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Income Tax - Case Laws
Showing 61 to 80 of 667 Records
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2020 (12) TMI 1195 - ITAT INDORE
Rectification of mistake - Reopening of assessment on basis of audit objection raised by Revenue Audit Party - HELD THAT:- DR could not controvert the fact that before Hon'ble High Court of Madhya Pradesh it was stated on behalf of the Revenue that the assessment was not re-opened on the basis of audit objection. Hence, the Revenue has contrary stand. We therefore dismiss the Miscellaneous Application of Revenue.
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2020 (12) TMI 1194 - ITAT MUMBAI
Revision u/s 263 - Exemption u/s 11 eligibility - dividend income received by assessee trust - HELD THAT:- As decided in Sir Dorabji Tata Trust [2020 (12) TMI 1121 - ITAT MUMBAI] observations so made by the learned Commissioner show that he has not even applied his mind to the undisputed facts of the case. If he had cared to look at paragraph 8 of the subject assessment order, he would have noticed that the Assessing Officer has already included the dividend income in the available gross receipts of the assessee trust and examined the application of the said income. That is beside the point that such an action was contrary to the claim of the assessee that once this income is held to be exempt under section 10(34), it cannot be brought to taxation under section 11 of the Act, and the rejection of the said claim is the subject matter of assessee’s appeal before the CIT(A).
Clearly, what was being directed by the learned Commissioner was already done by the Assessing Officer, and, therefore, these directions clearly show that there was a clear and glaring non- application of mind to even undisputed material facts of the case. We, therefore, cannot approve justification of the subject assessment order being held to be ‘erroneous and prejudicial to the interests of the revenue’ for this reason as well. No other reason is pointed out to us.
In view of the detailed reasons set out above, as also bearing in mind the entirety of the case, we hold the impugned revision order as devoid of legally sustainable merits. We, therefore, quash the impugned revision order.
Respectfully following the views so taken, we hold that the impugned revision order is devoid of any legally sustainable merits. Accordingly, we hereby quash the impugned revision order - Decided in favour of assessee.
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2020 (12) TMI 1193 - ITAT BANGALORE
TP Adjustment - Comparable selection - Geometric Software Solutions Co. Limited, Bodhtree Consulting Limited, Flextronics Software Systems Limited (Seg.) and Tata Elxsi Limited (Seg.) - HELD THAT:- All the four companies referred above were considered by co-ordinate bench in the case of Sharp Software Development India P. Ltd. [2017 (1) TMI 1734 - ITAT BANGALORE] and they have been held to be not good comparable companies. Accordingly, following the decision rendered by the co-ordinate bench in the case of Sharp Software Development India P. Ltd. (supra), we direct exclusion of four companies cited above
Computation of book profit u/s. 115JB - A.O. took the view that the Provision for bonus is a contingent liability and hence, the same is required to be added to the net profit for the purpose of computing book profit u/s. 115JB - HELD THAT:- We notice that the nature of liability in respect of "provision for bonus" was examined by Chennai bench of Tribunal in the case of ACIT Vs. Sun Paper Mills Ltd. [2011 (7) TMI 1372 - ITAT CHENNAI] - The above said decision was rendered by Chennai Bench of Tribunal in the context of Section 115JB only. The Ld A.R. also submitted that the assessee that the assessee has actually paid the bonus in the succeeding year. Accordingly, we hold that the provision for bonus created by the assessee is an ascertained liability. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to exclude it from book profit.
Disallowance u/s. 14A - A.O. computed the disallowance by applying rule 8D(2)(iii) of I.T. Rules - HELD THAT:- Since the provisions of Rule 8D has been held to be prospective in nature, i.e., from AY 2008-09 onwards, the tax authorities are not justified in applying the same to the assessment year under consideration. However, the provisions of sec. 14A shall apply to the exempt income. Hence the disallowance u/s. 14A should be made on a reasonable basis.
Hon'ble Bombay High Court, in the case of Godrej Agrovet Ltd. [2014 (8) TMI 457 - BOMBAY HIGH COURT] has upheld disallowance of 2% of the dividend income to meet the requirements of sec. 14A prior to insertion of Rule 8D. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance u/s. 14A to 2% of the exempt dividend income.
