A) recorded clear cut finding that the assessee has not claimed any expenditure in computation of income. Similarly, while discussing the computation of book profit under Section 115JB of the Act the learned CIT(A) at page No. 95 onwards has given a finding that the assessee has already disallowed expenditure under Section 14A of the Act on which the learned AO has failed to give any contrary findings. Under these facts and circumstances, we are not inclined to interfere in the order of the CIT(A) and accordingly the grounds raised by the Revenue are dismissed.
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2019 (12) TMI 1033
Revision u/s 263 - selection of scrutiny - mismatch in turnover - whether receipts reported in Statement 26AS fully reconciled with the receipts reported in the audited accounts? - HELD THAT:- Assessee had established before the AO as well as before the Ld. Pr. CIT that all receipts certified in the TDS certificates had been fully accounted in the assessee’s books for the relevant year. Although these documents and explanations were admittedly filed before the lower authorities, no factual infirmity or falsity was shown by the Ld. Pr. CIT or by the ld. CIT, DR appearing on behalf of the Revenue. The Ld. Pr. CIT set aside the assessment order on this issue merely observing that the issue was not properly examined. Applying the principles set out in Paras 8 to 17 above, we therefore hold the order u/s 263 of the Act on this issue to be unsustainable because not only did the AO had enquired into this issue but had consciously applied his mind to the facts made available before him and adopted the permissible view in law. On the contrary the Ld. Pr. CIT did not bring on record any material to disprove the assessee’s explanations which showed that receipts certified in the TDS Certificates totaling ₹ 972 Lacs were fully accounted in the assessee’s books of the relevant year but merely restored the issue for fresh examination by the AO. The order of the Ld. Pr. CIT with reference to issue in clause (a) is therefore set aside. Ground Nos. 3 & 4 are accordingly allowed.
Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report (Form 3CEB) and ITR - HELD THAT:- When the impugned order was passed by the Ld. Pr. CIT, clause (i) of section 92BA of the Act had already been omitted by the Finance Act, 2017 and in that view of the matter the Ld. Pr. CIT could not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT’s direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench in M/S. DVC EMTA COAL MINES LTD., M/S. BENGAL EMTA COAL MINES LTD., M/S. PANEM COAL MINES LTD. VERSUS ASSISTANT COMMISSIONER OF INCOMETAX, CENTRAL CIRCLE-3 (1) , KOLKATA. [2019 (5) TMI 1709 - ITAT KOLKATA] . For all the foregoing reasons therefore, we hold that the AO’s order did not suffer from any error for the reason that he did not make reference to the TPO.
Accordingly the Ld. Pr. CIT’s order for the reason setout in clause 3(b) of the SCN and for the entirely new set of reasons contained in the impugned order, is set aside. Ground Nos. 5 to 7 are accordingly allowed.
Disallowance u/s 14A not made by the A.O keeping in view the circular No. 5/2014 (F.No. 225/182/2013-ITA.II) dated 11-02-2014 as well as provisions laid down in the Act - HELD THAT:- Assessment order passed by the AO in which no disallowance u/s 14A was made, could not said to be unsustainable in law because the course adopted by the AO while passing the order u/s 143(3) of the Act was not only permissible in law but the said course was in conformity with the view expressed by the jurisdictional high court. Accordingly the impugned order of the Ld. Pr. CIT with reference to the reasons set out in clause (c) of the SCN is held to be unsustainable and accordingly set aside. Ground Nos. 8 & 9 are therefore allowed.
Assessee did not take valuation of properly sold as per provisions of section 50C - HELD THAT:-We find that in the Profit & Loss Account, the assessee never debited under the head ‘write-off of fixed assets’ nor separately claimed deduction therefore in the return of income. In the circumstances therefore when there was no claim for deduction of such an amount in the return, the issue of non-enquiry in respect of a non issue did not have any material impact and no prejudice can be said to have been caused to the interest of the Revenue because of the alleged nonenquiry.
We also find that before the Ld. Pr. CIT the assessee had filed the certificate issued by M/s D.V. Agarwal & Associates, Chartered Accountant in which it was certified that the assets written off were sold during the relevant year and the loss incurred on sale was netted off against profit made on sale of other fixed assets and the net gain was separately credited under the head ‘Other Operating Income, and this was separately considered in the computation of income. No factual infirmity or falsity was shown by the Ld. Pr. CIT in the explanations put forth which was supported by corroborative evidence.
Applying the ratio laid down in the decisions of the Hon’ble Delhi High Court in the case of ITO vs DG Housing Projects Ltd [2012 (3) TMI 227 - DELHI HIGH COURT] & DIT vs Jyoti Foundation [2013 (7) TMI 483 - DELHI HIGH COURT] we therefore hold that the order of the ld. Pr. CIT merely setting aside the AO’s order without independently dealing with merits of the issue was untenable and therefore the same is set aside. Ground Nos. 13 & 14 are accordingly allowed.
