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Income Tax - Case Laws
Showing 161 to 180 of 641 Records
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2021 (3) TMI 1062 - ITAT VISHAKHAPATNAM
Exemption u/s 11 - registration u/s 12AA denied - as per CIT-E since the objects of the assessee include both religious and charitable objects, registration u/sec. 12A cannot be granted to the assessee - HELD THAT:- As decided in Social Service Centre [2001 (2) TMI 69 - ANDHRA PRADESH HIGH COURT] if the primary or dominant purpose of an institution is charitable than any other object which by itself might not be charitable but just merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or institution from being a valid charity.
While coming to the instant appeal, the observations and conclusion of the ld.CIT(E) having no strength of law. There is no bar for grant of registration to the Trust/Institution which is having mixed activities i.e. charitable and religious in nature as held by the ITAT, Hyderabad Bench in the case of Rehoboth Mission case [2010 (5) TMI 669 - ITAT HYDERABAD] and though we did not find any fault in the objects of the Assessee, however the Ld. CIT(E) is empowered and at liberty to restrict the activities of the trust in consonance with the objects only , hence on the aforesaid analyzations and respectfully following the judgment of the Hon'ble Jurisdictional High Court and Co-ordinate bench of the Tribunal, we are unable to substantiate the 1st ground for rejection of registration by the ld.CIT(E).
Assessee –trust has been formed in the year 2015 and as seen from the Income & Expenditure account of the assessee filed for various years, the charitable activities carried out are either meagre or nil. Hence, it is premature to grant registration u/sec. 12A of the Act to the assessee - The Apex Court in the case of M/s. Ananda Social and Educational Trust [2020 (2) TMI 1293 - SUPREME COURT] reminded that carrying out of any activities is not a stipulation for grant of registration u/s 12A of the Act and even section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done and the term ‘activities’ in the provision includes ‘proposed activities’.
There is no such bar as held and observed by the ld.CIT(E) that the charitable activities carried out by the Assessee are either meagre or nil, hence, it is premature to grant registration u/sec. 12A to the Assessee. In our considered view, 2nd ground of rejection is also contrary to the law as the law has not specified any earmark as such observed by the Ld.CIT(E), for grant of registration u/sec. 12A of the Act. Registration can be sought at the nascent stage and/or after carrying out any activities. Hence we are unable to sustain the 2nd ground of rejection as well.
The order of the ld. CIT(A) is set aside and the Ld. CIT(E) is directed to grant the registration to the Assessee forthwith - Decided against revenue.
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2021 (3) TMI 1061 - ITAT JAIPUR
Income from house property - Income received on leasing of land and building - allowing deduction u/s 24F - assessee was not entitled for deduction @ 30% U/s 24A and interest expenses U/s 24B - HELD THAT:- A.O. has failed to pin point any violation of any condition regarding chargeability of income under the head “income from house property”. A.O. was not competent to treat the income earned by the assessee from rentals to be considered under the head “income from other sources”. More particularly when the assessee had fulfilled all basic conditions for treating the income under the head “income from house property” as enumerated in Section 22 - as meticulously gone through the orders passed by the revenue authorities and we found that the ld. CIT(A) while dealing with these amounts have elaborately discussed the provisions of Section 22 of the Act and the ingredients contained therein for treating the income earned by the assessee by giving portion of the property on rent and had rightly concluded that the assessee had correctly shown the said income under the head “income from house property” as the assessee had fulfilled all the basis conditions of Section 22 of the Act for treating the income under the head “income from house property”, therefore, it was rightly held that the assessee was also entitled for deduction U/s 24(a) and 24(b) of the Act.
No new facts or circumstances have been brought before us in order to rebut or controvert the findings so recoded by the ld. CIT(A). Therefore, we find no reasons to interfere into or deviate from the findings recorded by the ld. CIT(A). Hence, these grounds raised by the revenue stand dismissed and the order passed by the ld. CIT(A) qua these issues stand affirmed.
N.P. on declared sales - Assessee excluded the rent receipts from the net profit - HELD THAT:- In NP rate chart the NP has been shown at ₹ 77,23,674/- which ‘includes’ rent receipts. However, in the above chart which has now been filed by the assessee which ‘excludes’ the rent receipt from the net profit claimed by the assessee. Thus, in our view, the assessee had rightly excluded the rent receipts from the net profit as from the financial statements i.e. from the computation of total income, we noticed that the rental income had been considered separately under the head ‘income from house property’ and on which tax has already been paid. Therefore, in order to avoid double taxation, the assessee had excluded the rent receipts from the net profit which has now been reflected in the above chart which is termed as Annexure-A. Under these facts and circumstances, we direct the A.O. to apply N.P. rate after excluding the rent receipts from the total income of the assessee. With these directions, we restore this issue back to the file of the A.O. for deciding the issue afresh on the basis of above direction.
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2021 (3) TMI 1060 - ITAT MUMBAI
Scope of Limited Scrutiny - Disallowance of interest as sought to be claimed as deduction from Short Term Capital Gains - HELD THAT:- It is not in dispute that the assessee had claimed deduction towards interest under the head short term capital gains. Admittedly the short term capital gains falls under the ambit of ‘Securities Transactions’ and hence would fall within the scope of ‘Limited Scrutiny’ . Accordingly, the Ground No. 1 raised by the assessee is hereby dismissed.
Deduction of interest under the head ‘short term capital gains’ - HELD THAT:- As borrowed funds were indeed utilized for purchasing the shares of Indiabulls Hsg Fin Ltd. It is not in dispute that the said borrowings had suffered interest and that the said interest was debited by the share broker himself in the ledger account of the assessee.
