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Income Tax - Case Laws
Showing 101 to 120 of 506 Records
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2021 (11) TMI 1005 - ITAT MUMBAI
Disallowance u/s 14A under rule 8D2(ii) in respect of interest expenditure - case of the assessee has been selected for scrutiny under CASS and statutory notices were duly issued and served upon the assessee - HELD THAT:- Three investments in growth funds, in foreign companies and in properties have to be excluded while calculating the average investments. Similar adjustment are required to be made in the figures of investments in the corresponding previous year ended on 31.03.02013 as stated hereinabove. We note that the average investments come to ₹ 135,63,19,992.50. Similarly, the average own funds the calculation whereof is extracted above are ₹ 136,10,03,859/-. It is apparent from the above calculation that assessee’s average own funds are more than the average value of investments and in our considered opinion , no disallowance is called for under rule 8D2(ii).
The case of the assessee is squarely covered by the decisions as referred to above by the Ld. A.R. in support of his arguments. In the case of CIT vs. HDFC Bank Ltd.[2014 (8) TMI 119 - BOMBAY HIGH COURT] and it has been held that where the interest free funds as well as own funds employed in the business are more than the investments in the shares and securities yielding exempt income, in that case no disallowance is to be made. Similar ratio has been laid in another decision in the subsequent decision in the case of HDFC Bank [2016 (3) TMI 755 - BOMBAY HIGH COURT] that where assessee’s own funds are more than the investments made in shares and securities no disallowance is to be made under section 14A. In view of the facts of the instant case and the ratio laid down by the Jurisdictional High Court we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the disallowance as made under rule 8D2(ii). - Decided in favour of assessee.
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2021 (11) TMI 1004 - ITAT VISAKHAPATNAM
Adjustments while processing the return of income u/s. 143(1) - Disallowance of employees contribution to PF and ESI - HELD THAT:- In the instant case, there is no dispute that the return was processed u/s. 143(1) and there was no scrutiny assessment made u/s. 143(3) of the Act. It is settled issue that no debatable issues are permitted to be made adjustments u/s. 143(1) of the Act. In the instant case, what was added in the intimation u/s. 143(1) was the employees contribution to PF and ESI - employees contribution to PF and ESI is also allowable deduction, if, the same is paid before the due date for filing the return of income. This Tribunal in the case of Andhra Trade Development Corporation [2021 (5) TMI 263 - ITAT VISAKHAPATNAM] held that debatable issues are not permitted to be made adjustments while processing the return of income u/s. 143(1).
Since, the facts are identical respectfully following the view taken by this Tribunal, we hold that the addition made by the CPC u/s. 143(1) is unsustainable, accordingly deleted. The appeal of the assessee is allowed.
Employees contribution to PF and ESI is allowable deduction if the same is paid before the due date of filing the return of income. See M/S. EASTERN POWER DISTRIBUTION COMPANY OF A.P. LTD. AND VICA-VERSA [2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] - thus we hold that on merits also, the assessee succeeds in appeal. Accordingly, appeal of the assessee is allowed.
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2021 (11) TMI 1003 - ITAT VISAKHAPATNAM
Penalty u/s 271(1)(c) - Defective notice - allegation of non specification of charge - CIT-A deleted the penalty levy - HELD THAT:- As in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court further held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer.
Coming to the instant case, as the mind of the AO while issuing notice u/s. 274 of the Act was not clear, under which limb the penalty supposed to be levied, and without specifying any charge under which the Assessee was to reply and to defend its case, the penalty is not leviable as held by the various Courts. Hence, we have no hesitation to uphold the impugned order. - Decided against revenue.
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2021 (11) TMI 1002 - ITAT VISAKHAPATNAM
Addition u/sec. 69A - Assessee had received on-money over and above the consideration mentioned in the registered sale deeds - Commissioner held that the provisions of section 69A are not applicable in Assessee's case and the AO has erred in applying the provisions of this section - HELD THAT:- In the instant case, it is an admitted fact that no money was found at the time of survey conducted u/sec. 133A, however, certain information was found qua selling of flats at higher rate than the rate recorded in the sale deeds, however the AO without corroboration and fulfilling the ingredients of section 69A of the Act made the addition u/s. 69A of the Act, hence we are in concurrence with the finding of the Ld. Commissioner qua non-application of the provisions of section 69A to the issue in hand, consequently no interference is warranted qua conclusion drawn by the Ld. Commissioner.
Department has also raised a grievance that the Ld. Commissioner erred in directing the AO to estimate the profit @ 15% on unaccounted sale receipts, when the provisions of section 69 of the Act clearly applicable to the facts of the present case - Commissioner while deciding non-applicability of the provisions of section 69A of the Act to the case of the Assessee, directed the AO to estimate profit @15% on unaccounted sale receipts. We are of the considered opinion that the ld. Commissioner though decided that section 69A of the act is not applicable to the facts of the case, however used his own wisdom by considering the peculiar facts and circumstances while following the decision in the case of Jay Builder [2012 (12) TMI 1194 - GUJARAT HIGH COURT] by estimating profit @15% on unaccounted sale receipts. The direction of the Ld. Commissioner is based on the judgement of Hon'ble High Court and even otherwise in favour of the Revenue Department and against the Assessee, therefore, on overall consideration, no interference is called for on this issue as well.
