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Income Tax - Case Laws
Showing 61 to 80 of 674 Records
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2021 (4) TMI 1205
Revision u/s 263 - Tribunal quashing the order of the Commissioner of Income Tax passed u/s 263 as non-speaking and cryptic order - HELD THAT:- The first reason cited in the show cause notice was that deduction under Section 10B has been allowed without excluding other incomes. The assessee placed on record the copy of the assessment order dated 30.12.2011 passed under Section 143(3) read with Section 147 wherein AO has categorically stated that the assessee has not claimed deduction under Section 10B. Therefore, the finding of the Commissioner of Income Tax that the assessee has claimed deduction under Section 10B is factually incorrect.
So far as the genuineness of the expenditure claimed in the profit and loss account were not verified by the Assessing Officer and the Balance Sheet items and details of annexure were not examined at the time of assessment. The Tribunal, while setting aside the order of Commissioner of Income Tax, held that the Commissioner of Income Tax cannot direct the AO to conduct roving enquiry without any specific directions with regard to specific expenditure or income claimed or suppressed by the assessee. Tribunal observed that the order passed by the Commissioner of Income Tax is a non-speaking and cryptic order. Commissioner of Income Tax has not given any valid reason to come to the conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.
No error or irregularity in the order passed by the Tribunal. - Decided in favour of assessee.
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2021 (4) TMI 1201
Disallowance of depreciation on Intangible assets - HELD THAT:- As decided in own case [2020 (2) TMI 936 - ITAT PUNE]Tribunal allowed depreciation on Intangible assets of Non compete fees, Distribution net work rights and Customer list (depreciation on Goodwill was suo motu allowed by the AO). The authorities below have relied on their respective orders for the earlier years, which have been adjudicated by the Tribunal. In absence of any distinguishing facts having been brought to our notice by the ld. DR, respectfully following the precedent, we hold the assessee entitled to depreciation u/s.32(1)(ii) of the Act on the opening written down value of Non compete fees, Distribution of net work rights and Customer list.
Depreciation o goodwill - The Hon’ble Supreme Court in Smifs Securities Ltd [2012 (8) TMI 713 - SUPREME COURT] has allowed depreciation on goodwill. Respectfully following the same, we direct to allow depreciation on Goodwill also. The impugned order is overturned pro tanto resulting into grant of depreciation on opening written down value of the intangible assets.
Addition to the Intangible asset of Non compete fees and claimed depreciation thereon also - AR submitted that the assessee, while entering into original agreement with CRIL, agreed for certain more payment in future years on the basis of a formula. The said amount of ₹ 1.00 crore was stated to be pursuant to such formulae - HELD THAT:- No calculation in accordance with the formula has been placed on record. In these circumstances, we set aside the impugned order on this score and remit the matter to the file of the Assessing Officer for examining true nature of ₹ 1 crore. If the same is found out to be correct in accordance with the terms of the agreement as to the quantum and nature, then deprecation on such additional amount of ₹ 1 crore should also be granted. In the otherwise scenario, the AO is free to decide the issue as per law. Needless to say, the assessee will be granted reasonable opportunity of hearing.
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2021 (4) TMI 1199
Refusal for grant of registration u/s 12A - Charitable activity u/s 2(15) - HELD THAT:- Though the assessee university was formed in 2008, till the A.Y 2014, it was not required to file any return of income and therefore, the assessee’s contention that it was not aware of the requirement of filing returns of income appears to be bonafide - the assessee has made an application for registration only w.e.f. A.Y 2019-20 onwards. In such circumstances, the requirement of law is that the CIT (E) has to consider whether the objectives of the assessee were charitable in nature and if the activities have already begun, then whether the assessee is carrying on its activities in accordance with such objectives.
Therefore, we agree with the learned Counsel for the assessee that the CIT (E) has not looked into the objectives of this University while considering its application for registration u/s 12A of the Act. Further, from the very next A.Y i.e. 2020-21 onwards, the assessee has been granted registration u/s 12A - it is evident that the CIT (E) while granting the registration, was satisfied about the charitable nature of assessee’s activities. In view of the same, we deem it fit and proper to remand the issue to the file of the CIT (E) with a direction to grant registration u/s 12A if the objectives and activities of the assessee are the same as were considered by the CIT (E) while granting registration u/s 12A of the Act for the A.Y 2020-21 onwards - Assessee’s appeal is treated as allowed for statistical purposes.