Hence one to one nexus of borrowed funds being utilized for making investment in shares which had yielded short term capital gains to the assessee, has been proved beyond doubt. Admittedly, the assessee had not claimed the interest cost as revenue expenditure under the head ‘Income from Business’ as he had rightly bifurcated the brokerage income which is offered under the head ‘Income from Business’ and share transactions under the head ‘Capital Gains’ being an investor in shares and securities. Since the interest cost of ₹ 12,15,500/- has been capitalized by the assessee , it partakes the character of cost of acquisition and gets added to the same thereon and hence would be eligible for deduction u/s 48 of the Act while computing the capital gains.
The genuineness of the borrowings utilized for purchase of shares and payment of interest thereon to the broker is not disputed by the revenue. As relying on S. BALAN ALIAS SHANMUGAM BALKRISHNAN CHETTIAR. [2008 (1) TMI 489 - ITAT PUNE-B] we hold that the assessee is entitled for deduction of interest under the head ‘short term capital gains’.
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2021 (3) TMI 1058 - ITAT DELHI
Addition u/s 68 - acquiring shares of certain companies from certain shareholders without paying any cash consideration - HELD THAT:- Provisions of section 68 are not applicable in a case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and, instead, considerations were settled through issuance of shares to the respective parties. In other words, provisions of section 68 of the Act does not apply to cases of purchase of shares and allotment of shares when the purchase and allotment are under a barter system. In this view of the matter, we do not find any infirmity in the order of the CIT(A) in deleting the addition of ₹ 6,75,00,000 /- (wrongly typed in the grounds as ₹ 6,76,00,000/-). Therefore, the ground of appeal No.1 raised by the Revenue is dismissed.
Addition u/s 68 on the ground that the same is shown in the name of M/s Wamil Clothing Pvt. Ltd. and the summons issued u/s 131 was received back unserved - As order of the AO is very cryptic on this issue and the ld.CIT(A) has not at all given any finding on this issue. Considering the totality of the facts and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. We hold and direct accordingly. The second ground raised by the Revenue is accordingly allowed for statistical purposes.
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2021 (3) TMI 1057 - ITAT DELHI
Revision u/s 263 - certain facts have emerged which were not available on record at the time of assessment u/s 147 - addition u/s 68 - allegation of the Ld. PCIT that the AO should have conducted further enquiry which were necessary to gather relevant material which the AO failed to do and there was non application of mind on the part of the AO - HELD THAT:- We find in the instant case thorough enquiries were conducted by the AO at the time of reassessment proceedings. Full details giving the names, addresses, number of shares of nominal value and share premium amount of all the share holders alongwith their bank statements, copy of IT returns, PAN etc. were filed before the AO. Even if the share holders were bogus as per allegation of the revenue in view of the reasons recorded for reopening, however, as per prevailing law at that time in view of decision of Hon'ble Supreme Court in the case of Lovely Exports (P) Limited [2008 (1) TMI 575 - SC ORDER] addition could not have been made in the hands of the assessee and addition, if any, could have been made only in the hands of such bogus share holders. Since AO has taken a plausible view, therefore, it cannot be said that the order of the AO is erroneous.
We find from a perusal of the paper book that the assessee during the course of reassessment proceedings had filed the requisite details as called for by the AO and the Assessing Officer after considering the same completed the assessment which is in consonance with the decision of the Hon’ble Supreme Court in the case of Lovely Exports prevailing at that time. Therefore, in view of our discussion in the preceding paragraphs the order of the AO in the instant case cannot be held as erroneous.
Since for invoking jurisdiction u/s. 263 the twin conditions i.e. order must be erroneous and the order must be prejudicial to the interest of revenue must be satisfied and since, we have held that the order cannot be held to be erroneous since the view of the AO in accepting the share capital is a plausible view, therefore, the twin conditions are not satisfied. Therefore, the Ld. PCIT in our opinion could not have invoked jurisdiction u/s. 263 of the IT Act. We, therefore, set aside the order of the PCIT passed u/s. 263 of the IT Act and the grounds raised by the assessee are allowed.
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2021 (3) TMI 1055 - ITAT DELHI
Rectification u/s 254 - coordinate bench has failed to consider the financial statement of the associated enterprises - HELD THAT:- The coordinate bench considered the financial statements of the associated enterprise, which were placed by the assessee to show that the financial condition of the associated enterprise was not good and therefore the associated enterprise was not paying price of the services of the assessee. In the transfer pricing analysis we were supposed to look at the operating margin of the assessee and in analyzing the comparable prices, the financial condition of the associated enterprise was not at all required to be considered. Further the associated enterprise as we have already held in the order that has taken away the whole money from the associated enterprise, which was lying as reserve and surplus in the hands of the assessee.
We do not now hesitate to state that the associated enterprise has withdrawn the full results are available with the assessee in the form of outstanding advances which are really in the form of dividend payment to the associated enterprise from India. Therefore, in our view it is immaterial whether the associated enterprise is making a losses or it is making of profit for working out the operating margin of the assessee.
Coordinate bench has inadvertently overlooked that assessee is providing ITeS services to its associated enterprise and amounts outstanding was only in respect of the services provided and that it had not made any loan or had made any advances to its associated enterprise and the sum outstanding was only in respect of services provided and nothing else - We failed to understand why the distinction is required to be made from sale of goods or sale of services. According to us fact that it is for services or goods. According to us, assessee has made advances to the AE for more than usual credit period. In fact, it is an advance of the full reserve and surplus available with the assessee to its associated enterprise. It is immaterial whether the assessee has obtained any loan or has not taken any loan. Therefore, this contention is rejected.