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2021 (11) TMI 1001 - ITAT JAIPUR
Disallowing the payment of commission paid by the assessee to three persons - HELD THAT:- These are undisputed fact that the assessee is engaged in the business of manufacturing of sprinklers which used in the agriculture and had maintained his targets from the previous years and had made payments to the respective persons on account of commission payment through account payee cheques and all those accounts are audited and required TDS had also been deducted. Since, engaging of these persons for enhancing of sales is specifically within the notice and knowledge of the assessee and the assessee has discharged his burden of proving the existence of circumstances for engaging the persons for enhancing the sales and had making payment towards commission @ 1.5% to the respective persons and apart from this nothing has been brought on record by the A.O. to controvert the said facts placed on record by the assessee alongwith supportive documents. Therefore, we see no reasons to disbelieve the specific averments and supportive documents made by the assessee to this effect. Therefore, we direct to delete the addition made qua this issue.
Trading addition - HELD THAT:- We noticed that the assessee's proprietorship firm M/s. Jamna Industries is manufacturing of Sprinkler System and its Spare Parts and the assessee has maintained complete books of account including stock register. All the sales, purchases and expenses are fully vouched and verifiable. There is no change in the method of accounting as compared to preceding years. The books of account are duly audited. All the books of account and record of the unit were produced before the A.O.. All the details of purchases were furnished before the lower authorities and maintained stock register, production record and finished stock register of the unit. The assessee also filed complete stock chart of Raw Material, Finished Goods showing opening stock, purchase, manufacturing, sales and closing stock alongwith audit balance sheet before the Revenue authorities. Since the A.O. checked the books of account and also checked the manufacturing records and no any defect was pointed out then in that eventuality, sustaining of addition on account of trading addition is no legs to stand, therefore, we direct to delete this addition.
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2021 (11) TMI 1000 - ITAT PUNE
Addition of software usage charges received treated as royalty - use the copyrighted software - proof of parting with copyright as envisaged within the meaning of Section 14 of the Copyright Act - HELD THAT:- The assessee has merely transferred the right to use copyrighted software ANTIFOG and that it had not transferred the copyright itself to Trigo India. TRIGO India was authorized to have access to and make use of the copyrighted software ANTIFOG. In the Software License Agreement entered into, it is evident that the assessee i.e. Trigo SAS is ‘Licensor’ and TRIGO Quality Production Services Pvt. Ltd. which is Indian Company as a ‘Licensee’. That the various clauses of this Software License Agreement verified the fact that copyright of the software ANTIFOG is very much with Trigo SAS (Licensor) and that the Trigo India (Licensee) has been authorized to use the software ANTIFOG as per various terms and conditions specified in this Software License Agreement.
There is no difference in facts of the present case as compared to the facts of the judgment in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. [2021 (3) TMI 138 - SUPREME COURT] which was referred by the Tribunal in Ansys Inc. [2021 (6) TMI 513 - ITAT PUNE] There has been no parting with copyright as envisaged within the meaning of Section 14 of the Copyright Act by the Licensor (assessee) to Licensee who is given access to only use the copyrighted software against which assessee’s receipts cannot be taxed as royalty. Therefore, respectfully following the judicial precedents mentioned aforesaid on this issue - Grounds No.1 & 2 raised in appeal by the assessee are allowed.
Addition of management service fees received by the assessee treating it as ‘fees for technical services’ - HELD THAT:- Whatever services were provided by the assessee to Trigo India, no technical knowledge was made available by the assessee to the Indian Entity. Rather, it is a case of providing a service involving technical knowledge, which got consumed with its provision itself. Since such services simply involve use of technical knowledge and do not result into handing over some technical know-how to the recipient of the services.
DR could not bring on record any materials/evidences to suggest that the facts and circumstances in the case of the present assessee was different from the case of the M/s. Faurecia Automotive Holding [2019 (7) TMI 402 - ITAT PUNE] Moreover, on going through the services agreement, it is absolutely clear that whatever services were rendered by the assessee to the Trigo India was services of such nature which got immediately consumed on delivery. There is no part of technical know-how made available by which the Indian Entity could have used services later on its own - Also as relying on the case of CIT Vs. De Beers India Minerals Pvt.Ltd [2012 (5) TMI 191 - KARNATAKA HIGH COURT] we allow Grounds No. 3 & 4 of the assessee.
Levy of education cess on the tax liability computed under the provisions of the India France DTAA - HELD THAT:- . Having heard the parties herein and considering the decision of the Mumbai Bench of the Tribunal in the case of Sunil V Motiani [2013 (12) TMI 1105 - ITAT MUMBAI] to hold that tax payable @ 12.5% under Article 11(2) of FTAA is inclusive of surcharge and education cess. - on the same parity of reasoning, we provide relief to the assessee. Thus, Ground No.5 raised in the appeal by the assessee is allowed.
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2021 (11) TMI 999 - ITAT RAIPUR
Revision u/s 263 by CIT-A - inadequacy in enquiry on share application money - Addition u/s 68 - HELD THAT:- The assessee has established not only the source of loan obtained but has also adequately demonstrated before the AO the source of money in the hands of the share applicants. A small portion of cash deposited by lender doesn't necessarily signify any collusion with assessee. The relevant facts were present before AO and were scrutinized. Thus, the burden of proof cast upon the assessee was broadly discharged.
A presumption can be safely drawn that the AO was armed with reasonable evidences to draw satisfaction with the explanation offered by the assessee towards receipt of share application money from various parties and consequently it can be said that the statutory discretion was exercised in favour of the assessee based on tell-tale evidences furnished by the assessee in this regard. The action of the AO thus cannot be wholly disregarded as untenable or implausible more so, where share applicants attended the enquiry and deposed on oath for the subscription made. The share applicants are assessed to tax and confirmed the subscription. On these facts, a question would arise as to whether it was incumbent upon the AO to disregard such evidences and hold the explanation to be unsatisfactory in terms of Section 68 of the Act or not. Having regard to the prerogative vested with the AO towards the extent and manner of inquiry for drawing satisfaction, it is difficult to hold that the action of the AO is unintelligible. In our view, the AO has not committed any error in not chasing 'will o the wisp' in the absence of any brazen circumstances. In the light of aforesaid discussion, the basis of issuance of show cause notice under s. 263 of the Act does not appear to be tenable in law in the peculiar set of facts. Consequently, the assumption of jurisdiction under s. 263 of the Act will have to be regarded as without authority of law.