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2021 (4) TMI 1198
Rectification u/s 154 - AO erred in taxing the same income of assessee twice, once at special rate of 15% under Double Taxation Treaty between UK and India as per Article 13 of the said treaty and again as normal business income at the rate of 40% being the rate applicable to foreign companies - HELD THAT:- On perusal of the original as well as return of income filed in compliance to defective memo under section 139(9), we find that the assessee was having very casual approach towards filing returns of income. The return of income filed by the assessee on 30/09/2014 contains parts A and B.
After these two parts, there is a verification by the assessee and thereafter different schedules are available in the return of income. In the part A-TI (computation of income), the assessee declared [in the row 2(i)] profit and gains from business other than speculative business at ₹ 26,43,090/-. The assessee also declared income chargeable to special rates as per schedule ‘SI’ at ₹ 26,43,090/-. The Learned Counsel has claimed before us that income of the assessee was liable under section 44D has been but in the return of income filed on 30/03/2015 in the row 34(vi) (on page 58 of the paper-book) the income again section 44D reported as nil. Thus, definitely, return of income has been filed in negligent and casual manner with errors and omissions.
On perusal of the order under section 143(1) dated 10/03/2016 , available on page 78 to 83 of the paper-book, we find that in row having serial No. 10, income chargeable to tax at a special rate has been reported NIL in both columns, i.e., as provided by the taxpayer as well as computed under section 143(1) of the Act. Despite nil income reported in both columns, against Serial No. 10, the Assessing Officer in serial No. 22 has computed tax at special rate of ₹ 3,96,464/- in both the columns for taxpayer as well as under section 143(1) of the Act. Thus, there is an apparent mistake of computing tax at a special rate without any income reported for tax at a special rate.
This apparent mistake in the order under section 143(1), the finding of the Ld. CIT(A) that there is no mistake in the order of the Assessing Officer, is not correct. It is evident that the assessee is at fault for not reporting the income in proper columns, but the Assessing Officer, has also committed apparent mistakes of computing tax without considering the income for special rate. In view of the above observation and in the interest of the substantial justice, we set aside the order of the Learned CIT(A) on the issue in dispute and restore the matter back to the file of the Assessing Officer for deciding the rectification application of the assessee on merit keeping in view the cardinal principle that assessee cannot be taxed twice for the same income, one under the head “profit and gain of business and profession” and other under “special rate specified in DTAA”. It is needless to mention that the assessee shall be provided adequate opportunity of being heard. The grounds of the appeal of the assessee are accordingly allowed for statistical purposes.
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2021 (4) TMI 1197
Rectification u/s 254 - denial of deduction u/s 80-IA on interest on Income Tax refund and interest earned by the assessee on Fixed Deposits (FDs) held with the bank - HELD THAT:- We find that that the circumstances under which deposits were kept with the bank were duly noted in para 5.4 as well as in para 7 of the order. The argument that FDR would have direct nexus with assessee’s business activities and therefore, the same should be treated as part and parcel of the business activities was duly taken note of in para 7 of the order. However, the point of dispute was not the circumstances under which the deposits were held by the assessee and whether the same were part & parcel of business activities.
The same is evident from the fact that Ld. AO, in all the years, had accepted interest on FDR as Business Income only. Rather the point of dispute was whether the assessee was eligible for deduction on interest on FDR within four corners of Sec. 80-IA or not. In fact, the assessee has claimed deduction u/s 80-IA even on interest on Income Tax refund which is ultimately assessed as ‘Income from Other Sources’. Therefore, the fact that FDRs were kept out of commercial expediency and the same was part and parcel of business activities was not under dispute. The assessee claimed deduction u/s 80-IA on interest on FDRs which was assessed as ‘Business Income’ and also claimed similar deduction on interest on Income Tax Refund which was assessed as ‘Income from other sources’. Therefore, the first agreement would not convince us to alter the order, in any manner.