In paragraph number (iii) the note states that the coordinate bench did not record that such an amount had the character of making advances is interest free loan which has been the the material statement for not granting any working capital adjustment. The working capital adjustment is required to be given difference in the working capital employed by the different comparables compared to the assessee.
In the case of the assessee we have already held that outstanding of associated enterprise was a device employed by the assessee in connivance with its associated enterprise to withdraw the full reserve and surplus available in India which otherwise could not have been withdrawn without paying dividend distribution tax but has been withdrawn by the making a device of keeping the outstanding receivable from associated enterprise to the extent of reserve and surplus available with the assessee.Therefore, this contention also deserves to be rejected.
Demonstration by the assessee before the learned assessing officer for granting of any working capital adjustment - We do not find any error in the order of the coordinate bench as it has considered all the aspects of the working capital adjustment requested by the assessee. In fact, when the assessee could not show that the amount outstanding from its associated enterprises is towards outstanding service business or is a methodology to allow the associated enterprise enjoyment of four reserve and surplus available in India. We have held that assessee has allowed the associated enterprise to enjoy the reserve and surplus available with an Indian entity without paying dividend distribution tax thus there is no working capital adjustment required to be made in the comparability analysis. Thus the contention raised by the assessee deserves to be rejected
The coordinate bench has followed the order in the case of the assessee for earlier years noted in para 16. That decision has been followed by the coordinate bench in assessee’s own case. The coordinate bench in further para 2 stated that the peculiar facts of the case noted by the coordinate bench in para No. 17 to 20 are so startling that decision relied upon by the ld AR does not apply to the facts of the present case. Thus, all the decisions placed before the coordinate bench were considered and in view of the peculiar facts of the case of the assessee were held to be distinguishable. Vide para number D, it has been stated that sum of the grounds have not been considered.
All these grounds are related to the working capital adjustment. Thus, all the grounds of the appeal were also on the same issue of adjustment on account of outstanding receivables. All these grounds were considered and decided against the assessee as the main issue has already been decided against the assessee for the reason that the outstanding receivable from its associated enterprise does not deserve to be considered for granting any working capital adjustment to the assessee.
No error in the order of the coordinate bench in following the decision of coordinate bench in assessee’s own case. That binds us and has been followed.
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2021 (3) TMI 1053 - ITAT MUMBAI
TP Adjustment - determining the ALP - Cost aggregation for the purpose of benchmarking - HELD THAT:- Given the range of transactions involved, the arm’s length method cannot be adequately applied on a transaction-by-transaction basis. Accordingly, for the purpose of determining the ALP, the assessee has rightly aggregated for the purpose of benchmarking (i) purchase of raw materials, sale of finished goods and engineering services that are essentials to its business, (ii) payment of ASP charges, IT and service charges to assist in business administration and (iii) payment of commission that assists the assessee in obtaining purchase orders from third parties.
Burden of proof - It is well-settled that the primary onus is on the assessee to maintain documentation to demonstrate that the price charged in an international transaction complies with the ALP and the method followed to ascertain the price is the most appropriate method. The assessee discharges this onus by maintaining the documentation; thereafter, the onus shifts to the tax authorities. In the event, the tax authorities disagree with the assessee’s view and seek additional explanation, the burden of proof against shifts to the assessee to prove why the method adopted by the assessee is correct.
In the instant case, as narrated hereinabove the assessee has discharged its onus by maintaining the documentation. Further, during the TP proceedings, the assessee has filed before the TPO sufficient details called for. Then the burden of proof has shifted to the TPO. However, the TPO has made the disallowances / adjustments on general propositions. We are reminded by the great aphorism of Justice Oliver Wendell Holmes in Lochner v. New York, 198 U.S. 45,76 (1905) that “general propositions do not decide concrete cases.”
As mentioned earlier, the assessee vide letter dated 27.02.2015, 04.09.2015, 24.09.2015, 08.12.2015 and 15.12.2015 has filed sufficient details in response to the queries raised by the TPO during the course of TP proceedings. Further, the assessee has filed before the DRP additional evidence dated 06.06.2016. However, instead of examining / scrutinizing those submissions, the tax authorities have made disallowances/adjustments on general propositions.- Allow assessee ground.
Adjustment relating to the international transaction of charges pertaining to Restricted Stock Units issued by associated enterprise, by determining its arm's length price at NIL - HELD THAT:- As per the date of joining Mr. Venkatasubramanian had been allocated 457 shares. The purpose of granting the RSUs to the employee was to retain and motivate him for continuing his employment with the assessee. The assessee expected to drive benefits from the employee’s experience and exposure and hence had awarded RSUs to him. Considering the same, any cost incurred in exercise of the RSUs by the employee typically represents the cost of the assessee-company. Since the cost was initially incurred by the AE, the assessee reimbursed the same to its AE as the same was for the benefit of the assessee-company. Considering the above facts, we delete the adjustment and allow the 10th ground of appeal.
Unreconciled income appearing in Form 26AS as unaccounted in the books of accounts - HELD THAT:- In the instant case, admittedly there is difference in the receipts as per the TDS certificates and the receipts as appear in the books of accounts of the assessee. It is not a question of reconciling 97.17% of the entries and only 2.83% of the entries to be reconciled. It is the question of genuineness of the receipts and the amount involved. Therefore, we set aside the order of the AO on the above ground of appeal and restore the matter to him to pass an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/ evidence before the AO. Accordingly, the 11th ground of appeal is allowed for statistical purposes.