As noted, the share applicants have unequivocally confirmed the share subscription. In such facts, it will be difficult to discredit the share application money received per se and make additions in the realm of s. 68 of the Act in the hands of the assessee in place of the share applicants where 'source of source' allegedly remains unproved in the opinion of the PCIT. Therefore purported inadequacy in inquiry as alleged, cannot be stated to be 'erroneous' per se in so far as assessee is concerned, even if, such inaction of AO towards fuller enquiry is branded as 'prejudicial to the interest of Revenue'. Therefore, the mandatory twin conditions of Section 263 is also not found to be fulfilled when tested on the touchstone of taxability of share application money in the hands of assessee on the grounds of unproved source of source.We thus concur with the plea on behalf of the assessee that S. 263 proceedings cannot be inflicted upon the assessee in these circumstances. - Decided in favour of assessee.
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2021 (11) TMI 998 - ITAT AHMEDABAD
Estimation of income - bogus purchases - CIT-A confirming addition being 25% of the bogus purchases - CIT (A) treated the balance amount of purchases in cash which is the violation of the provisions of section 40A(3) - HELD THAT:- There remains no ambiguity to the fact that the assessee has not debited any purchases in its profit and loss account. Admittedly, the audited financial statements were available before the AO during the assessment proceedings. Thus, the finding of the AO that the assessee has not furnished any supporting documents to justify it’s (the assessee) contention, is contrary to the facts available on record. Once, it is established beyond doubt that the assessee has not debited the purchases in the profit and loss account, the question of making any disallowance either treating them as bogus or against the violation of the provisions of section 40A(3) of the Act does not arise. On this count only, the assessee succeeds in its appeal.
At the time of hearing, there were various arguments which were advanced by both the sides being the learned AR and the DR. However, we do not find any reason to entertain the argument of both sides for the reason that the assessee has not made claim of expenditure on account of purchases in its audited financial statement. Thus the ground of appeal of the assessee is allowed.
Estimation of income of Bogus purchases - A.Y. 2013-14 - HELD THAT:- The income which has been generated to the assessee out of such bogus transaction of purchase and sales. There is no standard jacket formula to work-out the income from the bogus activity carried out by the assessee. Some element of guesswork is required to determine the income of the assessee which is embedded in the bogus activities carried out by the assessee. It is also pertinent to note that the assessee has already disclosed the income in its income tax return for ₹ 77,07,990.00 which is inclusive of the income earned by the assessee with respect to its bogus purchases. Accordingly, in the interest of justice and fair play, we are inclined to estimate the gross profit at the rate of 8% of such bogus purchases as discussed above. Accordingly, we set aside the order of the learned CIT (A) and direct the AO to estimate the gross profit on the purchases at the rate of 8% of the purchases.
Violation of the provisions of section 40A(3) - There in conclusive evidence that cash were paid in violation section 40A(3) i.e. cash payment above ₹ 20,000/- was made in a day to a particular supplier. Further the AO has doubted the genuineness of the purchase. In this scenario we are of the view that once the genuineness of transaction is doubted then only profit embedded under such transaction should be brought to tax - See VIJAY PROTEINS LTD. VERSUS COMMISSIONER OF INCOME TAX [2015 (1) TMI 828 - GUJARAT HIGH COURT] - we set aside the order of the learned CIT (A) with the direction to the AO to confirm the addition to the extent of 6% of the purchases as discussed above.
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2021 (11) TMI 997 - ITAT CHENNAI
Reopening of assessment u/s 147 - Disallowance u/s 14A - Mandation of recording satisfaction - HELD THAT:- Though the original assessment was completed u/s.143(3) of the Act, the AO has not examined application of Section 14A r.w.R.8D of the Income Tax Rules, 1962. Therefore, the change of opinion does not arise. Thus, the AO had rightly reopened the assessment.
So far as tangible material is concerned, we find that the Assessing Officer after examining the entire file, has come to a conclusion that the suo-muto disallowance made by the Assessee is not correct and that the Assessee has not followed the formula prescribed in the Act to calculate the dividend income u/s.14A r.w.R.8D of the Income Tax Rules, 1962. Therefore, the reopening is based on the material available on record which is sufficient to reopen the assessment. The tangible material available to the Assessing Officer in this case is the balance-sheet on the basis of which the assessment is reopened.
In our opinion, the balance-sheet which is the tangible material and supposed to have been considered by the Assessing Officer while passing the Assessment Order u/s.143(3) of the Act had totally ignored the balance-sheet. If at all he has considered, he has not even passed the assessment order by ignoring the provisions of law, i.e. Section 14A r.w.R.8D of the Income Tax Rules, 1962 - As in this case, tangible material is clearly available to the Assessing Officer and therefore the Assessing Officer validly reopened the assessment. In view of the above, we upheld the reopening made by the Assessing Officer u/s.147. - Decided against assessee.
Addition u/s 14A r.w.r.8D - In the assessment order, the Assessing Officer has not discussed details of the own and borrowed funds. In the order of the Commissioner of Income Tax (Appeals), CIT(A) has categorically given a finding that the Assessee has not maintained separate books of account, year-wise to prove that only interest-free source has been utilized for investments.