So far as the case laws are concerned, the decision of Hon’ble Apex Court in Liberty India Ltd. [2009 (8) TMI 63 - SUPREME COURT] was rendered on 31/08/2009 and it was concerned with deduction of DEPB Credit / duty drawback in the context of Sec.80-IB read with Sections 80-I and 80- IA. A principle was laid down therein that the words “derived from” is narrower connotation as compared to the words “attributable to” and by using the words “derived from”, the parliament intended to cover sources not beyond the first degree.
During the course of hearing of the appeal, Ld. Sr. Counsel primarily relied upon the decision of Hon’ble Delhi High Court in CIT V/s Eltek SGS (P) Ltd.[2008 (2) TMI 17 - DELHI HIGH COURT] which was rendered on 19/02/2008
However, following Liberty India, the decision of Hon’ble Delhi High Court in Eltek SGS stood reversed by Hon’ble Apex Court on [2010 (3) TMI 1255 - SC ORDER] Therefore, the ratio of this decision rendered by Hon’ble Delhi High Court and other decisions, which followed this decision, was no longer applicable.
Lastly, the two decisions of Hon’ble Rajasthan High Court and Hon’ble Madras High Court have been cited for the first time during the hearing of this application. These decisions are from non jurisdictional High Court and the same were not cited during the hearing of the appeal. Therefore, non consideration of these decisions would not make the order erroneous which would call for any interference in terms of mandate of Section 254(2).
We find that the provisions of Section 254(2) have narrow application and envisage rectification of mistakes which are apparent from record. There is power to rectify but not to review the order. The arguments of Ld. Sr. Counsel, if accepted, would amount to review of the order which is impermissible.
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2021 (4) TMI 1196
Exemption u/s 11 - registration granted by the CIT under Section 12AA of Act is validly in operation - CIT-A allowed exemption - HELD THAT:- CIT(A) has followed the finding of the Hon’ble Jurisdictional High Court in the case of the assessee in earlier year and held that the activity of authority of developing of land etc. are charitable in nature and eligible for registration under section 12AA of the Act. The Ld. CIT(A) has accordingly found the claim of the assessee for exemption under section 11 of the Act in order and also observed that assessee has applied more than 85% of the total income towards charitable purposes. The registration granted by the CIT under Section 12AA of Act is validly in operation in the relevant year and not withdrawn. Thus, the assessee was entitled for exemption under Section 11 subject to fulfilling the conditions contained therein. In view of binding precedent followed by the learned CIT(A), we do not find any error in the order of the Learned CIT(A) on the issue in dispute and accordingly we uphold the same. The additional ground and ground No. 1 of the appeal of the Revenue are accordingly dismissed.
Addition of transfer to infrastructure development funds - claim of the Revenue is that amount has not been considered for application of funds and therefore this issue might be restored back to the file of the Assessing Officer as decided in the case of Khurja Development Authority - HELD THAT:- Exemption under section 11 is allowed, if 85% of the funds received are applied for charitable purposes in the year under consideration and, if there is any short fall in application of such funds, the assessee has to follow the procedure prescribed for getting benefit of section 11
CIT(A) has noted that the assessee had produced before him prescribed form as laid down in the Rules, with the request for carry forward of the amount for utilization in subsequent years and, thus, has fulfilled the requirement as prescribed in Explanation –I to Section 11 of the Act. Before us, the learned DR failed to controvert this finding of the Learned CIT(A). In our opinion, in the instant case before us, the assessee has fulfilled the requirement of law and we do not find any reason for restoring the matter to the Assessing Officer. We do not find any error in finding of the Learned CIT(A) on the issue in dispute and accordingly we uphold the same. The ground No.2 of the appeal of the Revenue is also dismissed.
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2021 (4) TMI 1193
Rejection of books of accounts - Estimation of profit - assessee submitted that he had maintained regular books of account and got audited them u/s 44AB - HELD THAT:- We are of the view that since the books of account of the assessee are subject to audit u/s 44AB of the Act and bills & vouchers were not available and before the AO the assessee confessed that he destroyed the bills/vouchers after incurring the expenditure. Considering the prayer of the assessee & in the interest of justice as well as looking into the facts of the case, we direct the AO to estimate the profit @ 8% on direct contract receipts and @ 3% on sub-contract works. Accordingly, ground raised by the assessee on this issue is partly allowed.