Amount paid by the assessee in the nature of Education Cess and Higher and Secondary Education Cess - whether allowed as deduction in computing its business income for the year under consideration? - HELD THAT: Since, the above issue has been raised for the first time before the Tribunal, we deem it appropriate to restore the issue back to the AO for passing an order in the light of the ratio laid down in Sesa Goa Ltd [2020 (3) TMI 347 - BOMBAY HIGH COURT]. Thus the additional ground of appeal is allowed for statistical purposes.
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2021 (3) TMI 1052 - ITAT DELHI
Penalty u/s 271(1)(c) - Assessment u/s 153A - person has failed to comply with the notice under Sub Section 2 of Section 115WD or under Sub Section 2 of Section 115WE or under Sub Section 1 of Section 142 or Sub Section 2 of Section 143 or fails to comply with a direction issued under Sub Section 2 A of Section 142 or has concealed the particulars of his income or furnished inaccurate particulars of such income - HELD THAT:- In the present case, from the perusal of the assessment order, it is seen that the Assessing Officer has simply stated that “I am satisfied that the assessee has concealed his income in the return filed u/s 139 thereby stating that the income was disclosed after the search and, therefore, expenditures are part of concealed income of the assessee. In-fact, the assessee filed his return u/s 153(A) after enhancing the income on account of house renovation/repair expenses and the expenditure, therefore, in our opinion, cannot be stated as concealment of income. Therefore, the satisfaction in the instant case in our opinion is inadequate.
For invoking Clause (c) of Section 271(1)(c) of the Act, while issuing the notice, the Assessing Officer has to categorically state upon under which limb the penalty is initiated, since the assessee has to give reply to the notice issued u/s 271(1)(c) read with Section 274 in respect of concealment of particulars of income separately and that of furnishing of inaccurate particulars of income separately.
In the present case, though the initiation in the assessment order was on concealment of particulars of income, the first primary stage of satisfaction was not given by the Assessing Officer. The initiation of penalty has been simply stated on concealment of income but which was not properly revealed in notice issued to the assessee. The Department cannot over look the technicalities and the procedure given under the Income Tax Statue which is a mandate to be followed by the tax authorities. The Revenue authorities cannot vaguely issue notices which are very much the basis of proceedings initiated under Income Tax statute.
Coming to the actual penalty order, the same is though stated upon concealment of particulars of income has not given the specification as to how the income was concealed when the expenditures which was incurred was not accounted in original return but revealed in the return filed u/s 153A - penalty order has made the specification of furnishing of inaccurate particulars of income. AO though finally imposed the penalty on concealment of particulars of income was not sure whether it is for furnishing of inaccurate particulars or concealment of income. The assessee has suo moto /voluntarily surrendered the amount before the Assessing Officer and paid the taxes thereupon. Thus, on the merit also the assessee has proved that the penalty does not survive. - Decided in favour of assessee.
Penalty u/s 271AAB on the undisclosed income - HELD THAT:- The insertion of this Section is from Finance Act, 2012 w.e.f 1/7/2012. The Section 271AAB shall be invoked in case where search has been initiated u/s 132 on or after 1st Day of July, 2012. In the present case, the search took place on 30/03/2016. This penalty can be imposed in addition to tax if any payable by him. The Assessing Officer specifically at the time of penalty proceedings contemplated Clause B of Section 271AAB of the Act. But the limb of Clause B specifically mentions that if such assessee in the course of search in a statement under Sub Clause 4 of Section 132 does not admit the undisclosed income.
In the present case, the assessee has very much admitted the undisclosed income and surrendered the undisclosed income. The assessee also paid the tax thereon. Besides this, the notice upon which the assessee is bound to give reply is vague and not as per provisions of the Income Tax Statute. The Revenue Authorities have not properly adjudicated/ invoked in true spirit of the penalty Provisions to impose penalty on the assessee. Thus, on the technicality as well as on merit, the penalty does not survive. Hence, appeal filed by the assessee is allowed.
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2021 (3) TMI 1048 - ITAT MUMBAI
Addition on account of stock losses & diminution - AO made the addition in absence of documentary proof regarding clear & verifiable evidence in support of the expenditure claimed by the assessee - HELD THAT:- In the circumstances, where the assessee deals in thousands of stocks of goods, it is practically impossible to verify each and every aspect of claim of shrinkage, theft and expiry written off. But the assessee should explain the basis and the criteria of claim. As rightly pointed out by the Ld.DR, the A.O. should not be deprived to verify the facts on sample basis or in full and make enquiries and shall take a decision considering the assessee’s past record.
The revenue should be provided a minimum opportunity to verify the facts submitted by the assessee for the first time before the Ld.CIT(A) - We notice that though the information was submitted for the first time before the appellate authority, the Ld.CIT(A) having accepted the evidences should have called for the comments of the A.O. on vital specific issues before deciding the assessee appeal - We provide an opportunity to the revenue by restoring the disputed issue for limited purpose to the file of the CIT(A) to call for the remand report from the AO and also adequate opportunity of hearing be provided to the assessee and pass a reasonable and speaking order and allow this ground of appeal of the revenue for statistical purposes.