By considering the above findings Commissioner of Income Tax (Appeals) and by keeping in view the facts and circumstances of the case, we are of the opinion that one more opportunity should be given to the Assessee to substantiate his case before the Assessing Officer. In so far as the application of Section 14A of the Income Tax Act, 1961 r.w.R.8(2)(iii) of the Income Tax Rules, 1962 is concerned, this argument is neither placed before the Assessing Officer nor before Commissioner of Income Tax (Appeals). This argument is placed for the first-time before us. This issue is also to be examined by considering the relevant facts and materials.
We set aside the order passed by the learned Commissioner of Income Tax (Appeals) and we remit back this issue to the Assessing Officer with a direction to re-compute the disallowance u/s.14A r.w.R.8D of the Income-Tax Rules, 1961, in the light of the decision of the Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] as held in respect of the interest disallowance that “if there are funds available both, interest-free and overdraft and/or loans are taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds are sufficient to meet the investments”.
As regards, disallowance of other expenses, Section 14A r.w.R.8D(2)(iii), the Delhi Special Bench of this Tribunal in the case of ACIT Vs. Vireet Investment Private Limited [2017 (6) TMI 1124 - ITAT DELHI] wherein has held that “only those investments are to be considered for computing the average value of investment which yielded exempt income during the year.”
Accordingly, the Assessing Officer is directed to consider only those investments which yield exempt income for the year under consideration is to be considered. - Decided partly in favour of assessee.
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2021 (11) TMI 996 - ITAT DEHRADUN
Income tax liability of employees - Remission of income tax liability borne on behalf of the employees is to be added to the income under the head "Income from business or profession" u/s 41(1)(a) - assessee had computed its income in terms of Section 44BB - HELD THAT:-As established by the assessee that this liability of income tax born by the assessee on behalf of its employees was pertaining to which year and Whether the assessee has offered its income for that year applying the provisions of Section 44 BB of the act or not. If the liability pertains to the year for which the assessee has offered its income by applying the provisions of Section 44 BB of the act than once again this remission of liability cannot be taxed u/s 41 (1) of the act for the impugned assessment year i.e. assessment year 2011 – 12.
It is also to be seen that assessee is setting of losses for previous year as evident from the assessment orders. Therefore, it is also possible that earlier years the assessee has not opted for presumptive income scheme u/s 44 BB of the act but has offered income based on its accounts. In such circumstances, remission of income tax liability if it pertains to those year for which the assessee is claiming set-off of losses by offering its income based on its regular income and expenditure accounts, would definitely be chargeable to tax in this year u/s 41 (1) of the act. These facts are not available on record; it is also not available with the assessee readily at the time of hearing. As it is not available before hand that for which assessment year, this remission of income tax liability pertains to and whether in that year how the income of the assessee has been offered i.e. whether u/s 44 BB of the act or at the actual income - we set aside this ground of appeal back to the file of the learned assessing officer with a direction to the assessee to show with evidence for which assessment year the income tax liability of employees was considered as an expenditure and how the income of the assessee was offered for that year.
Chargeability of interest on income tax refund as business income and taxable at maximum marginal rate of tax by the AO and upheld by the learned CIT – A - HELD THAT:- No reason to deviate from the orders of the lower authorities wherein the decision of BJ Services Company Middle East limited [2007 (3) TMI 311 - ITAT DELHI-H] is followed and the assessee has a permanent establishment in India is not denied. In the result ground number 2 of the appeal of the assessee is dismissed.
Income accrued in India - interest u/s 244A received and computed the tax thereon at the rate of 40% as applicable to foreign companies as business income - whether assessee has a permanent establishment in India or not? - HELD THAT:- Merely having a project office in India cannot result into a permanent establishment of the assessee in India. Therefore, it is now apparent that assessee does not have a permanent establishment in India.
The honourable High Court in Director Of Income Tax versus Pride Foramer [2013 (12) TMI 606 - UTTARAKHAND HIGH COURT] after reading article 12 in case of India France Double Taxation Avoidance Agreement held that plain reading of the provisions of the Double Taxation Avoidance Agreement makes it absolutely clear that some articles (1) and (2) will apply interalia when the recipient of interest does not have a permanent establishment in the country where he has received the interest. Therefore, in the present case the assessee is entitled to take the benefit of article 12 of the Double Taxation Avoidance Agreement, as there is no permanent establishment in India.
Therefore the interest received on income tax refund of the assessee is subject to taxation as per article 12 (2) of the Double Taxation Avoidance Agreement at the rate of 15% of the gross amount of interest as income. Accordingly reversing the orders of the lower authorities, we allow ground number 1 and 2 of the appeal of the assessee.
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2021 (11) TMI 971 - CALCUTTA HIGH COURT
Revision u/s 263 by CIT - Allowability of provision and contingencies on account of arrear payment due to wage revision - whether Tribunal was justified in law or in fact in holding that the assessing officer had made due enquiries on the assessment of deduction on account of arrear payment which are payable consequent to wage revision and that it was an ascertained liability and was liable to be allowed as deduction? - HELD THAT:- Tribunal on facts came to the conclusion that the action of the assessing officer in allowing the claim of the assessee for deduction cannot be said to be erroneous as it was a possible view which the assessing officer has taken and merely because the CIT does not agree with the view expressed by the assessing officer, he could not invoke his jurisdiction under Section 263 of the Act. On facts, we have found that there is nothing to interfere with the order passed by the Tribunal.
Appearing for the respondent/assessee places reliance on a decision in the case of Commissioner of Income Tax, Ward-3, Tirunelveli versus Smt. Padmavathi [2020 (10) TMI 425 - MADRAS HIGH COURT] as held that the Commissioner while invoking his power under Section 263 faults the assessing officer on the ground that he did not make proper enquiry and in the absence of any clarity as to why in the opinion of the Commissioner the enquiry was not proper, invocation of power under Section 263 was not justified.