Deduction u/s 80IC on income from other Sources - Rationale behind such claim was not verified by the A.O during the course of assessment proceedings - the preceding four income-tax assessments framed u/s 143(3), the AOs had consistently allowed the deduction u/s 80IC in respect of scrap sales which was accounted in the respective standalone accounts under the head ‘Other Sources’. Having regard to these facts and judicial precedents, we do not find merit in the submissions of the ld. CIT, DR that the order of the AO suffered from any error or that the view taken by the AO was unsustainable in law making the AO’s order liable for revision u/s 263 of the Act. The Ld. Pr. CIT’s order on this issue is therefore held to be unsustainable and accordingly set aside. Ground Nos. 15 & 16 are allowed.
Headwise break up of miscellaneous expenses was not called for by the A.O - HELD THAT:- We find from the chart furnished before us that in fact the expenditure debited under the head Miscellaneous Expenses during the year under consideration was substantially lower than the expenditure incurred in the prior years
Miscellaneous Expenses not permissible as deduction u/s 37(1) the same was disallowed by the AO in the impugned order which showed that the AO had examined the amounts disallowable but included under the head Miscellaneous Expenses. We also note that in none of the past assessments completed u/s 143(3) any part of the expenses debited under the head Miscellaneous Expenses was disallowed and therefore we find merit in the submissions of the ld. AR that by allowing deduction for expenses debited under the broad head of Miscellaneous expenses, no prejudice was caused to the Revenue. For the foregoing reasons therefore we hold that the assessment order passed by the AO could not be held to be erroneous and prejudicial to the interests of the Revenue for the reason set out clause 3(g) of the SCN. Accordingly the order of the Ld. Pr. CIT on this issue is set aside and Ground No. 17 is allowed.
Assessment order was not the result of non-enquiry or nonapplication of mind or assumption of wrong facts. We are also of the considered opinion that while passing the assessment order the AO had followed the permissible view in law which cannot be said to be 'unsustainable in law'. In the circumstances therefore, the jurisdictional facts for usurping the jurisdiction u/s 263 of the Act, being absent, we hold that the action of Ld. CIT was without jurisdiction - Decided in favour of assessee.
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2019 (12) TMI 1032
Interest on late payment of TDS u/s 201(1A) - computation of period as "per month or part of the month" - British calendar months or otherwise - identical language in section 244A(1) as in section 201(1A) - HELD THAT:- For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar. The Ld. AR has placed on record computation to submit that excess interest levied would be ₹ 49,363/- which need to be reversed. We direct Ld. CPC-TDS / concerned AO to verify the same and charge interest accordingly in terms of our above order. HELD THAT:- For the purpose of computation of interest, the expression month is to be interpreted as period of 30 days and not British calendar.
AR has placed on record computation to submit that excess interest levied would be ₹ 49,363/- which need to be reversed. We direct Ld. CPC-TDS / concerned AO to verify the same and charge interest accordingly in terms of our above order.
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2019 (12) TMI 1031
Disallowance u/s 40(a)(ia) - HELD THAT:- Hon’ble Kerala High Court in the case of CIT –vs.- PVS Memorial Hospital Limited [2015 (8) TMI 277 - KERLA HIGH COURT] in support of the Revenue’s case on this issue, it is observed that the decision of the Hon’ble Calcutta High Court in the case of S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] relied upon by the ld. CIT(Appeals) in his impugned order to give relief to the assessee on this issue squarely covers this issue in favour of the assessee. We, therefore, respectfully follow the said decision of the Hon’ble Jurisdictional High Court and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made under section 40(a)(ia). Ground No. 1 of the Revenue’s appeal is accordingly dismissed.