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2020 (12) TMI 1192 - ITAT BANGALORE
TDS u/s 195 - interest income accrued in the hands of the foreign entity - Interest was waived later - Liability to deduct TDS on accrual basis - demand u/s. 201(1) and 201(1A) - HELD THAT:- Section 195 specifies that taxes will have to be deducted either at the time of credit of such income in the account of the payee or at the time of payment thereof in cash or any other mode. In the case of the assessee there is no interest credited to the payee's account and there was no payment made as per books of account. No expenditure was claimed towards interest payable. In the light of these facts, we find that the provisions of section 195 is not applicable.
As per the terms of agreement, the interest for the F.Y. 2010-11 was required to be credited on 30.04.2011 and during this period, there was no interest required to be credited also. There was no expenditure accrued during the previous year and also claimed and hence, the provisions of section 195 of the Act has no application. The interest payable was eventually waived, therefore, the assessee had not paid any interest. Since no interest was paid or claimed as expenditure, the provisions of section 195 of the Act cannot be applied.
As decided in the case of CIT vs. Kalyani Steels Ltd [2018 (5) TMI 152 - KARNATAKA HIGH COURT] wherein it was held that if there is no income embedded in a payment there is no tax deductible at source. In the case of the assessee neither any interest is paid nor provided for in the books as payable. Further, an amount which will not be included in the total income of a person cannot be considered as "income" for the purpose of deduction of tax at source at all. The purpose of deduction of tax at source is not to collect a sum which is not a tax levied under the Act, it is to facilitate the collection of tax lawfully leviable under the Act. For the aforesaid reasons, we hold that the liability to deduct tax did not arise in the year under consideration.
Whether the order passed u/s. 201(1) and 201(1A) of the Act for the assessment year 2011-12, was barred by limitation? - In the instant case, the financial year concerned is 2010-11 and notice for initiating proceedings u/s. 201(1)/201(1A) was issued on 19.03.2018. The orders u/s. 201(1)/201(1A) of the I.T. Act was finally passed on 31.03.2018, which is seven years from the end of the financial year. Therefore, it cannot be stated in facts of this case, the order u/s. 201(1)/201(1A) was passed within a reasonable time, going by the dictum laid down by the judicial pronouncement mentioned supra and the prescription of limitation mentioned u/s. 201(3) and (4) of the I.T. Act. Similar view was taken in the case of M/s. U.S. Technology Resources (P) Ltd. [2018 (4) TMI 991 - ITAT COCHIN] wherein the present Accountant Member was the co-author of the said order. In view of the aforesaid reasoning, we hold that the order passed u/s. 201(1)/201(1A) of the I.T. Act was barred by limitation in the facts and circumstances of the case.
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2020 (12) TMI 1191 - ITAT BANGALORE
TP Adjustment - comparable selection - HELD THAT:- Persistent Systems Limited - As segmental details were not available and it cannot be included in the list of comparables. Accordingly, we direct the TPO/Assessing Officer to exclude the company from the list of comparables.
Sasken Communication Technologies Limited - As considered as not comparable in the case of LG Software India Pvt. Ltd. [2020 (8) TMI 832 - ITAT BANGALORE] in the Assessment Year 2011-12 on the reason that the company is functionally distinguishable to the assessee's company since Sasken Communication Technologies is dealing with the Media Products and R & D activities with no break up of segmental information. Accordingly, we direct the TPO/Assessing Officer to exclude this company from the list of comparables.
Evoke Technologies Limited - When both the Assessee and the revenue seek inclusion of this company, there was no valid basis for the DRP to suo motto exclude this company from the list of comparable companies. In the decision cited STERLING COMMERCE SOLUTIONS INDIA PRIVATE LTD. [2020 (2) TMI 1279 - ITAT BANGALORE]such as the Assessee, this company was held to be a valid comparable company and included in the list of comparable companies. We therefore direct inclusion of this company in the list of comparable companies.
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2020 (12) TMI 1190 - ITAT DELHI
Addition on account of buy back/prepayment of foreign currency convertible bonds (FCCBs) at discount - The assessee had availed Foreign Currency Convertible Bonds (FCCBs) from Europeon Union aggregating US $36 millions - Reason to make the addition is that FCCBs were utilised in increasing the depreciable asset of the assessee company - HELD THAT:- The assessee satisfied the conditions of RBI to buy-back FCCBs. The assessee also proved on record that all the conditions of RBI in this regard have been made by assessee company. Section 41(1) of the I.T. Act would not apply because the amount of FCCBs was not allowed as expenditure or trading liability in earlier year - no addition could be made under section 28(iv) - The assessee is in manufacturing business and has admittedly utilised the FCCBs by increasing the asset of the assessee company and most of them being depreciable asset which fact is also mentioned by the A.O. in the assessment order. Since the FCCBs were raised to use the proceeds for setting-up of new project and this fact is admitted by the A.O. in the assessment order, therefore, assessee used the loan to purchase the capital asset for the company.