In our considered view, the said decision will apply with full force to the case on hand. We say so because the Tribunal on examining the facts found that there was no error in the manner in which the assessment was completed and no fault can be attributed to the assessing officer as to how the enquiry was conducted. Thus, we find that the order passed by the Tribunal does not call for any interference. In the result, the appeal fails and the same stands dismissed and the substantial question of law is answered against the Revenue.
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2021 (11) TMI 970 - KERALA HIGH COURT
Deduction u/s 43B - AO rejected deduction claimed on the ground that the assessee has paid tax under Act 1991 on the whole of its income, whereas a part of income alone is amenable to Agricultural Income Tax Act - obligation of assessee to file separate returns under Central Act and Act 1991 - HELD THAT:- Assessee is under obligation to file returns under both the enactments. Agricultural income is excluded from the scope of Section 10(1) of Central Act. Therefore agricultural income does not form part of computation under Section 14 of the Act, 1991. Further, the deduction is envisaged for the purpose of ascertaining the net income of the assessee under different heads. The agricultural income is excluded and appering into admissible tax, a deduction would again be inconsistent with Sections 10,14 and 43B of the Act. Clause-B of Section 43B deals with the tax payable by the assessee.
Main fault under any law for the time being in force means tax payable by the assessee for earning the income for which the computation is carried out. The agricultural income tax paid for the apportioned agricultural income cannot overlap into the business income as tax payable by the assessee for earning business income. No reported judgment on this aspect of the matter is brought to our notice. Therefore from a plain and literal meaning of applicable clause, we are of the view that the argument that the tax paid under Act 1991, ensures for deduction is unsustainable and accordingly rejected.
Revenue has accepted the return of the assessee for the preceding assessment years and the departure now in the subject assessment years is illegal - The judgment relied on by the revenue [2012 (1) TMI 410 - KERALA HIGH COURT] provides a complete answer in this behalf and by following the ratio of the Apex Court in Gangadharan's case [2008 (7) TMI 10 - SUPREME COURT], the said objection of the assessee is also rejected. For the above reasons and discussion, we are of the view that the gist of the questions framed by the assessee is canvassed in the manner referred to above and we have, after taking note of the liability under respective enactments are satisfied that the Tribunal has recorded a valid, legal and correct finding on the claim of assessee for deduction of agricultural tax paid under Act 1991 as not available.
Questions in the instant appeals are answered against the assessee and in favour of revenue.
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2021 (11) TMI 969 - ITAT HYDERABAD
Suppressed turnover - DR submitted that the assessee’s authorised person had duly admitted the impugned suppressed turnover in the search statement - HELD THAT:- No such admission from the assessee’s side since all its authorised persons had done was to estimate the corresponding power sector consumption trends than anything else. Be that as it may, the CBDT’s twin circulars dt.10-03- 2003 and 18-12-2014 have made it clear that such admissions or confessional statements made during the course of a search or survey; as the case may be, do not hold any significance in absence of contemporaneous supportive evidence. We conclude in all these facts that both the lower authorities have erred in law and on facts in making the impugned identical addition of suppressed turnover in lead AY.2010-11 and varying sums in all remaining assessment years. The same stands deleted in all appeals.
Disallowance u/s 40A(3) - HELD THAT:- We notice that the assessee appears to have made trip-wise payments only than those involving the transport invoices on whole-sum basis. This is also not the Revenue’s case that all of these invoices are well beyond the specified limit of the cash payment in the relevant previous year. We therefore hold that the impugned addition based on mere search statement which goes against the record, is not sustainable. The same is directed to the deleted in all the appeals.
Addition u/s 68 - addition of commission income as “un-explained cash credits” - HELD THAT:- There is hardly any dispute that the assessee had claimed to have received the impugned sum(s) from Mumbai based company M/s.Benzo Chem Industries Pvt. Ltd., through banking channels along with corresponding TDS deduction as well. Learned lower authorities hold that the same is in the nature of accommodation entry only since the corresponding entity(ies) had not supported its explanation of having arranged the marketing and sales for the payer entity. Learned departmental representative sought to clarify that the assessee’s authorised person’s statement could not throw light on the place(s) of these entity(ies) as well.
We decline the Revenue’s instant last adjustment as well since not only all the impugned commission payments have been subjected to TDS by the concerned payer M/s.Benzo Chem Industries Pvt. Ltd. but also it has come on record that latter; on its own, had very well confirmed before the Assessing Officer qua sales & marketing arrangement with the taxpayer vide letter dt.24-11-2015. We further make it clear that the Assessing Officer herein did not undertake any further confirmation from the payer’s side since he has adopted the above stated technical reasoning to treat the assessee’s commission income as “un-explained cash credits”. We therefore hold that the same deserves to be deleted.
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2021 (11) TMI 968 - ITAT MUMBAI
Computation of capital gains on sale of property - long term capital or short term capital asset - Period of holding of asset - whether the holding period of the asset should be reckoned from the date of registration of the property or from the date of allotment of the property for the purpose of deciding whether the asset transferred is a long term capital asset or a short term capital asset? - HELD THAT:- We find that this issue is no longer res integra in view of the decision PCIT vs. Vembu Vaidyanathan [2019 (1) TMI 1361 - BOMBAY HIGH COURT] wherein it was held that, date of allotment would be relevant date for the purpose of determining the holding period of capital asset. It was also held that date of allotment so made shall be the relevant date for the purpose of capital gain tax as date of acquisition - as also noted that the allottee gets title to the property on the issue of allotment letter and payment of instalments was only a follow-up action and taking delivery of the possession is only a formality - asset has been held by the assessee for more than three years as computed from the date of allotment and accordingly, the asset transferred would be a long term capital asset thereby resulting in long term capital gains in the instant case. Assessee would also be eligible for benefit of indexation.