Addition u/s 14A read with Rule 8D - HELD THAT:- As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2012-13, we respectfully follow the decision of the Tribunal for A.Y. 2012-13 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 14A read with Rule 8D
Applicability of MAT section 115JB to the assessee being a Banking Company - HELD THAT:- A similar issue as involved in the year under consideration thus was decided by the Tribunal in favour of the assessee for A.Y. 2002-03 after taking into consideration not only the provisions of section 115JB but also the relevant provisions of the Companies Act, 1956. The Tribunal also considered the Circulars issued by the Board from time to time in this regard and took note of the decision of the Hon’ble Supreme Court in the case of Surana Steels Pvt. Limited [1999 (4) TMI 5 - SUPREME COURT] wherein the legislative intent of section 115J was considered. As rightly contended by the ld. Counsel for the assessee, a similar issue thus has been decided by the Tribunal in favour of the assessee for A.Y. 2002-03 by passing a well discussed and well reasoned order and we do not find any justifiable reason to reconsider the said decision as sought by the ld. D.R. Also see UNION BANK OF INDIA VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [2012 (6) TMI 500 - ITAT MUMBAI]
Since there is not a single decision of the Jurisdictional High Court or even of any other Hon’ble High Court cited by the ld. D.R, which is in favour of the Revenue on this issue, we respectfully follow the judicial pronouncements referred to and discussed above, which are in favour of the assessee and uphold the impugned order of the ld. CIT(Appeals) holding that the provision of section 115JB was not applicable in the case of the assessee being a Banking company for the year under consideration, i.e. A.Y. 2010-11
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2019 (12) TMI 1030
Bogus purchases - information received from investigation department which in turn relied on information from VAT Department - reliance on the statements of the dealers - disallowance u/s 14A - nexus of expenditure with tax free income - HELD THAT:- This present appeal has been filed by the assessee in ITAT against the aforesaid impugned appellate order of the CIT(A). At the time of hearing, Revenue was represented by Shri Saras Kumar, the Ld. Departmental Representative (in short 'Ld. DR'). However, none was present from the assessee's side.
In the absence of any representation from assessee's side, at the time of hearing before us, we heard the Ld. DR. The Ld. DR relied upon the order of the Assessing Officer and the aforesaid impugned order of the Ld. CIT(A). After perusal of the order of the AO and the aforesaid impugned order dated 20.01.2016 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. Relevant portion of the impugned order of the Ld. CIT(A) has already been reproduced in foregoing paragraph (C) of this order. We find that the Ld. CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order dated 20.01.2016 of Ld. C1T(A). During appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order of Ld. CIT(A); and this appeal filed by the assessee is dismissed.
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2019 (12) TMI 1029
Royalty u/s. 91 (vi) OR Business income - amount received by the assessee company from its customers as per Article 12 (3) of the Indo US DTAA - PE in India - whether software with restriction of copying etc is a copy right or a copy righted product ? - HELD THAT:- Mumbai Bench of the Tribunal in the case of ADIT (IT) Mumbai Vs. First Advantage Private Limited [2017 (1) TMI 984 - ITAT MUMBAI] has held that Payment made by assessee to US company for use of software owned by US company, when assessee would use software only for internal business operations and would not sub-license or modify same, could not be considered as royalty within meaning of article 12(4) of DTAA.
Coordinate Bench of the Tribunal in the case of ACIT Vs. Landmarks Graphics Corporation [2017 (7) TMI 1269 - ITAT DELHI] has held that where assessee, a US based company, did not have PE in India and its activities were not covered by deeming fiction of article 5(2) of India - USA DTAA, income earned by it from sale of software to Indian companies which was 'off the shelf software, was not taxable In India.
Tribunal in the case of Black Duck Software Inc Vs. DCIT [2017 (7) TMI 1269 - ITAT DELHI] has held that where assessee, a US based company, granted a non-exclusive, non-transferable software license to Indian customer for a specific time period, since copyright in said software programme was retained by assessee, payment received by it was not liable to tax in India as royalty.
In the case of Aspect Software Inc Vs. ADIT [2015 (5) TMI 726 - ITAT DELHI] held that consideration received by assessee for supply of 'contact solutions' used for better management, customer interaction, comprising of sale of hardware alongwith license of embedded software to end user is not royalty under article 12 of DTAA between India and USA. Provision of implementation and maintenance services are inextricably and essentially linked to supply of software; where supply of software is itself not taxable as 'royalty', these services are also not royalty.
Respectfully following all we hold that the payment received by the assessee from its customers from sale of software products/ licenses is not in the nature of the royalty u/s. 9(1)(vi) of the IT Act, 1961 and also as per article 12 (3) (a) and article 12(3) (b) of the Indo US DTAA. In our opinion the said amount received by the assessee is normal business income of the assessee on account of sale of copy righted products (licenses) and not taxable in India in the absence of permanent establishment. - Decided in favour of assessee.
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2019 (12) TMI 1028
Default U/s 201(1) and 201(1A) - non-deduction of tax on interest payment exceeding basic limit due to submission of form 15G/15H - HELD THAT:- As found from the record that during the appellate proceedings, the assessee had filed the additional evidences which were sent by the CIT(A) to the AO for his remand report. The remand report so submitted by the AO has been reproduced by the CIT(A) at page 7 of his appellate order.