ITAT, Delhi E-Bench, Delhi in the case of M/s. OK Play India Ltd., [2020 (2) TMI 416 - ITAT DELHI] considering the Judgment of the jurisdictional Delhi High Court in the case of Logitronics P. Ltd., vs., CIT (2011 (2) TMI 12 - DELHI HIGH COURT] and Judgment of Hon’ble Supreme Court in the case of CIT vs.Mahindra & Mahindra Ltd., (supra), decided the identical issue in favour of the assessee [2003 (1) TMI 71 - BOMBAY HIGH COURT].
Disallowance of depreciation - enhanced cost on account of exchange fluctuation in respect of assets acquired in India - HELD THAT:- Assessee purchased the machinery in India from the foreign funds through FCCBs which fact is not disputed by the authorities below. It is, therefore, clear that though Section 43A apply to the assets acquired from Abroad, still the A.O. without justification applied Section 43A for making the disallowance of depreciation against the assessee. Section 43A thus could not apply in the case of the assessee which is also held by various Benches of the Tribunal in the decisions quoted above. Accounting Standard-11 would also apply in the case of the assessee. The assessee has also explained that Companies Amendment Rules also apply to the facts of the case because option is given to assessee and it provided “Where long term foreign currency monetary items relates to acquisition of depreciable capital asset, the same shall be added/deducted from the cost of the asset and shall be depreciated accordingly over the balance life of the asset.”. It is not in dispute that assessee followed AS-11 regularly.In A.Y. 2010-2011 the Ld. CIT(A) allowed similar claim of the assessee, but, the Department did not file any appeal against the same Order.
No infirmity in the Order of the Ld. CIT(A) in following the same. It may also be noted here that wherever there was an exchange gain to the assessee, the same was reduced from the WDV and claim was made accordingly, therefore, assessee is following the AS-11 consistently and as such the same should not have been disputed by the authorities below. The Ld. D.R. has not pointed-out any infirmity in the Order of the Ld. CIT(A) in allowing the depreciation to the assessee as per Law.
Addition of returned loss of the exempted unit u/s 10B - HELD THAT:- When the Tribunal has allowed similar claim of assessee in preceding A.Y. 2008-2009 and ultimately in group appeals, the Hon’ble Supreme Court has allowed the claim of assessee, the issue is covered by the aforesaid decisions in favour of the assessee which fact is also accepted by the Ld. D.R. Therefore, there is no infirmity in the Order of the Ld. CIT(A) in allowing the claim of assessee.
Addition to the book profit under section 115JB under section 14A - HELD THAT:- As decided in VIREET INVESTMENT (P.) LTD. [2017 (6) TMI 1124 - ITAT DELHI] we answer the question referred to us in favour of assessee by holding that the computation under clause( f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income-tax Rules, 1962
Disallowance u/s 14A - HELD THAT:- In the case of Joint Investments Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT]the Hon’ble Delhi High Court held that “by no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expenditure “incurred by assessee in relation to the tax exempt income.” This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case.” It is, therefore, well settled Law that disallowance cannot exceed the exempt income. We, therefore, set aside the Orders of the authorities below and direct the A.O. to restrict the disallowance to ₹ 2,37,896/- only.
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2020 (12) TMI 1189 - ITAT DELHI
TP Adjustment - selecting the tested party for the purpose of applying the TNMM - Comparable selection - HELD THAT:- While selecting the tested party for the purpose of applying the TNMM, the functional profile of the transacting entities is required to be taken into consideration and the entity having simpler functional profile i.e. the entity not assuming significant risks and employing non-routine intangibles should be selected as the tested party. We note that the assessee’s objection being selected as a tested party were not dealt in the proper perspective by the Ld. CIT (A) and, therefore, this issue needs re-examination by the Ld. CIT (A).