Having held that the asset transferred is a long term capital asset, the next question that arises for our consideration is whether the indexation benefit for cost of acquisition should be allowed to the assessee, based on the payments made in instalments and applying the cost inflation index in the relevant year of payment. We find that assessee itself had claimed indexation benefit by applying the cost inflation index in the year of payment of instalments. Hence, there is no dispute that arises in this regard.
We direct the ld. AO to accept long term capital gains returned by the assessee on sale of this flat and delete the addition made on account of capital gains made in this regard.
Treatment of repairs and renovation expenses incurred by the assessee on the leased premises - HELD THAT:- From the perusal of each of those bills which are in great detail, the assessee had identified the specific items which are giving enduring benefit to the assessee and accordingly, had capitalized the same in the books of accounts and claimed depreciation accordingly, both under the companies Act as well as under the Income Tax Act. In respect of items where no enduring benefit is available, the assessee had duly charged off as revenue expenditure.
No infirmity in the action of the assessee on treating the said expenditure as revenue expenditure. CIT(A) had categorically given a finding that none of the expenditure entails any structural change or extension or improvement of the building. This finding has not been controverted by the ld. DR before us. CIT(A) ought not to have treated the said expenditure as capital in nature - expenditure incurred should be allowed as revenue expenditure. Reliance on the case of CIT vs. Talathi and Panthaky Associated (P) Ltd., [2012 (2) TMI 82 - BOMBAY HIGH COURT] wherein it was held that cost of repairs / reconstruction of tenanted premises is revenue in nature and allowable as deduction. Respectfully following the aforesaid decision, the ground No.iii raised by the assessee is allowed.
Disallowance of foreign travel expenditure @20% of total expenditure on an adhoc basis - As pleaded by the assessee before the ld. CIT(A) that the Managing Director had incurred various expenses during his foreign travel which is meant for business purposes and had incurred various expenses on behalf of the company - HELD THAT:- We find that the entire foreign travel expenses of the employees of the assessee company have been duly allowed in full by the ld. AO. Admittedly, the Managing Director of the assessee company is also an employee of the company and hence, he cannot be treated in a different manner with that of the other employees with regard to allowability of foreign travel expenditure for business purposes. Accordingly, we direct the ld. AO to allow the entire foreign travel expenditure and delete disallowance made on an adhoc basis - Decided in favour of assessee.
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2021 (11) TMI 967 - ITAT DELHI
TP Adjustment - markup of 4% and 5% has been disallowed by the TPO and accordingly enhanced the income of the assessee - main argument of the ld. AR was that these transactions are benchmarked by using TNMM and furnished that TP documentation whereas the TPO did not follow any prescribed method and the entire markup is disallowed without giving any reasons - HELD THAT:- The observation of the revenue that the parent company gets benefited by better synergies, scale of economy, better coordination and reporting cannot be accepted.
While the assessee avails supervision services from its AEs and pays markup charges, it also provides such services to the AEs for their third party contracts and receives markup charges. The pricing basis and the results arising from the same have been accepted by the TPO. Disallowing the mark-up on receipt of services while in-principle accepting the provision of similar services rendered having similar intent and basis of pricing cannot be valid ground to disallow the markup. It is not out of contest to note that no such disallowance has been made on the markup in the case of the assessee AY 2007-08 to 2012-13 and AY 2015-16.
Hence, keeping in view, the entire facts and circumstances, the contention of the revenue that the AE invariably derives some benefit and hence no markup should be charged, cannot be accepted.
Provision for warranty disallowance - assessee contended that the issue of warranty is a recurring provision made in the past several years - DRP for both the years in question directed the AO to modify the disallowance after verifying the provisions made in the earlier years, its actual utilization and writing back of unutilized provision for taxation - HELD THAT:- Since, the provision for warranties has been made @ 3% and the unutilized portion has been reversed at a regular intervals from year to year, the appellant has been consistently following the policy of making provision for warranty as per the terms of the contract, the ITAT for AY 2008-09, AY 2010-11, AY 2011-12, AY 2012-13 & AY 2013-14 has allowed provision for warranty, the provision made during AY 2014-15 is on same basis as in earlier years is hereby allowed.
Allowability of provision for liquidated damages - HELD THAT:- Since, the provision for liquidated damages has been made regularly and allowed in P&L account and since the unutilized portion has been reversed at a regular intervals from year to year, since, the ITAT for AY 2008-09, AY 2010-11, AY 2011-12, AY 2012-13 & AY 2013-14 has allowed provision for liquidated damages, the provision made during AY 2014-15 is on same basis as in earlier years is hereby allowed.
Provision for anticipated losses - HELD THAT:- The primary goal of financial accounting is to provide useful information to management, shareholders, creditors, and others properly interested; the major responsibility of the accountant is to protect these parties from being misled. The primary goal of the income tax system, in contrast, is the equitable collection of revenue, the major responsibility of the state is to protect the public finance. Hence, any presumptive equivalency between tax and financial accounting would be unacceptable.