Nothing was produced by the Department so as to persuade the Bench to deviate from the findings recorded by the CIT(A) wherein the CIT(A) after considering the remand report held that the assessee was not in default u/s 201(1) and 201(1A). Thus we do not find any reason to interfere in the findings of ld. CIT(A). - Decided against revenue
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2019 (12) TMI 992
Exemption u/s 11 - admittedly the assessee got registration U/s 12AA from A.Y. 15-16 - Exemption claim from prospective effect that is from assessment year 2011-12 - HELD THAT:- Application seeking exemption from filing certified copy of the impugned order is allowed.
Issue notice.
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2019 (12) TMI 991
Validity of Revision of Income Tax Returns (ITR) after the expiry of the due date prescribed under Section 139(5) on account of the pendency of proceedings for amalgamation of the assessee companies with other companies in the group under Sections 230-232 of the Companies Act, 2013 - Succession to business otherwise than on death - HELD THAT:- In the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etc.
In view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies.
We find that the learned Single Judge had rightly allowed the Writ Petitions. We accordingly set aside the impugned Judgment and Order dated 04.07.0219 passed by the learned Division Bench, and restore the judgment dated 30.04.2019 passed by the learned Single Judge. Accordingly, the Civil Appeals are allowed. The Department is directed to receive the revised Returns of Income for A.Y. 2016-2017 filed by the Appellants, and complete the assessment for A.Y. 2016-2017 after taking into account the Schemes of Arrangement and Amalgamation as sanctioned by the NCLT.
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2019 (12) TMI 990
Maintainability of the appeal - Stay of recovery proceedings - position to interdict the interim order under challenge - Main relief' sought for in the writ petition - HELD THAT:- The 'interim relief' sought for in the I.A. is virtually the 'main relief' sought for in the writ petition. It has been held by the Apex Court in Bank of Maharashtra v. Race Shipping and Transport Co. Pvt. Ltd. and Another [1995 (2) TMI 471 - SUPREME COURT] that no final relief can be granted in the form of interim relief.
Proviso to Section 2(1) of the Act, 2006 clearly shows that no appeal is maintainable against an interim order passed by the learned Single Judge. Admittedly, the order dated 05.09.2019 is an interim order passed by the learned Single Judge in I.A. No. 1 of 2019. By virtue of the statutory bar, no appeal can be entertained against such an order.
Unless the order finally adjudicates the lis, it cannot be treated as an order from which appeal lies.
It is relevant to note that the Appellant / writ Petitioner is free to substantiate the contentions in the writ petition with regard to the 'main reliefs' and also as to the necessity to have the appeal / stay petition stated as filed before the 2nd Respondent to be finalized within a specific time. Similarly, the observation made by the learned Single Judge in the 'last sentence' of the order under challenge, that it is open for the writ Petitioner to move the Assessing Officer / 3rd Respondent to have relaxation in any manner and as to the alleged futility in this regard (having already moved the said authority and also the higher authority / 1st Respondent) could be highlighted in the course of final hearing.
In the said circumstance, the appeal is dismissed as not maintainable, without prejudice to the rights and liberties of the Appellant to substantiate the merit involved with reference to the main prayers sought for in the writ petition.
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2019 (12) TMI 989
Validity of reopening u/s 147/148 - issue of limitation - HELD THAT:- The legislature has designedly not placed any time limit under Section 150, and reading a period of limitation into it, would be incorrect approach. In the present case, the date relevant for deciding the question of limitation in terms of Section 150(2), and the observations in Praveen Kumari [1998 (12) TMI 72 - PUNJAB AND HARYANA HIGH COURT] would be the date of the order of the CIT (A), which was passed on 05.10.2011 and was the subject matter of appeal. Thus, the limitation of six years under Section 149, must be alive on the date of passing of the order of CIT (A). In the present case since, as on 05.10.2011, the time limit for reopening of assessment for A.Y. 2009-10 had not lapsed, the order of the ITAT was well within the limitation.
In view of the forgoing decision, we are of the view that the reopening of the assessment under Section 147, read with Section 150, was within the period of limitation.
Needless to say that during the reassessment proceedings, the Asseessee will be entitled to lead fresh material and evidence to prove his entitlement to claim deduction under Section 80-IC for the AY 2009-10, before the AO, and this order does not in any way abrogate or limit his rights to justify his claim before the AO. The present petition is dismissed in the above terms.
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2019 (12) TMI 988
Addition u/s 68 - Reason for taking cash loan - HELD THAT:- From the record of the Assessing authority, we do not find any kind of examination of Affidavits or cross examination by the Assessing authority of these persons. The Affidavit of Mr.N.Rajagopalan, inter alia states that he is a retired employee of the Southern Railways and out of his retirement benefits received, he advanced a sum of ₹ 3,00,000/- (Rupees three lakhs only) to his brother's son who is the Managing Director of the Assessee Company. The other Affidavit of Ms.Dhanam shows that she has advanced a sum of ₹ 1,00,000/- (Rupees one lakh only) as loan to the Managing Director of the Assessee Company, from the amount received out of the business carried out by her husband and agreed to take interest at the time of final settlement.