Comparable selection - TPO has selected 99 comparables without actually conducting FAR analysis in respect of each comparable and has undertaken the exercise of selection without applying any quantitative and qualitative filters. TPO has also not assigned any reason for the selection of these comparables and the Ld. CIT (A) has also dismissed the assessee’s objection against selection of these comparables without assigning any reason except by making general observations like that the data provided by the assessee was insufficient, the evidences were sketchy and that quantitative details were not available. We are not in agreement with the summery dismissal of the objections of the assessee in this regard.
Contention of the department that relevant details were not filed is wholly incorrect as we have gone through the voluminous evidences and data supplied by the assessee before the TPO as well as the Ld. CIT (A) in this regard. In a such situation, it is our considered opinion that the entire transfer pricing exercise needs to be done afresh by the TPO and, therefore, we restore the issue of transfer pricing adjustment to the file of the TPO for fresh analysis and verification for deciding the issue afresh after duly considering the detailed workings, arguments and evidences filed earlier by the assessee in this regard. The TPO is also directed to give proper opportunity to the assessee to present its case prior to passing a detailed order as per provision of law.
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2020 (12) TMI 1188 - ITAT MUMBAI
Revision u/s 263 - Unexplained cash investment u/s 69 - Revision of assessment based on order of Settlement Commission - AO treated the cash loan given by the assessee as 'On Money' given to the builder for the purchase of flat and accordingly, AO made the additions - Builder Ahuja Group has accepted the unaccounted nature of the transaction before Settlement Commission - HELD THAT:- From the order passed u/s 263 of the Act, we notice that Ld. PCIT is trying to review the assessment based on order of Settlement Commission which was passed on 26.06.18 and coming to a new conclusion based on new information which is different from the view taken by the AO at the time of passing assessment order.
As per the provision of section 263(1) Explanation-1(C), the order of the AO which was a special matter of any appeal before Commissioner, powers of the PCIT under this sub-section only to the matter which has not been considered and not decided in the appeal. PCIT has no right to review the order which was subject matter of appeal before Ld. CIT(A) and we notice that the issue which is challenged before Ld. CIT(A) is the same issue in which Ld. PCIT has reviewed u/s 263
PCIT has no power to review the order passed u/s 143(3) and the same order was appealed and adjudicated u/s 254 of the Act. Therefore, we are in agreement with the submission of assessee and we quash the order passed u/s 263 of the Act without going into any merits of the case since Ld. CIT(A) has already considered the merits of this case and passed an order in this regard. Accordingly, the grounds raised by the assessee in this regard are allowed.
PCIT has initiated the proceedings u/s 263 of the Act and treated the order passed by AO u/s 153C r.w.s. 143(3) of the Act for the AY 2014-15 and 2015-16. We notice that the issue under consideration is exactly similar to the issue raised in Assessment Year 2016-17. PCIT has reviewed the assessment order which was passed on 11.12.17. It is fact on record that search and seizure operation was initiated on 25.06.15 and assessment orders under consideration for Assessment Year 2014-15 and 2015-16 were assessed u/s 153C and combined order for all the assessments including Assessment Year 2016-17 were passed on the same date 11.12.17. Therefore, in our considered view, AO has considered the facts on records and taken a view on the transactions with M/s. Ahuja Group in Assessment Year 2016-17 and also made the additions in Assessment Year 2016-17 after analyzing the same sets of documents which was reviewed by Ld. PCIT now. Therefore, Ld. PCIT cannot review the order which was already verified and investigated by AO at the time of assessment and the same order which was investigated on coordinated basis, Ld. PCIT cannot review and cannot take a different view. - PCIT has not investigated this issue himself and not offered any cross examination to the assessee - Decided in favour of assessee.
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2020 (12) TMI 1187 - ITAT KOLKATA
Revision u/s 263 - Unexplained investment in the residential property - HELD THAT:- When the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law.
Reverting to the facts of the present case the AO has called for necessary details regarding the investment source in the said residential property and the assessee in their letter dt. 29.06.2016 received by the Department on 01-07-2016 has replied to all such queries and after such examination and enquiry only the AO has passed the assessment order, when investigation was done by the AO details/evidences regarding the house property were called for in such situation the order of the AO is not erroneous.
Once the AO has taken a view after enquiry and the Ld. Pr. CIT is not agreeable to that view of the AO the assessment order cannot be treated as an order prejudicial to the interest of the revenue. That further the Ld. Pr. CIT has not specifically with evidences shown the reasons why the order of the AO is erroneous and prejudicial to the interest of the revenue.