There are other reasons why taxation might deviate from accounting concepts of income. While the most obvious purpose of taxation is to finance public expenditure, the extent and magnitude of taxation in modern economies also makes it a powerful instrument of government economic and social policy in its own right. While it is true that some taxation measures might be introduced to improve economic decision making, others are implemented for very different reasons. The concept of tax expenditures ably describes the situation that those provisions of the income tax containing special exemptions, deductions and other tax benefits were really methods of providing benefits by deviating from the system of profits derived following accounting standards. Thus, we find that wherever exemption or deductions are called for, the same has been provided explicitly in the provision of the Income Tax Act. Even, the provision for warranty, liquidated damages have been allowed taking into consideration the matching principle of revenue accounting. In the instant case, we further find that no cogent evidences have been furnished by the assessee as to how this loss has been arrived at.
Charging of interest u/s 234A - HELD THAT:- We hereby direct the AO to verify the date of filing of return by the assessee with regard to the timeline extended for the instant year and charge interest accordingly.
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2021 (11) TMI 966 - ITAT KOLKATA
Disallowance of deduction claimed u/s. 80IA(4)(iii) in respect of profit derived from "Industrial Park Salarpuria Softzone - assessee failed to furnish CBDT notification in accordance with Industrial Park Scheme, 2020 which is mandatory for claim of deduction u/s. 80-IA(4)(iii) - CIT-A deleted the addition - HELD THAT:- CIT(A) has given a finding of fact that all the items claimed under the head 'Miscellaneous Income' have a direct nexus with the business of the assessee namely operation and maintenance of the three (3) eligible industrial parks. CIT(A) has noted that in the facts of the case the profits and gains from sale of scrap and the interest income constitutes income from business and citing the decision in Sanjeeb Lal [2014 (7) TMI 99 - SUPREME COURT] was of the opinion that purposive interpretation is required to be made while adjudicating such claims. We find that since the scraps or waste materials which were left behind by the occupants when they shift from the Park were getting accumulated in the parks and removal of the same was necessary to keep the Park clean & tidy which activity is the task of assessee i.e. operation & maintenance of the Park, so the income which was generated from the sale of scrap/waste material (non-reusable) and interest from BESCOM have nexus with the maintenance and operation of the industrial parks.
The deposits interest from BESCOM which was clarified by the Ld. AR of the assessee that without deposit of money, electric connection and un-interrupted supply of electricity could not be given by the BESCOM, therefore, for smooth operation and maintenance of the parks uninterrupted electricity is the necessity and, therefore, the interest income in this way is having nexus with the maintenance and the operation of the park and have direct nexus with the income (interest) which is a plausible view of Ld. CIT(A), which we do not want to interfere because in earlier years & subsequent years, such a disallowance was made by the AO. Therefore, applying the Rule of consistency we uphold the action of Ld. CIT(A) and we dismiss the ground of Revenue.
Addition as rental income earned in the three industrial parks - profit derived from Industrial Parks Salarpuria Softzone was treated as non-eligible income to qualify for deduction u/s. 80IA(4)(iii) - CIT-A deleted the addition - HELD THAT:- CIT(A) found that the income derived from letting out of such "KIOSKS/STALLS" and the resultant benefit in the hands of the assessee was for providing better services to the occupants of the industrial parks and, therefore, was an extended portion of the business activity of operating and maintenance of the industrial parks. The Ld. CIT(A) noted that the said "KIOSKS/STALLS" were given on rent so that the persons working in various companies operating from the industrial parks to get coffee, tea and refreshment as well. Moreover, the Ld. CIT(A) has taken note of the CBDT Circular No. 16 of 2016 which clarifies that the lease rent from letting out buildings/developed space along with other amenities in the industrial park (SEZ) need to be treated as business income
As brought to our notice that the AO in earlier years had allowed the claim of the assessee in respect of this rental income by treating it as business income and allowed the claim u/s. 80IA(4)(iii) of the Act. In the light of the CBDT circular (supra) and taking note of the fact that in earlier years and subsequent years the lease rent income from letting off of kiosks/stalls to be treated as business income and since in earlier years and subsequent years this claim was not disallowed and for the first time this disallowance is made, so by applying the Rule of consistency, the disallowance was not warranted since there is no change in facts or law. Therefore, the action of Ld. CIT(A) is confirmed. Therefore, we confirm the order of the Ld. CIT(A) and dismiss this ground of revenue's appeal.
Undisclosed 26AS receipt - reconciliation statement furnished by the assessee is not backed by credible evidence - CIT-A deleted the addition - HELD THAT:- CIT(A) after going through the facts and the reconciliation filed as well as after going through the complete list of parties (who deducted TDS on reimbursement along with the amount of reimbursement) has made a factual finding that there is no difference which warrants any addition on this count. In the light of the aforesaid discussion we are of the opinion that the AO erred in making the addition merely on the basis of the data in 26AS and the Ld. CIT(A) after perusal of the reconciliation and other documents filed has rightly deleted the addition which does not require any interference from our part and, therefore, we confirm the order of the Ld. CIT(A) on this issue. Therefore, this ground of appeal of revenue is dismissed.
Addition on account of sundry balances written off debited in the Audited P & L Account - assessee has failed to furnish any document in this regard despite providing several opportunities of being heard to the assessee - CIT-A deleted the addition - HELD THAT:- We note that the amount in question includes sundry debtor as well as loans and advances. The loans and advances are not allowable u/s. 36(v)(iii) of the Act. Break-up of the amount in question, which has been written off has not been given. Therefore, the allowability of the loans/advances written off by the assessee have to be examined by the AO. According to the Ld. AR, even if the advances are not allowable u/s. 36(v)(iii) of the Act still it is allowable as business expenditure u/s. 28 of the Act. Be that as it may, on this issue the order of the Ld. CIT(A) is set aside and this issue is remitted back to the file of the AO for examining whether the advances/loans which were written off can be treated as business loss which he may decide in accordance to law after giving opportunity of being heard to the assessee.