In the absence of any cross examination or rebuttal or controverting of these Affidavits, the learned Assessing Authority could not have concluded that the Assessee has failed to adduce the evidence to prove the identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. The Managing Director who was drawing a sum of ₹ 60,000/- p.a. as salary had advanced only a sum of ₹ 10,000/- out of the sum of ₹ 4,10,000/-.
He has also stated in his Affidavit dated 05.09.2007 about the adverse legal consequences under Section 58A of the Companies Act, 1956, as the direct cash deposits will tantamount to the acceptance of Deposits, in violation of Section 58A of the Companies Act. Therefore, the Managing Director, for obtaining the required unsecured loan, had chosen the route of taking cash loans from his own relative and friend and had given the same to the Assessee Company without attracting Section 58A of the Companies Act. About the non- mentioning of the said fact in his own return of income, the said Managing Director has explained that since he was not maintaining the Books of Accounts and nor he furnished any Balance Sheet, he was not bound to give any note for the same in his Return of Income, as there was no statutory requirement for disclosing the personal cash loan taken by Managing Director in the Return of Income, where only income earned during the year is required to be disclosed and not the loan taken during the year. In the absence of maintaining of the Books of accounts, there was no question of producing the Balance sheet with the Return of Income, which was a reasonable explanation and these explanations of the Managing Director at least required the consideration on the part of the Assessing Authority as the said Assessing Authority enjoyed the powers of a Civil Court but he has not undertaken the exercise of cross examination in respect of the Affidavits filed by the Managing Director and two other persons as aforesaid. Without undertaking this exercise, the conclusions drawn by him in the Appeal proves that he has failed to discharge his duty and therefore such foundation less findings cannot be sustained, as they are perverse.
The power to make additions under Section 68 of the Act of the un-explained cash credit, requires such an exercise to be undertaken by the authorities in a diligent, just and fair manner. But we do not find any such solemn exercise undertaken by the Authorities in the present case.
The affirmation of findings without undertaking similar exercise also cannot be sustained. They just glossed over and mechanically affirmed the findings of Assessing Authority. Therefore, we are inclined to remit the case back to the Assessing Authority for the limited purpose of holding enquiry on the issue of additions made under Section 68 of the Act in the present case.
We allow this Appeal filed by Assessee only for this limited purpose and remand the case back to the Assessing Authority without answering the Substantial Questions of Law at this stage and grant six months time to the Assessing authority to complete the said exercise.
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2019 (12) TMI 987
Reopening of assessment - low tax effect - HELD THAT:- As per circular No.17/2019 dated 08.08.2019, issued by the Central Board of Direct Taxes which came into effect from 08.08.2019, the above tax appeal may be dismissed on account of low tax effect,
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2019 (12) TMI 986
Software expenses for licence up to 2 years - allowable revenue expense - HELD THAT:- Toyota Kirloskar Ltd. [2013 (2) TMI 108 - KARNATAKA HIGH COURT] held that software expenses for licence up to 2 years is revenue in nature and is fully allowable as a deduction. Respectfully following this judgment, the Tribunal held in that year that the AO is directed to allow the deduction in respect of software expenses having licence period up to 2 years after considering and verifying the details furnished by the assessee. In the present year, as per para 27 of his order, it is noted by the learned CIT(A) that the Tribunal in the assessee’s own case for Assessment Years 2004-05 and 2006-07 held that software expenses up to 2 years are allowable as deduction and directed the AO to allow the same. Learned CIT(A) has followed this Tribunal’s order and decided the issue in favour of the assessee.
Deduction u/s 10A - interest on loans to subsidiary company - deemed income under section 41(1) - HELD THAT:- Regarding the first aspect of interest amounting to ₹ 27.80 lakhs, we restore the matter back to the file of the AO for fresh decision, after examining the factual aspect as to whether the loan given to subsidiary is a loan given in ordinary course of business or not. We do so by following the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Hewlette Packard Global Ltd., . [2017 (11) TMI 205 - KARNATAKA HIGH COURT] with observation that incidental activity of parking of surplus funds with the banks or advancing of staff loans by such special category of assessee covered under sections 10A or 10B of the IT Act is integral part of their export business activity but the factual aspect noted by Hon’ble Karnataka High Court was this that parking of surplus funds with the bank or advancing of staff loans was in ordinary course of business of the assessee in that case.