Long term capital gains on the sale of landed - HELD THAT:- The contention of the assessee is that the purchase consideration of the property is at ₹ 1,49,00,000/- and the AO while making the assessment for AY 2008-09 has determined the total purchase of the property at ₹ 3.5 crores. Therefore, to meet the ends of justice, we remit the issue back to the file of the AO with a direction to ascertain the correct purchase value of the property and decide the issue in accordance with law after providing reasonable opportunity of being heard to the assessee in the matter. The assessee is directed to substantiate his claim by way of documentary evidence. This ground is allowed for statistical purposes.
Unexplained cash credit - HELD THAT:- On perusal of record and submissions of the assessee, the assessee could not satisfy the basic ingredients laid down in section 68 of the IT Act even though the revenue authorities provided sufficient opportunities to the assessee to substantiate his claim by way of documentary evidence as per the requirement of section 68 of the Act. Therefore, we are of the considered view that the CIT(A) has rightly decide the issue against the assessee and accordingly, we uphold the order of the CIT(A) and dismiss the ground raised by the assessee on this issue.
Unexplained investments in form of pro-notes in the hands of the assessee in respect of the following pro-notes found and seized by the department at the time of search - HELD THAT:- The submission of the assessee is that these three pro-notes were not in the name of the assessee and it was in the name of others as per the above table. We are of the view that if the AO was not satisfied with the submission of the assessee, he could have summoned the persons, whose names are appeared on the pro-notes, but, without doing the same, he had made addition in the hands of the assessee is not proper and not in accordance with law. We find force and substance in the arguments advanced by the ld. AR of the assessee and therefore, we direct the AO to delete the addition made in the hands of the assessee.
Addition of interest income accrued - HELD THAT:- On perusal of the interest calculation done by the AO @ 20% on the entire pro-notes, we are of the view that the calculation done by the AO is not correct.
The assessee has admitted the interest of ₹ 2,17,101/-. The AO has calculated the interest on the entire amount of ₹ 33,76,000/- whereas we have directed the AO to delete the additions of ₹ 9,00,000 + 1,26,000/- + 23,50,000/- on the ground that the source of the same were explained by the assessee. We have observed that the assessee has explained the source of ₹ 23,50,000/- and directed the AO to delete this addition; however, he is liable for interest income thereon only @ 24% as offered on the pro-notes as observed by the AO. Therefore, we direct the AO to recalculate the interest on ₹ 23,50,000/- . This ground is partly allowed.
Unexplained investment in jewellery - HELD THAT:- During the course of search, gross weight of jewellery at 751.5 grams were found. On perusal of the submissions made by the assessee before the CIT(A) that there are four members in his family consisting of his wife, unmarried daughter, son and himself. Assessee quoted Instruction No. 1916 of 11/05/1004 of CBDT and according to which, he is entitled to have 950 grams of jewellery and the assessee is having the less than the entitled quantity. However, the AO denied to give benefit as per the said Instruction of CBDT on the ground that as per the above Instruction certain jewellery not to be seized. We are of the view that various courts have decided the issue in favour of the assessee in the light of the above Instruction issued by the CBDT - We direct the AO to delete the addition made in the hands of the assessee on account of jewellery.
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2021 (4) TMI 1192
Reopening of assessment u/s 147 - addition u/s 68 on account of unexplained cash credit and u/s 69C on account of unexplained expenditure - HELD THAT:- As decided in SHRI UDIT KUMAR DUGAR [2019 (5) TMI 430 - ITAT KOLKATA] from a reading of the reasons recorded by AO to justify re-opening of assessment, clearly show that the AO has taken note of the information from the DIT(Inv.) and taken the contents of the information given by DIT (inv) as gospel of truth against the assessee [without any verification or enquiry] to form a conclusion about escapement of income without independent application of mind by himself is nothing but an action taken by AO based on the strength of borrowed belief of DIT (inv) and not that of AO, which vitiates the very assumption of jurisdiction by AO to re-open the assessment, which finding of us will be clear when we analyze the reasons recorded in detail infra.