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2021 (11) TMI 965 - ITAT MUMBAI
Penalty levied u/s. 271(1)(c) - defective notice u/s 274 - assessee stated that the penalty order is bad in law as penalty proceedings were initiated and penalty was levied without specifying the exact limb of section u/s.271(1)(c) - HELD THAT:- On a perusal of the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act we observe that the Assessing Officer has not specified any limb for which the notice was issued i.e., either for concealment of particulars of income or for furnishing inaccurate particulars of such income. Assessing Officer did not strike off irrelevant limb in the notice and specifying the charge for which notice was issued.
Case of MR. MOHD. FARHAN A. SHAIKH [2021 (3) TMI 608 - BOMBAY HIGH COURT] squarely applies to the facts of the assessee’s case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued mechanically in a printed format without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notice was issued. Thus, respectfully following the said decision we hold that the penalty order passed u/s. 271(1)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty order passed u/s. 271(1)(c) of the Act is quashed - Decided in favour of assessee.
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2021 (11) TMI 964 - ITAT AHMEDABAD
Validity of assessment order u/s 153A - Period of limitation - HELD THAT:- Admittedly in the present case, the AO has framed the assessment final order on 29.11.2017 which is time barred in the light of the provisions of section 153B of the Act . As such the assessment order should have been passed on or before 31-12-2016 and without referring to the provisions of section 144C of the Act. Thus the impugned assessment order is unsustainable and void-ab-initio.
As we have held the order of the assessment as invalid and unsustainable in law, we do not find any reason to adjudicate the issue raised by the assessee on merit. Moreover, the ld. AR at the time of hearing has also not advanced any argument on merit, accordingly we dismiss such issues raised on merits.
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2021 (11) TMI 931 - DELHI HIGH COURT
Capital gain - land in dispute to M/s ESS ESS Metals and Electricals on lease for 99 years in the year 1975, and subsequent to the death of Jeewan Lal Virmani, his children selling the same to the assessee under three sale deeds on different dates - sale consideration for transfer of respective shares in the property - Whether parties were closely related and there was no proper basis for settlement of sale consideration between them and it was done with a view to evade payment of tax? - HELD THAT:- CIT(A) and the ITAT have given concurrent findings on the above. It is also not denied that M/s ESS ESS Metals and Electricals held a lease for 99 years with respect to the land and the vendee has paid consideration of ₹ 17 Crores for cancellation of the said lease. In the present case, the vendor did not have an unencumbered right over the land and M/s ESS ESS Metals and Electricals admittedly had a perpetual leasehold right over the land, which right was also extinguished under the Sale Deed.
The bifurcation of the sale consideration was not challenged by the Assessing Officer. In fact, the Assessing Officer took ₹ 18 crores received by the respondent as the Sale Consideration. This was clearly erroneous as the Sale Consideration was ₹ 35 crores, however, was bifurcated between two right-holders over the land. The transaction being collusive was not the case of the Assessing Officer.
Keeping in view the concurrent findings of fact by the CIT(A) and the Tribunal, this Court is of the view that the said findings should not be lightly interfered with. In fact, the Supreme Court in the case of Ram Kumar Aggarwal & Anr. vs. Thawar Das (through LRs),[1999 (8) TMI 1008 - SUPREME COURT] has reiterated that under Section 100 of the Code of Civil Procedure, 1908, the jurisdiction of the High Court to interfere with the orders of the Courts below is confined to hearing on substantial question of law and interference with finding of the fact is not warranted if it involves re-appreciation of evidence.
Supreme Court in State of Haryana & Ors. vs. Khalsa Motor Limited & Ors.,. [1990 (8) TMI 416 - SUPREME COURT] has held that the High Court was not justified in law in reversing, in second appeal, the concurrent finding of the fact recorded by both the Courts below. The Supreme Court in Hero Vinoth (Minor) vs. Seshamma [2006 (5) TMI 478 - SUPREME COURT] has also held that “in a case where from a given set of circumstances two inferences of fact are possible, the one drawn by the lower appellate court will not be interfered by the High Court in second appeal. Adopting any other approach is not permissible.” It has also held that there is a difference between question of law and a ‘substantial question of law’.
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2021 (11) TMI 930 - CALCUTTA HIGH COURT
Sale of the chemical unit of the assessee company - itemised sale OR slump sale - addition under section 50B read with section 2(42C) and explanation 1 to section 2(19AA) - HELD THAT:- Tribunal found from the memorandum as well as the addendum that the individual assets were determined and fixed at a pre-determined and agreed value and such price has been received by the assessee by different account payee cheques during the previous year relevant to the assessment year 2009-10 - on perusal of the balance-sheet, the Tribunal found that on the date of transfer apart from the assets which were sold and transferred, the said chemical unit had several other assets which were never sold nor transferred to the purchaser - Tribunal took note of the crucial fact that none of the liabilities were transferred to the purchaser and the same continued to be a liability of the assessee and to be discharged and were discharged by the assessee.
Tribunal in our view, rightly held that the sale cannot be regarded as a slump sale. The Tribunal took note of the decision of this Court in the case of Kwality Ice Cream (India) Ltd. [2011 (1) TMI 905 - CALCUTTA HIGH COURT] in which it was held that though the sale of the undertaking was for a lump sum consideration, Section 50 of the Act in respect of depreciable assets will override all other provisions and for depreciable assets, the value has to be determined in accordance with the principles of block of assets, read with Section 43(6) of the Act. There are other decisions which were also noticed and referred to by the Tribunal. Thus, we find that the Tribunal has not committed any error of fact calling for an interference by this Court. - Decided against revenue.
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