There is no satisfaction arrived at before assuming revisional jurisdiction by the Ld. Pr.CIT, no reasons have been enumerated in his order showing any nexus between his satisfaction arrived at and the assessment order being erroneous so as to be prejudicial to the interest of the revenue.
Order passed u/s. 263 of the Act by the Ld. Pr. CIT in respect of both the assessee is arbitrary, ambiguous bad in law and liable to be quashed - Decided in favour of assessee.
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2020 (12) TMI 1186 - ITAT AHMEDABAD
Income from salary - addition being the amount of salary refunded to the employer company - Double addition - appellant was working as Whole Time Director (WTD) with Sun Pharma Advanced Research Company Ltd. (SPARCL) and his remuneration was fixed at maximum salary of ₹ 3,50,00,000/- in AGM - HELD THAT:- Since there was limit for payment of remuneration to the whole time director as per the Company Act, 1956, therefore, the company has made an application to the Ministry of Corporate Affairs, Govt. of India for approving the salary of the whole time director as per the resolution passed in the annual general meeting dated 31st July, 2012.
Central Government has approved the salary of the whole time director at a lesser amount. Thereafter, the company had made second application to the Central Government to approve the excess salary, however, no response was received from the Central Government.
Assessee was asked to refund the excess salary of ₹ 2.14 crores out of ₹ 1.99 crores pertained to the year under consideration. The assessee has refunded the excess amount of salary to the company and filed revised return of income showing the actual amount of salary received as approved by the Ministry of Corporate Affairs, Govt. of India. However, the Assessing Officer has taxed the excess amount as salary income on the ground that the amount was received by the assessee. The ld. CIT(A) has deleted the addition holding that refund of salary by the assessee was not voluntary but was to comply with the legal requirements of law, therefore, the same cannot be considered as income assessable to tax
In the case of the assessee, the Central Government had decided the remuneration according to the provisions of Companies Act, 1956 and the refund of the salary was not voluntary but was to comply with the legal requirement of law. We find that the facts and issue involved in the case of the assessee are similar to the case of the CIT Vs. Raghunath Murti [2008 (8) TMI 996 - DELHI HIGH COURT]. We consider that the refund was made merely with a view to comply with the provisions of Companies Act, 1956, therefore, we do not find any infirmity in the decision of ld. CIT(A). Accordingly, the appeal of the Revenue is dismissed.
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2020 (12) TMI 1185 - ITAT MUMBAI
Estimation of income - bogus purchases - CIT(A) restricting the disallowance of purchases to 12.5% as against 15% done by the AO - HELD THAT:- CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following case of CIT v. Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] correctly restricted the disallowance to 12.5% of the non-genuine purchases. Appeal of the Revenue is dismissed.
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2020 (12) TMI 1184 - ITAT AHMEDABAD
Deduction u/s 10A - export revenue subsidy, Miscellaneous income and sundry balances written off as not derived from the business carried on by the Appellant and hence not eligible for deduction - HELD THAT:- As relying on M/S. PRIYANKA GEMS [2014 (3) TMI 938 - GUJARAT HIGH COURT]and M/S. GEM PLUS JEWELLERY INDIA LTD. [2010 (6) TMI 65 - BOMBAY HIGH COURT] once export is made, the profits/losses may arise due to variety of reasons from such export activity. Noticeably, sub-section (4) to Section 10A of the Act explicitly explains the term 'profits derived from the export of particles or things' to mean amount which bears to the 'profits of the business of the undertaking', the same proportion as the export turnover bears to the total turnover of the business carried on by the undertaking.
What is required to be determined is 'profits of the business undertaking'. In short, the profits derived from export have been equated with business profits of the undertaking in view of the statutory formula provided in Section 10A(4) of the Act. In view of the statutory formula available for determination of quantum of deduction, the expression 'derived from' used in Section 10A(1) fades into insignificance and the quantum of deduction is required to be determined as per the aforesaid formula provided in Section 10A(4) - considerable weight in the plea advanced on behalf of the assessee for eligibility of deduction of the incidental profits alongwith the export profits for the purposes of Section 10A of the Act. We thus set aside the order of the CIT(A) on the point. The AO is directed to compute the quantum of deduction under s. 10A of the Act in the light of formula provided in Section 10A(4) of the Act - Appeal of the assessee is allowed.