From the aforesaid reasons recorded by AO it is evident that other than the general information given by DIT (inv) there is no other material the AO collected himself after preliminary enquiry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that “income of the assessee has escaped assessment”. According to us, the information given by DIT(Inv) can only be a basis to ignite/trigger and be the starting point to enquire; and at that stage the information of DIT (Inv.) can be termed as a foundation only to form “reason to suspect” and not reason to believe escapement of income which is the jurisdictional fact & law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147 of the Act. And the reason to suspect cannot be the basis for usurping jurisdiction to reopen u/s. 147 of the Act, for conducting roving/further examination to be resorted by him in order to strengthen the suspicion to an extent which can later transform the suspicion to create the belief in his mind that income chargeable to tax has escaped assessment. Merely on an allegations levelled by DIT (Inv.), as in this case explaining the general modus operandi carried out by un-scrupulous persons in suspected transactions to earn bogus LTCG, can only raise suspicion in the mind of the AO (which fact we have pointed out earlier) which is not sufficient/requirement of law for reopening of assessment. - Decided in favour of assessee.
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2021 (4) TMI 1191
Deduction u/s 80IC - whether CIT (A) has erred in deleting the disallowance of addition made u/s 80IC by the AO by granting 25%/30% of the deduction instead of 100% claimed by the assessee during the year under assessment? - Revenue contended that when initially assessee has availed deduction u/s 80IC for a period of 5 years @ 100%, it would be entitled to deduction on substantial expansion for remaining five assessment years @ 25%/30% - HELD THAT:- Hon’ble Supreme Court in case of Aarham Softronics [2019 (2) TMI 1285 - SUPREME COURT] in the preceding para after duly discussing the decision rendered by Hon’ble Supreme Court in case of Classic Binding Industries [2018 (8) TMI 1209 - SUPREME COURT], reached the conclusion that when the assessee has carried out substantial expansion in the existing unit immediately on completion of first five years i.e. FY 2011-12 and duly complied with the conditions laid down in clause (ix) sub-section 8 of section 80IC, it is entitled for deduction u/s 80IC for the year under assessment. So, we are of the considered view that ld. CIT (A) has decided the issue in controversy in favour of the assessee by duly relying upon the order passed by the coordinate Bench of the Tribunal in case of Tirupati LPG Industries Ltd. [2014 (1) TMI 1689 - ITAT DELHI] and has rightly deleted the addition made by the AO on account of disallowance u/s 80IC. So, finding no scope to interfere into the findings returned by the ld. CIT (A), grounds no.1, 2, 3 & 4 are determined against the Revenue.
Addition on ad hoc basis @ 10% on account of interest expenses on car having element of personal use, tour and travelling expenses and conveyance expenses respectively - HELD THAT:- When undisputedly assessee has claimed the expenses on the basis of its audited financials which have not been disputed by the AO, the ad hoc additions on the basis of surmises are not permissible under law. Moreover when it is not the case of the AO that these expenses have not been made wholly and exclusively for the purpose of business by the assessee, there is no ground to disallow the same. So, we are of the considered view that when AO has proceeded to make aforesaid disallowances without assigning any reason but on the basis of surmises, the disallowances are not sustainable in the eyes of law, hence there is no scope to interfere into the deletion made by the ld. CIT (A). - Decided against revenue.
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2021 (4) TMI 1190
TDS at the higher rate of 20% in case of payee without PAN under the provisions contained u/s 206AA - Section 206AA overriding effect on DTAA or not? - DTAA between India and Neitherland - Short deduction of TDS - non-provision of PAN in case of Engine Lease Finance B.V. (ELFC), a non-resident company, taxed resident in Neitherland, which was not mentioned at the time of return as the foreign company did not have PAN.HELD THAT:- As engine is a part of aircraft and cannot be said to be an aircraft and payment made for rent of engine are covered under equipment as per Article 12 (4) of the DTAA between India and Neitherland; that under Article 12(4) of the DTAA between India and Neitherland, the term “royalty” does not cover use of, or the right to use equipment itself; that rental of aircraft engine is neither a copyright nor a payment of any information; that under Article 12(6) of the DTAA, fee for technical services also does not include the amount paid for services that are ancillary and subsidiary to the rental of ships, aircrafts, containers or other equipment used in connection with the operation of ships or aircrafts in international traffic; the assessee is entitled for beneficial provisions of DTAA.