Addition on account of depreciation of ‘Bizerba weighing scales’ - AO has made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items - HELD THAT:- In assessee’s own case for the earlier assessment year relying on CIT Vs. BSES Yamuna Power Ltd., [2010 (8) TMI 58 - DELHI HIGH COURT] claim of depreciation @ 60% on Bizerba weighting scales is concerned, in our opinion nothing has been on record to demonstrate that this particular asset functions integral part of computer and cannot function independently.
A photocopy (xerox) machine can also be attached to a computer, however, that does not entitle it for depreciation @ 60%. CIT(A) has allowed assessee’s claim of depreciation on the weighing scales without proper reasoning. Therefore, while allowing assessee’s claim of depreciation on printer, router, scanner, switches, etc. We uphold disallowance of assessee’s claim of depreciation on bizerba weighing scales @ 60%.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Since, the appellant had not earned any exempt income during the year under consideration and the facts are similar to earlier years i.e AY 2011-12 & 2012-13 where the company had not earned exempt income. The same were adjudicated in favour of appellant’s successor. Therefore, have no reason to deviate from the findings given by my processor in above mentioned cases of the successor or appellant. In view of these facts, the appeal of the appellant on this ground is allowed and the disallowance made by the AO is deleted.
Books of accounts the doubtful debts and advances written off - AO found that out of the said amount being insurance claim is receivable has been written off - CIT(A) considered the submissions of the assessee and allowed the claim of the assessee - HELD THAT:- AR supported the orders of the CIT(A) and relied on the judicial decisions. Accordingly we are not inclined to interfere with the findings of the CIT(A) on this disputed issue and upheld the same and dismiss the ground of appeal of the revenue. The revenue appeal is partly allowed for statistical purposes.
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2021 (3) TMI 1046 - ITAT AHMEDABAD
Capital gain computation - reference to the matter to the DVO for determining the valuation of the property in question in terms of the Section 50C - HELD THAT:- It is mandatory on the part of the AO to refer the matter to the DVO under Section 50C(2) of the Act, even if it is not requested by the assessee before the authorities below. If that view has been taken by the different judicial forum then though admittedly the said plea was not taken before the AO rejection of such request made before the Ld. CIT(A) is palpably bad in view of Section 50C of the Act and in that view of the matter respectfully relying upon the judicial pronouncements we do not hesitate to delete the addition made by the Ld. CIT(A).
We find it fit and proper to remit the issue to the file of the Ld. AO with a further direction upon him to make fresh assessment upon making reference of the matter to the DVO and to complete the assessment on the basis of the valuation so received from the DVO upon giving an opportunity of being heard to the assessee. Assessee's appeal is allowed for statistical purposes.
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2021 (3) TMI 1045 - ITAT DELHI
Addition on account of income earned on investment of corpus fund - income received from investments and credited to the corpus fund has been credited as per the directions of the Government of India - HELD THAT:- Respectfully following the earlier year precedent, we hold that amount cannot be treated as income of the assessee as it is a diversion of income by overriding title in view of letter from the Government of India, Ministry of Agriculture wherein it has been clearly stated that the corpus fund belongs to the Central and State Government and the interest thereto also belongs to the Government, and therefore, interest accrued on the corpus fund is required to be added in the corpus fund only. Accordingly, the appeal of the Revenue is dismissed.
Disallowance u/s 14A - HELD THAT:- Once the assessee's income is to be computed u/s. 44 which relates to all insurance business which is a non obstante clause, therefore disallowance of Section 14A cannot be made.- Decided against revenue.
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2021 (3) TMI 1043 - ITAT MUMBAI
Penalty levied u/s. 271(1)(c) - Estimation of income on bogus purchases - HELD THAT:- It is a settled position of law that penalty cannot be levied when an ad hoc estimation is made. In both the cases an ad hoc estimation was made by the Assessing Officer restricting the profit element in the purchases @25%.
As relying on SHRI DEEPAK GOGRI [2017 (11) TMI 1857 - ITAT MUMBAI] and AERO TRADERS (P) LTD. [2010 (1) TMI 32 - DELHI HIGH COURT] estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars.
On hand the Assessing Officer has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. Thus, we do not observe any infirmity in the order passed by the Ld. CIT(A) in deleting the penalty u/s. 271(1)(c) of the Act levied by the Assessing Officer for both the Assessment Years. Grounds raised by the revenue are rejected.
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2021 (3) TMI 1042 - ITAT DELHI
Penalty u/s 271(1)(c) - AO has not recorded any satisfaction as to whether the penalty u/s 271(1)(c) has been levied for furnishing of inaccurate particulars of income or it was a case of concealment of income - HELD THAT:- The show-cause notice dated 20.03.2015 also does not specify as to for which limb of Section 271(1)(c) of the Act the penalty proceedings are initiated i.e. whether it is for concealment of the particulars of income or for furnishing of inaccurate particulars of income. Even in the penalty order, no specific charge i.e. whether it is a case of furnishing of inaccurate particulars of income or a case of concealment of the particulars of income has been indicated. It is a settled law that while levying penalty for concealment, the AO has to record satisfaction and thereafter come to a finding in respect of one of the limbs, which is specified under section 271(1)(c) of the Act. The first step is to record satisfaction while completing the assessment as to whether the assessee had concealed its income or furnished inaccurate particulars of income.
Notice u/s 274 read with Section 271(1)(c) of the Act is to be issued to the assessee. The Assessing Officer thereafter has to levy penalty under Section 271(1)(c) of the Act for non-satisfaction of either of the limbs. While completing the assessment, the Assessing Officer has to come to a finding as to whether the assessee has concealed its income or furnished inaccurate particulars of income.