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2020 (12) TMI 1183 - ITAT AHMEDABAD
Addition to closing stock towards unutilized CENVAT credit u/s 145A - HELD THAT:- The availability of CENVAT credit is dependent on the extent of utilization of credit against the liability arising to an assessee on goods manufactured and has no co-relation to the closing stock. The Excise Duty component on closing stock is thus required to ascertained independently as per quantum of stock.
CIT (A) has rightly approached the issue on determination of exact liability by either inclusive or exclusive method. No justification in the action of the CIT (A) in dismissing the plea of the assessee altogether on the point. CIT (A), in our view, ought to have given a reasonable opportunity to the assessee for substantiating its claim that method of accounting followed by the assessee does not impinge upon the provisions of Section 145A of the Act, in tandem with the action of the CIT (A) in AY 2010-11.
We therefore consider it expedient to set aside the direction of the CIT (A) on the issue and remit the issue to the file of the AO for suitable verification of facts afresh. The AO may satisfy itself that while the assessee follows exclusive method of accounting towards purchase costs, such method does not impact the ultimate profit in any manner. Needless to say, the addition towards Excise Duty, VAT etc. will not be permissible by resorting to section 145A of the Act where the action of the assessee is found to be tax neutral.
Addition on account of short receipts shown as per Form 26AS - HELD THAT:- In the absence of any cogent explanation offered on behalf of the assessee either before the CIT (A) or before us towards impugned difference detected by Revenue from the annual statement in Form 26AS, we decline to interfere with the order of CIT (A) in this regard.
Disallowance towards reimbursement of travelling expenses paid to foreign parties without deduction tax at source - HELD THAT:- A contradictory version is coming to the fore. Hence, we consider it expedient that the issue is remitted back to the file of the AO for enabling the assessee to establish that the aforesaid amount of ₹ 17,21,392/- represents actual reimbursement of travelling expenses claimed to have been paid to foreign parties without any profit element embedded in it. AO shall provide reasonable opportunity to the assessee to make suitable representations and submissions to establish its case. Needless to say that a payment in the nature of a mere reimbursement of actual expenses would not be covered by the obligations cast under s. 195 of the Act in the absence of any chargeable income annexed to such payment and consequently Section 40(a)(i) would not be attracted in the light of decision in the case of CIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014 (4) TMI 235 - GUJARAT HIGH COURT]. Hence, no part of amount in the nature of actual reimbursement can be disallowed owing to non-deduction of tax.
TDS u/s 195 - disallowance on account of training expenses - HELD THAT- AO noticed that the training expenses is in the nature of fee for technical service and is covered by obligations of deduction of tax as stipulated u/s 195 of the Act. No reasons could be assigned for non-compliance of Section 195 of the Act. In the absence of any satisfactory explanation for non-deduction of TDS on such remittance, the expenses incurred were disallowed with the aid of Section 40(a)(i) of the Act. The assessee has failed to substantiate its action for non-deduction either before the CIT (A) or before the Tribunal with any reasonings. We thus decline to interfere with the action of the AO.
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2020 (12) TMI 1182 - ITAT MUMBAI
Bogus LTCG - Addition u/s 68 - HELD THAT:- The issue is squarely covered by the decision of co-ordinate Bench in the case of Mukesh B. Sharma [2019 (5) TMI 1845 - ITAT MUMBAI] as held CIT-A was not justified in upholding the action of the ld AO in bringing the sale proceeds of shares of GIFL [Global Infratech and Finance Ltd.] as unexplained income of the assessee treating the same as just an accommodation entry. Consequentially, the addition made towards commission on such accommodation entry at the rate of 5% is also hereby directed to be deleted. - Decided in favour of assessee.
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2020 (12) TMI 1181 - ITAT AHMEDABAD
Disallowance on account of prior period expenses - HELD THAT:- In the present case all the expenses claimed by the assessee under the head prior period expenses do not represent the expenses. As such the 2 items namely interest income and rental income represent the income which was offered to tax in the earlier years and written off in the year under consideration as claimed by the assessee which in our considered view represent the bad debts - assessee cannot be allowed deduction for these items as prior period expenses. But the same can be claimed as bad debts under the provisions of section 36(1)(vii).
On perusal of the documents filed by the assessee it is not decipherable whether the impugned amount of bad debts were offered to tax in the earlier years and the same were written off in the books of accounts in the current year as on 31-3-2006 as contended by the assessee.