On this aspect, there is no finding of any of the authorities below in the present case as to whether the loan given to subsidiary company and staff advances were given by the assessee in ordinary course of business or not and hence, the AO has to examine this factual aspect and if it is found that such loan and staff advances are given by the assessee in ordinary course of business, then on resultant interest income earned by the assessee, deduction should be allowed under section 10A. Regarding the second aspect in respect of deemed income under section 41(1) of the IT Act, 1961, amounting to ₹ 107,62,841/-, we allow the claim of the assessee by following the judgment of Hon’ble Karnataka High Court rendered in the case of CIT Vs. Wipro Ltd. [2012 (2) TMI 535 - KARNATAKA HIGH COURT]
We find that this is true that note was there in the audited accounts for the year ended 31.03.2004 and present year both. In this note, only it was stated that one of the customers have agreed to settle consideration in respect of services rendered by assessee by transferring certain software programs along with annual maintenance services which amounted to ₹ 157.14 lakhs. Similar note is there in the audited account for the present year also and hence, the confusion has arisen as to whether this sale transaction of ₹ 157.14 lakhs is pertaining to Assessment Year 2004-05 or the present year or similar transaction is there in both years. Hence, we feel it proper to restore this matter to the file of the CIT(A) for fresh decision after examining the facts in this regard carefully and after providing reasonable opportunity of being heard to both sides and he should decide this issue by way of a speaking and reasoned order
Disallowance of brokerage charges - HELD THAT:- We find that in para Nos.29 and 30 of his order, it is noted by the learned CIT(A) that it was explained by the assessee before him that the assessee has incurred this amount as brokerage charges for securing residential accommodation for its employees but no documentary evidence has been furnished by the assessee to support his claim. Before us also, no documentary evidence has been submitted by the learned AR of the assessee and hence, on this issue, we find no reason to interfere in the order of the CIT(A) and accordingly, ground No.7 is rejected.
Disallowance on account of debonding charges - HELD THAT:- Disallowance respect of interest on debonding charges was upheld by learned CIT(A) with a categorical finding that the assessee has not furnished any documentary evidence in this regard. Before us also, no documentary evidence has been brought on record and hence, on this issue also, we find no reason to interfere in the order of the CIT(A).
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2019 (12) TMI 985
Assessment u/s.144 - whether the assessment order is barred by limitation u/s.153(1)(b) - HELD THAT:- Plain reading of the provisions of Sec.153(1)(b) it is evident that the said provisions applies only to AY 1988-89 or any earlier Assessment year and cannot be applied for AY 2008-09 as contented by the learned counsel for the Assessee. The assessment order was passed in the present case on 30.12.2011 and is well within the period of limitation as contemplated by the provisions of Sec.153(1)(a). AO rightly assumed jurisdiction and was well within his power to frame the assessment u/s.143(3) of the Act. We therefore find no merit in the argument advanced on behalf of the Assessee.
Without an order of transfer u/s.127 of the Act having been passed by the Commissioner of Income Tax, the case of the Assessee for AY 2009-10 could not have been transferred from ITO, Ward-2, Shimoga to ITO, Ward- 3,Davangere - Admittedly, in the present case the Assessee on his own filed return of income before the ITO, Ward-3, Davangere, even though as per the PAN the jurisdiction was with ITO, Ward-2, Shivamogga. When ITO, Ward-2, Shivamogga issued notice u/s.143(2) of the Act dated 25.8.2010, the Assessee submitted that ITO, Ward-3, Davangere had jurisdiction over the Assessee. Thereafter the Assessee in reply to the notices u/s.142(1) of the Act took a plea that notice u/s.143(2) of the Act ought to have been issued by ITO, Ward-3, Davangere and since the notice u/s.143(2) of the Act dated 25.8.2010 was issued by the ITO, Ward-2, Shimoga, the ITO, Ward-3, Davangere cannot frame an assessment u/s.143(3) of the Act. It is for the first time in his letter dated 3.12.2011 that the Assessee took a stand that there has to be an order u/s.127 of the Act for transfer of jurisdiction from ITO, Ward-2, Shivamogga to ITO, Ward-3, Davangere.
Assessment was getting time barred on 31.12.2011. The Assessee thus acquiesced to the action of the AO at Davangere in framing assessment for AY 2009-10. The Assessee never took a stand that the AO at Davangere had no jurisdiction. The Assessee cannot be allowed to blow hot and cold at the same breath. I am of the view that the AO at Davangere had jurisdiction and he validly assumed jurisdiction and was well within his powers to pass the order of assessment. We find no merits in the argument advanced by the Assessee.
On merits of the addition made by the AO, no arguments were advanced by the learned counsel for the Assessee except stating that the presumptive income declared by the Assessee as per sec.44AF of the Act ought to have been accepted.