In the present case following the aforesaid decision in the case of Sahara India Life Insurance Co. Ltd.[2019 (8) TMI 409 - DELHI HIGH COURT] we are of the view that since the basic condition for levy of penalty has not been fulfilled the penalty order cannot be upheld. We accordingly set aside the penalty order passed by AO - Decided in favour of assessee.
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2021 (3) TMI 1041 - AUTHORITY FOR ADVANCE RULINGS — NCR BENCH (INCOME-TAX)
Income accrued in India - Withholding of tax in India - vessel engaged in seismic survey at high sea constitutes a fixed place permanent establishment - Whether the sum paid by the applicant to the vessel providing company ("VPC") under global usage bareboat charter agreements ("BBC Agreements") could be said to accrue or arise or deemed to accrue or arise in India under the provisions of the Income-tax Act, 1961 and, therefore, subject to withholding tax in India ? - whether the sum paid by the applicant to the VPC's under the global usage BBC agreements are taxable in India under the provisions of section 44BB ? - sum paid or to be paid by the applicant to VPC's under global usage BBC agreements be construed to be in the nature of "Royalty" under section 9(1)(vi) - HELD THAT:- When we examine the facts of the present case in the perspective of the principle of "source rule" propounded by the apex court, it is seen that the payer, i. e., the applicant was located in the Indian Territory, i. e., in Bombay High where it was carrying the contract of ONGC. The commercial need of the deployment of vessel was generated by the contract of the applicant with ONGC and the services of the seismic vessels were utilized within the Indian Territory. Thus, all the parameters of the "source rule" as explained by the apex court in the case of GVK Industries is found fulfilled in this case and the business activity of the VPCs is found to have a clear nexus with the Indian Territory. There was existence of close, real, intimate relationship and commonness of interest between the non-resident VPCs and the applicant both of whom were operating in Indian Territory and which satisfies the essence of "business connection" and "territorial nexus".
The applicant has emphasized that sections 4, 5 and 9 of the Act are to be kept in consideration even in those cases where assessment is done under section 44BB of the Act, as held by the hon'ble Supreme Court in the case of Sedco Forex International Inc. [2017 (11) TMI 78 - SUPREME COURT] In this case the issue was whether mobilization fee on account of mobilization/movement of rig from foreign soil/country to offshore site at Mumbai (India) received by the non-resident assessees can be treated as "income" under section 5 of the Act and would fall within section 9, i. e., whether it can be attributed as having arisen or deemed to arise in India. The seismic vessels of the VPCs also constitute a permanent establishment (PE) for the business operation carried out by them
The sum paid by the applicant to the vessel providing companies (VPCs) under global usage under bareboat charter (BBC) agreements is deemed to accrue and arise in India and is liable to tax in India under the Income-tax Act and, therefore, subject to withholding tax in India.
The income liable to tax is to be assessed as business income under the provisions of section 44BB of the Act.
The sum received by VPCs is not in the nature of "royalty" under section 9(1)(vi) of the Act.
As already mentioned earlier the computation mechanism under section 44BB of the Act would apply. Therefore, the answer to this question is not found necessary.
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2021 (3) TMI 1040 - ITAT MUMBAI
Revision u/s 263 - AO allowed of the assessee‟s claim for deduction of forfaiting charges as revenue expendiure - CIT observed that, thus the A.O had rendered the assessment order as erroneous insofar it was prejudicial to the interest of the revenue - when the forfaiting charges had been capitalised by the assessee in its books of account, therefore, the raising of a separate claim for deduction of the said charges by the assessee in its profit and loss account which thereafter was allowed by the A.O while framing the assessment had resulted in a double deduction - HELD THAT:- Forfaiting charges were incurred by the assessee wholly and exclusively for the purpose of its business and was not in the nature a capital expenditure, the same, thus, was clearly allowable as a deduction under Sec. 37(1) - At this stage, we may herein observe that as per the settled position of law all expenditure incurred to bring an asset to use is to be capitalised. Analysing the term ‘actual cost‟ as defined in Sec. 43(1) of the Act, as in the case of Challapali Sugars Ltd.[1974 (10) TMI 3 - SUPREME COURT], had held, that as per the accepted rule of accountancy all expenditure that is incurred to bring a fixed asset into existence and put it in a working condition shall be included for determining its cost. It was further observed, that in case money is borrowed by a newly started company which is in the process of constructing and erecting its plant, the interest incurred before the commencement of production on such borrowed money can be capitalised and added to the cost of the fixed asset which had been created as a result of such expenditure.
As regards the observation of the PCIT that the A.O had failed to consider as to whether the forfaiting charges incurred by the assessee were in the nature of a capital expenditure or a revenue expenditure, we are unable to find favour with the same. In our considered view, as the forfaiting expenditure incurred by the assessee had not resulted in any enduring benefit to the assessee company, therefore, the same could not have been considered as capital in nature.
In our considered view, as the forfaiting charges borne by the assessee had not brought any capital asset into existence and were incurred merely with a view to carry on the business as per the terms of the EPC contract, the same, thus, was clearly in the nature of a revenue expenditure. Be that as it may, in our considered view as the A.O while framing the assessment had after carrying out necessary verifications arrived at a plausible view and allowed the assessee‟s claim for deduction of forfaiting charges of ₹ 3.85 crores, therefore, the PCIT stood divested of his jurisdiction to revise the assessment order for the purpose of substituting his view as against that arrived at by the A.O. As such, we are of a strong conviction that now when the A.O after making proper and detailed inquiries had arrived at a plausible view that the assessee‟s claim for deduction of forfaiting charges was in order, the PCIT could not have thereafter in the garb of the jurisdiction vested with him under Sec.263 of the Act directed the A.O to carry out further verifications, for the reason, that he held a view different than that arrived at by the A.O.