Similarly, it is also not clear that the assessee has not claimed such interest as bad debt along with the bad debts of the debtors as apprehended by the learned CIT(A) in his order dated 4th June 2015.
On perusal of the financial statements prepared under the companies Act for 11 months, the assessee has shown prior period adjustments - where the assessee has adopted a different period under the companies Act than the previous year defined under the Income Tax Act, it is to file separate financial statements under the Income Tax Act. But we note that the assessee has not filed such financial statements prepared under the Income Tax Act. Thus in the absence of sufficient documentary evidence by the assessee even in the set-aside proceedings, we are not inclined to disturb the finding of the authorities below.
Reversal of the rental income - Assessee has justified its claim based on the documentary evidence that it has reversed the entry in respect of accounts of the rental income which was offered to tax. Accordingly, we find that the conditions as specified under section 36(1)(vii) of the Act have been duly satisfied. Accordingly, we reverse the finding of the learned CIT(A) and direct the AO to delete the addition made by him.
Advance given to the sales representative - Though it is not a prior period expenses/adjustment, but represent the loss which has been incurred in the course of the business. Once the assessee has written of any loss in the books of accounts which was incurred in the course of the business, we are of the view that such loss is eligible for deduction. Accordingly, we reverse the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Thus the ground of appeal of the assessee is partly allowed.
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2020 (12) TMI 1161 - KARNATAKA HIGH COURT
Computation of deduction u/s 10A - telecommunication expenses and traveling expenses incurred in foreign currency reduced from export turnover has to be reduced from total turnover for computing deduction - HELD THAT:- The first substantial question of law has already been answered against the revenue by a decision of the Supreme Court in HCL TECHNOLOGIES LTD.' [2018 (5) TMI 357 - SUPREME COURT]. The aforesaid aspect of the matter could not disputed by the learned counsel for the revenue. In view of the decision of the Supreme Court, the first substantial question of law involved in this appeal is answered against the revenue and in favour of the assessee.
TP Adjustment - Arms length price adjustment on account of interest on external commercial borrowings - loans or external commercial borrowings between the cross border entities resulting in an international transaction and each transaction has to be considered every year with respect to the arms length price - HELD THAT:- It is equally well settled that rate of interest should be determined on the basis of rate of interest prevailing at the time of availing the loan. From perusal of the order passed by the tribunal, it is evident that before the tribunal, the assessee had filed the copy of show cause notice issued by Transfer Pricing Officer, the assessee's submission in response to the same and order of the Transfer Pricing Officer for Assessment Year 2008-09. The tribunal has further found that the loans were obtained by the assessee in the year 2000-01 at the rate of 7.5% and 8.49% respectively. The tribunal has further recorded the finding that assessee has obtained the loans in the year 2001 and the issue has been considered by the Transfer Pricing Officer for the Assessment Years 2004-05 and 2005-06 and also for the Assessment Year 2008-09. It has further been held that Transfer Pricing Officer after considering the assessee's submission has accepted the rate of interest fixed in the loan agreements. It is also pertinent to mention here that the rate of interest has been accepted by the Assessing Officer for the years 2002-03 to Assessment Year 2008-09 except the Assessment Year 2006-07. Therefore, the tribunal has rightly held that the revenue cannot be allowed to make a departure in case of rate of interest for Assessment Year 2006-07.
The Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX’ [1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. For this reason also, in the facts of the case, a different view cannot be taken.
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2020 (12) TMI 1160 - KARNATAKA HIGH COURT
Disallowance u/s 40(a)(ia) in respect of depreciation on intellectual property rights - Failure to deduct TDS - HELD THAT:- Section 40 refers to the outgoing amount chargeable under this Act and subject to TDS under Chapter XVII-B. The deduction under Section 32 is not in respect of the amount paid or payable which is subjected to TDS; but is a statutory deduction on an asset which is otherwise eligible for deduction of depreciation. Section 40(a)(i) and (ia) of the Act provides for disallowance only in respect of expenditure, which is revenue in nature, therefore, the provision does not apply to a case of the assessee whose claim is for depreciation, which is not in the nature of expenditure but an allowance.
The depreciation is not an outgoing expenditure and therefore, provisions of Section 40(a)(i) and (ia) of the Act are not applicable. In the absence of any requirement of law for making deduction of tax out of expenditure, which has been capitalized and no amount was claimed as revenue expenditure, no disallowance under Section 40(a)(i) and (ia) of the Act would be made. It is also pertinent to note that depreciation is a statutory deduction available to the assessee on a asset, which is wholly or partly owned by the assessee and used for business or profession.