AO has given reasons for his conclusions in determining the total income of the Assessee and there is no rebuttal of those conclusions drawn by the AO. Therefore confirm the action of the AO in framing the order of assessment as he did in the present case. - Decided against assessee.
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2019 (12) TMI 984
Penalty u/s 271 - non furnishing of the returns as required under section 139(1) - CIT(A) passed the order under section 154 confirming the penalty levied by the AO - HELD THAT:- There are two views are possible on the issue one is in favour of the assessee and the other one is against the assessee. When the two views are possible on the same issue and the issue which needs to be decided after debate and deliberations it is not permitted to make the rectification section 154 of the Act. It is settled issue that under section 154 of the Act, the authorities are permitted to rectify the mistake which is apparent from the record and in the instant case, there was no mistake which is apparent from the record and the issue required to be discussed deliberately and consider various case laws. Therefore, we hold that the order passed by Ld. CIT(A) u/s 154 is bad in law and unsustainable. Accordingly, we the cancel the order passed under section 154 of the Act and restore the original order dated 19-4-2018 and allow appeal of the assessee.
Penalty u/s 271F - assessee could not file the return of income because of preoccupation of the employment - HELD THAT:- The department has not made out the case that the assessee required to pay tax which remained unpaid. The income tax return was refund return and the order of Hon’ble ITAT, Kolkata in the case of Mrs. Manju Kataruka vs. ITO [2004 (4) TMI 262 - ITAT CALCUTTA-B] held that when there was a refund due, non filing of return of income within specified time u/s. 139(1) of the Act has to be considered as a bonafide belief and the said bonafide belief is to be treated as reasonable cause for non furnishing the return before the end of the assessment year. Considering the all the facts of the case that the assessee has filed the return of income within time allowed u/s. 139(4) of the Act, the return being refund return, the decision of Hon’ble High Court of Bombay in the case of Trustees of Tulsidas Gopalji Charitable and Chaleswar Temple Trust vs. CIT [1993 (9) TMI 75 - BOMBAY HIGH COURT] we hold that there is no case for levy of penalty u/s. 271F of the Act. - Decided in favour of assessee.
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2019 (12) TMI 983
Revision u/s 263 - validity of reopening of the assessment - HELD THAT:- For deciding about the validity of reopening of the assessment, this aspect was open before CIT (A) that reopening was made for the allegation of accommodation entry of ₹ 65 lacs from Sri Aseem Kumar Gupta although no addition of ₹ 65 lacs was made by the AO in the assessment order passed u/s 147 rws 143 (3) of I. T. Act on 11.03.2013 and that order was under challenge before CIT (A) in that appeal which was pending before CIT (A) when the notice was issued u/s 263 by PCIT and the impugned order was passed by him.
In our considered opinion, under these facts, this Judgment of Hon’ble Madras High Court rendered in the case of CWT vs. Sampathmal Chordia [2001 (11) TMI 39 - MADRAS HIGH COURT] is applicable and respectfully following the same, we hold that learned PCIT had no jurisdiction u/s 263 in the facts of the present case and hence, we set aside the impugned order passed by PCIT u/s 263 - Decided in favour of assessee.
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2019 (12) TMI 982
Addition of interest income - assessee had earned interest on the deposits in its bank account out of funds received by the assessee to be used as its own and the claim of transfer of the interest income to the payer was in contravention to provisions of section 60 - HELD THAT:- We find that identical issue in the case of the assessee for the assessment year 2009-10 has been decided by the Tribunal in favour of the assessee CIT (A) has also made finding of fact that out of total interest earned by assessee interest related to this account. CIT(A) has also made a finding of fact that the conditions stipulated for grants of funds to the appellant clearly provides that interest earned on the deposits shall be utilized for cost of the projects by way of adjustment in the last instalment and therefore there was no difference between funds granted by the Government and the interest credited by the bank in the account of the appellant. We find that learned CIT (A) has correctly allowed relief to the assessee and we do not find any infirmity in his order.
Expenditure was incurred on social responsibility activities - HELD THAT:- In comparison to the business turnover of the assessee, the amount incurred on community development and welfare is very miniscule amount and has been incurred to encourage a conducive atmosphere in the area of working of the assessee. In view of the fact, the finding of the ld. CIT(A) that expenditure has not been incurred wholly and exclusively for the purpose of business can not be said to be correct.