We are of the considered view that as the A.O while framing the assessment had after making exhaustive verifications arrived at a plausible view as regards the assessee‟s entitlement towards claim of deduction of the forfaiting charges therefore, the PCIT could not have invoked his revisional jurisdiction under Sec. 263 - Decided in favour of assessee.
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2021 (3) TMI 1037 - DELHI HIGH COURT
TP adjustment - Addition of advertising, marketing and promotion expenditure (“AMP expenditure”) - Tribunal deleted the addition - HELD THAT:- As per tribunal ALP of an international transaction involving AMP expenses, the adjustment made by the TPO/DRP/ AO is not sustainable in the eyes of law. At the same time, we cannot ignore the submission of the learned DR that the matter is pending before Hon'ble Apex Court and the decision of Hon'ble Apex Court would be binding upon all the authorities. We set aside the orders of authorities below and restore the matter to the file of the Assessing Officer. We hold that as per the facts of the case and the legal position as of now and discussed above in this order, the adjustment made by the TPO/DRP/AO in respect of AMP expenses is not sustainable.
Revenue, says that the impugned order has been passed to protect the interest of the respondent/revenue in the event it were to succeed in the civil appeals pending adjudication before the Supreme Court.
Senior Advocate, on the other hand, says that TPO was only required to give effect to the order passed by the tribunal and therefore ought not to have passed the impugned order.
Does not deny that if the respondent/revenue were to succeed before the Supreme Court, then, consequences would follow and, perhaps, the adjustment made by the TPO in the transfer pricing qua AMP would have to be factored in.
Having regard to the aforesaid facts and contentions of the learned counsel for the parties, in our view, the best way forward would be to stay the operation of the impugned order and give liberty to TPO to take next steps in the matter, albeit, in accordance with the law once a decision is rendered by the Supreme Court in the pending civil appeals.
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2021 (3) TMI 1035 - MADRAS HIGH COURT
Exemption u/s 11- Power of AO to consider revised Form 10 - accumulation of income - AO did not consider the revised Form 10 as the jurisdiction vests only with the Commissioner of Income Tax and not with the Assessing Office - Tribunal held that revised Form 10 for accumulation of income can be furnished in the course of assessment proceedings before the Assessing Officer and there is no bar prohibiting the appellant from modifying the figure in the application and the Assessing Officer can consider the revised Form 10 and allow the accumulation of income ? - HELD THAT:- As relying on ratio laid down in the Judgment Simla Chandigarh Diocese Society [2009 (8) TMI 103 - PUNJAB AND HARYANA HIGH COURT] it is clear that if Form 10 is filed within the stipulated time and during the course of assessment proceedings before the Assessing Officer, there is no bar prohibiting the assessee from modifying the figure in the application. Only in the case of revised Form 10 being filed after the assessment proceedings, the same cannot be accepted. The said ratio laid down by the Hon'ble Supreme Court supports the case of the assessee. Nagpur Hotel Owners'Association [2000 (12) TMI 99 - SUPREME COURT]
It is not in dispute that the assessee filed Form 10 within the stipulated time. Since the Assessing Officer disallowed the claim of application in respect of the depreciation, it filed a revised Form 10 enhancing the claim. The very intention of the assessee is to accumulate the surplus for the subsequent years. As per the ratio laid down in the Judgment reported in [2009 (8) TMI 103 - PUNJAB AND HARYANA HIGH COURT] modified Form 10 may be furnished in the course of assessment proceedings and there is no specific bar prohibiting the assessee from modifying the figure of application.
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2021 (3) TMI 1030 - KARNATAKA HIGH COURT
Disallowance of interest on borrowed capital - addition at the rate of 6% as being attributable to investments made by the appellant in its foreign subsidiary - as argued investments had been made to further sales in foreign markets, which is wholly for the purposes of its business and no part of the borrowed capital was utilized for such investment in any event - HELD THAT:- The assessee held its own funds which were far in excess of the investment made in A.N.Coffeeday. Therefore, the presumption in law arises that the investments were made out of non interest bearing funds and burden was on revenue to show that investments were made out of borrowed funds. The revenue has not discharged the aforesaid burden.
Therefore, it has to be presumed that the investments were made from interest free funds which were available with the assessee. It is also noteworthy that for Assessment Year 2008-09, the Commissioner of Income Tax (Appeals) had recorded a finding that investments made during the aforesaid Assessment Year including investments in A.N.Coffeeday as on 31.03.2009 were made out of the funds of the assessee, with reference to claim of disallowance under Section 14A read with Rule 8D(ii)of the Rules and therefore, the same conclusion ought to have been applied to Section 36(1)(iii) as well. Therefore, in the fact situation of the case, the remand by the tribunal to the Assessing Officer to examine whether the investments were made out of the funds of the assessee or from borrowed funds, is not warranted as the Assessing Officer for the Assessment Year 2009 10, the Assessing Officer on examination of the details furnished by the assessee had accepted the contention that investment was made by the assessee out of the funds owned by it.
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 the aforementioned reasons, the substantial question of law No.1 is answered in the negative and in favour of the assessee.