The depreciation is an allowance and not an expenditure, loss or trading liability. The Commissioner of Income Tax (Appeals) has held that the payment has been made by the assessee for an outright purchase of Intellectual Property Rights and not towards royalty and therefore, the provision of Section 40(a)(ia) of the Act is not attracted in respect of a claim for depreciation. The aforesaid finding has rightly been affirmed by the tribunal. The findings recorded by the Commissioner of Income Tax (Appeals) as well as the tribunal cannot be termed as perverse.
Substantial question of law framed by a bench of this court is answered against the revenue and in favour of the assessee.
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2020 (12) TMI 1159 - ITAT DELHI
Reopening of assessment - deduction of an amount pertaining to property tax relating to rectification entry of Assessment Year 2005-06 - Whether the said amount pertained to Assessment Year 2005-06, the same should not have been claimed in the computation for the Assessment Year 2006-07? - HELD THAT:- AO not only initiated the reassessment proceedings, but also made an addition of this amount under the notion that assessee had claimed a deduction in this year although, this was not any deduction but only a rectification entry for writing back the impugned amount which pertained to Assessment Year 2005-06. Thus, apparently this rectification was tax neutral and no addition/disallowance was warranted for the reason that this amount was never claimed or allowed as a deduction in the earlier year.
CIT (A) dismissed the assessee’s appeal on an altogether mis-appreciation of the facts of the case as well as law - He went on to observe that if a liability was wrongly provided in a particular Assessment Year, the assessee should have filed revised return for that year. The Ld. CIT (A) also observed that the assessee did not substantiate the working of this amount of ₹ 15,41,18,249/-. In our considered opinion, the Ld. CIT (A) has entirely misdirected himself by making observations which were entirely out of context and leading to an incorrect conclusion being guided by entirely irrelevant logic. Therefore, while setting aside the order of the Ld. CIT (A) on the issue, we hold that the impugned addition was unwarranted in as much as the rectification entry made by the assessee in Assessment Year 2006-07 was tax neutral. We direct the deletion of this addition. - Decided in favour of assessee.
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2020 (12) TMI 1158 - ITAT DELHI
Penalty proceedings u/s 271C - Failure to deduct TDS u/s 194C - 2% of the EDC amount paid to HUDA on which tax was alleged to be deducted at source u/s 194C - HELD THAT:- Undisputedly, the payment of EDC was issued in the name of Chief Administrator, HUDA. It is also not in dispute that HUDA has shown EDC as current liability in the balance sheet, but in the ‘Notes’ to the Accounts Forming part of the Balance Sheet, it has been shown that EDC has been received for execution of various external development works and as and when the development works are carried out, the EDC’s liabilities are reduced accordingly.
It is also not in dispute that HUDA is engaged in acquiring land, developing it and finally handing it over for a price. It is also not in dispute that EDC is fixed by HUDA from time to time. However, the fact of the matter remains that payment has been made to HUDA through DTCP which is a Government Department and the same is not in pursuance to any contract between the assessee and HUDA.
Thus, the payment of EDC is not for carrying out any specific work to be done by HUDA for and on behalf of the assessee but rather DTCP which is a Government Department which levies these charges for carrying out external development and engages the services of HUDA for execution of the work. Therefore, it is our considered view that the assessee was not required to deduct tax at source at the time of payment of EDC as the same was not out of any statutory or contractual liability towards HUDA and, therefore, the impugned penalty was not leviable. - Decided in favour of assessee.
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2020 (12) TMI 1157 - ITAT MUMBAI
Income accrued in India - Management services fee claim - royalty receipt - eligibility for benefits of Indo-Netherland DTAA - assessee claimed the same as managerial services, as it did not make available any technical knowledge, experience, skill, know-how or process - HELD THAT:- We fallow the judicial precedence and ratio of the decisions the Hon’ble Tribunal [2017 (11) TMI 1912 - ITAT MUMBAI] payments received by the assessee as per the service agreement dated 01.04.2004 does not come into the nature of royalty as defined Article 12(4) India Netherlands Tax Treaty. Accordingly, we set aside the order passed by the Assessing officer and allow the grounds of appeal of the assessee.
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