The Tribunal in the case of National Seeds Corporation Ltd. [2018 (4) TMI 335 - ITAT DELHI] has held the above Explanation 2 to be prospective and not to be operated retrospectively. Since the assessment year involved in the instant case is A.Y. 2012-13, the above Explanation cannot be invoked in the case of assessee. Accordingly, the expenditure incurred of ₹ 5,99,893/- on community Development and welfare is allowed. Ground of appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
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2019 (12) TMI 981
Gains arising on buy-back of shares taxable u/s 46A or under section 45 - “Transfer” in section 46A - charging provision for gains arising from buy-back of shares - HELD THAT:- Sections 45 and 46A operates in a different field. Section 45 of the Act is applicable regarding transfer of a capital asset whereas section 46A is applicable in respect of receipt of consideration from any company for purchase of its own shares. Since there is no requirement in section 46A of the Act that there has to be a transfer of shares, section 47(iv) of the Act is not applicable in connection with the issue covered by section 46A of the Act and hence, there is no merit in the argument that because of section 47(iv) of the Act, the capital gain in the present case is not chargeable to tax.
We deal with the applicability of the judgment of the Hon’ble Bombay High Court rendered in the case of Cadell Wvg. Mill Co. (P.) Ltd., Vs. CIT [2001 (2) TMI 105 - BOMBAY HIGH COURT] on which reliance has been placed by the learned AR of the assessee - Section 46A of the Act has been introduced in the statute book from 01.04.2000 and the issue involved is different and therefore, this judgment is not applicable in the present case where section 46A is applicable as per the department and in our considered opinion also.
When shares can be held by nominees also, it is not impossible to hold entire shares of the subsidiary company by the holding company along with one or more nominees or by the nominees only without holding of any share by the parent company.
Second reasoning given by us about non applicability of section 47 (iv) is this that in section 46A, there is no requirement of transfer of any capital asset being shares. Only requirement is that a shareholder receives a consideration from a company for purchase of its own shares and in that situation, subject to section 48, the difference between the cost of acquisition and value of consideration received by the shareholder shall be deemed to be the capital gains arising to such shareholder in the year in which, the shares are purchased by the company. There is no mention of the term “Transfer” in section 46A. Section 47 (iv) is regarding non applicability of section 45 to a transfer of a capital asset by a company to its subsidiary company if the parent company or its nominees hold the whole of the share capital of the subsidiary company. We have noted above that section 45 and section 46A operate in different fields. Section 45 covers actual capital gain on transfer of a capital asset but section 46A is about Deemed Capital gains on buy back of shares.
We hold that in the facts of the present case, section 46A is applicable and therefore, we find no reason to interfere in the order of the CIT(A). - Decided against assessee.
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2019 (12) TMI 980
Disallowance u/s 14A - assessee submitted before the AO that the investments in SBI Mutual Fund were made out of own surplus funds and no funds were borrowed for this purpose - AO after recording reasons and following CBDT Circular No. 5/2014 dated 11.02.2014 made disallowance - HELD THAT:- Keeping in view the judgment of Hon’ble Delhi High Court in the case Cheminvest Ltd. Vs CIT [2015 (9) TMI 238 - DELHI HIGH COURT] - Further, in the case of IL&FS Energy Development Company Ltd., [2017 (8) TMI 732 - DELHI HIGH COURT]
= [2017] 399 ITR 483 (Del) held that the Circular of the CBDT cannot override the provisions of the Section 14A. Hence, we hereby hold that the order of the ld. CIT (A) is not legally valid in confirming the disallowance made by the Assessing Officer.
Claim of Excise Duty subsidy and interest subsidy - capital receipt OR revenue receipt - HELD THAT:- The similar subsidy has been allowed as capital receipt and also the issue of computation of profits u/s 115JB has been examined by the Co-ordinate Bench of Tribunal in M/s Dhanuka Agritech Ltd.
[2019 (11) TMI 750 - ITAT DELHI] wherein the appeal of the assessee is allowed. The same is squarely applicable to the facts of the instant case. Further, the matter stands squarely covered by the order of the Hon’ble Jammu & Kashmir High Court in the case of Shri Balaji Alloys Vs CIT [2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] - Appeal of the assessee on the ground of Excise Duty subsidy and interest subsidy as capital receipt is hereby allowed.
Claim of education cess as an allowable expenditure - Allowable deduction u/s 37 - HELD THAT:- The similar issue of allowability of cess u/s 37 has been examined in ITC LTD. [2019 (4) TMI 1574 - ITAT KOLKATA] wherein the amount of the cess paid has been held to be an allowable deduction.
We find that in the case of Chambal Fertilizers and Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] held that in view of the Circular of CBDT where the word ‘cess’ is deleted, the claim of the assessee for deduction is acceptable. In that case, the Hon’ble High Court held that there is difference between the cess and tax and cess cannot be equated with the cess. Hence, keeping in view the provisions of the Act, Circular of the CBDT and judicial pronouncements, we hereby hold that the assessee is eligible to claim the deduction of the ‘cess’ as per the provisions of Section 37 of the Income Tax Act.
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