Disallowance of interest under Section 36 and disallowance of interest under Section 36(1)(iii) - interest on capital attributable to capital work in progress - HELD THAT:- In the instant case, the assessee has set up new coffee shops, which amounts to expansion of business and therefore, the bar under the proviso Section 36(1)(iii) is not applicable. It is only after the amendment of Section 36(1)(iii) with effect from 01.04.2016 the proviso can be attracted to the case of expansion of business which is not applicable to the facts of the case as the case of the assessee pertains to Assessment Year 2010-11. 14. For the subsequent Assessment Years i.e., 2011-12, 2012-13 and 2013-14, the Commissioner of Income Tax (Appeals) had granted relief to the assessee and had accepted the stand of the assessee that the setting up of new shops is a case of expansion of existing business and not extension of the same.
On an appeal being preferred by the revenue, the tribunal though noted that a similar issue was decided in favour of the assessee in another assessee's case allowed the appeal preferred by the revenue following the order passed in case of the assessee for Assessment Year 2010-11. The assessee had funds of ₹ 386.91 Crores as against the capital work in progress of ₹ 59.41 Crores, which leads to a presumption that assessee had used its funds towards the expansion and not for borrowed capital. Therefore, interest on borrowed capital could not have been disallowed.
From perusal of the order passed by the tribunal on an application filed by the assessee for rectification of the order, it is evident that tribunal has recorded a finding that there has been no adjudication of the claim for disallowance of processing charges and capitalization of ₹ 9,77,23,650/-. The tribunal has therefore decided the claim of the assessee on merits. Since, the omission on the part of the tribunal was an error apparent on the face of the record, and therefore, the tribunal rightly invoked provisions of Section 254(2) of the Act - On close scrutiny of the order dated 06.12.2017 passed by the tribunal, we find that the tribunal has invoked the jurisdiction to rectify the error apparent on the face of the record. - Decided in favour of assessee.
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2021 (3) TMI 1025 - KARNATAKA HIGH COURT
Assessment of trust - 'Pharmacy' income as income of charitable trust - pharmacy income treated as business income by the Assessing Officer as well as the Commissioner as the assessee does not maintain separate books of accounts - HELD THAT:- From perusal of the provision of Section 11(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A), it is evident that in order to claim benefit of the aforesaid provision, the assessee is required to comply with the twin conditions namely any Institution or Trust being profits and gains of business, unless such income is incidental to the attainment of the objective of the trust and maintenance of separate books of accounts by such Trust or Institution in respect of such business. From perusal of the order passed by the Tribunal, it is evident that the Tribunal has not recorded any reasons whether or not the assessee has complied with the twin conditions mentioned in sub-section 4A of Section 11. The order passed by the Tribunal is cryptic and suffers from the vice of non-application of mind. Therefore, the finding of the Tribunal insofar as it pertains to the first substantial question of law cannot be sustained.
Accordingly, the order of the Tribunal dated 13.07.2016 insofar as it records the finding with regard to the first substantial question of law is hereby quashed. Therefore, it is not necessary to answer the same. The matter is remitted to the Tribunal for recording the finding on the aforesaid substantial question of law bearing in mind the mandate contained in Section 11(4A) of the Act.
15% for accumulation on gross receipts instead of net receipts - nature of receipts in the case of assessee - HELD THAT:- Assessee submitted that the second substantial question of law is no longer res integra and has already been answered against the revenue in 'COMMISSIONER OF INCOME-TAX Vs. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION' [2017 (12) TMI 1067 - SUPREME COURT] and another decision of Supreme Court in 'COMMISSIONER OF INCOME-TAX Vs. PROGRAMME FOR COMMUNITY ORGANISATION' [2000 (11) TMI 4 - SUPREME COURT]. The aforesaid submission could not be disputed by the learned counsel for the revenue. Substantial question of law No.2 decided in favour of the assessee.
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2021 (3) TMI 1019 - KARNATAKA HIGH COURT
Validity and scope of remand order of ITAT - Assessment of trust - depreciation claim of trust - whether the assets in question were used by the assessee or not? - Tribunal held that order of the Commissioner of Income Tax (Appeals) is correct and if no income is earned from the use of the assets during the relevant year for the regular business activity, then depreciation is allowable - HELD THAT:- Tribunal agreed with the contentions urged on behalf of the assessee that if no income is earned from the use of assets during the relevant year for regular business activity of the assessee, then claiming of depreciation is justified. Therefore, the order of the Commissioner of Income Tax to that extent is upheld by the Tribunal also.
Tribunal in impugned order remitted the matter back to the Commissioner of Income Tax (Appeals) to inquire into the question of whether the assets were put to use in the relevant year before adding the block of assets, or not is a relevant factor to be established by the assessee and thereafter the Commissioner of Income Tax (Appeals) is required to pass a speaking order. There is sufficient force in the arguments of the Revenue in regard to such a finding recorded especially in view of the order passed in I.C.D.S. Ltd..[2013 (1) TMI 344 - SUPREME COURT] .
At this stage, the learned counsel for the assessee contended that the Tribunal did not specify the years for which the inquiry should be carried out and the Revenue may take advantage of such an observation and inquire into all years. In our opinion, such an apprehension is uncalled for in view of the fact that the dispute is only with regard to the assessment years 2011-12 and 2012-13. However, we make it clear that the inquiry as ordered by the Tribunal shall be restricted for the years 2011-12 and 2012-13.
Substantial questions of law raised in the appeal are answered against the assessee and in favour of the Revenue
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