So, following the order passed by the coordinate Bench of the Tribunal in cases of DDIT (IT-II), Pune vs. Serum Institute of India Ltd. [2015 (6) TMI 26 - ITAT PUNE], DCIT vs. M/s. Infosys BPO Ltd. [2020 (1) TMI 1011 - ITAT BANGALORE] and the judgment of Hon’ble Delhi High Court in case of Danisco India Pvt. Ltd. vs. UOI[2018 (2) TMI 1289 - DELHI HIGH COURT] we are of the considered view that ld. CIT (A) has erred in holding that in this case, provisions contained u/s 206AA overrides beneficial provisions of DTAA between India and Neitherland. Consequently, assessee has rightly deducted the tax @ 10% as per provisions contained under DTAA as section 206AA cannot have overriding effect on DTAA, hence no demand is payable by the assessee. Hence, question framed is decided in favour of the assessee.
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2021 (4) TMI 1189
Disallowance being brokerage paid - HELD THAT:- Disallowance was made based on the conclusion drawn by the Assessing Officer on the first time of disallowance of loans, forfeits the earnest money deposit. There is evidence of payment and services. No enquiries were made by the Assessing Officer. No adverse evidence is collected. Inference was drawn without any basis. The said payment was made for the purpose of business. In view of the above discussion and consistent with the view taken by us in the previous disallowance, we uphold the order of the ld. CIT(Appeals) and dismiss this ground of Revenue.
Loss on purchase of land or earnest money paid - HELD THAT:- We find that the Assessing Officer in this case has not made any enquiry or investigation, based on which he has come to the abovestated conclusions-
Nobody was examined. No questions were asked to third parties. No information was called for from third parties. There is no evidence collected against the claim of the assessee.
In our view, there is no contradiction between the versions of agreements for sale and the submissions made by the assessee- firm to the arbitrator that the assessee- firm was desirous to develop the plots of land for earning profit and that there were fall in prices of properties. No adverse inference can be drawn.
Before arbitrator, ld. Counsel stated that the assessee entered into the agreement with the hope they will be able to arrange a partner who will finance and that they tried to arrange finances for this deal. There is no evidence to controvert this submission. The arbitrator has given a finding of fact that the value of the property declined between the period 04. 01.2013 to 18. 02. 2013. The Assessing Officer has not found any evidence to controvert these findings of the arbitrator. Genuineness of this agreement to sale cannot be disputed by the Assessing Officer unless he examined the sellers of the land and unless he collects evidence to show that these are manipulated agreements which are arranged in connivance with other parties, for financial gain of the assessee and others involve in the events.
This observation cannot lead into a conclusion that the agreements are bogus. The fact that agreements were entered into, amounts were paid and the fact that these advances or earnest money was forfeited by the seller is not controverted with evidence by the Assessing Officer.
The undisputed fact is that the assessee is engaged in the business of real estate and that these payments were made in the course of business and that the earnest money was forfeited resulting into business loss of the assessee.
Such loss is allowable as a deduction as held in JWALA PRASAD RADHA KISHAN VERSUS COMMISSIONER OF INCOME-TAX, UTTAR PRADESH. [1970 (7) TMI 10 - ALLAHABAD HIGH COURT], Inden Bislers [1972 (9) TMI 28 - MADRAS HIGH COURT] and Kishangunge Madira Sangh [1986 (9) TMI 45 - RAJASTHAN HIGH COURT]
Addition of commission - HELD THAT:- As the persons who received the commission confirmed the same and submitted their income tax details, (ii) income-tax details demonstrated that these commission agents have disclosed the amount in question as their income by filing the return of income. Nothing is brought on record by the Assessing Officer to dislodge the claim of the assessee or to show that the money paid as commission has come back to the assessee. Thereafter the ld. CIT(Appeals) relied on the judgment of the Hon’ble Jurisdictional High Court in the case of Alpha Hydronics Pvt. Limited [2014 (11) TMI 1156 - CALCUTTA HIGH COURT] and allowed the claim of the assessee. We find no infirmity in the order of the ld. CIT(Appeals).
Capital gain declared u/ s 45 (4) - transaction of retirement of partners - partners who contributed the land in the partnership at the time of jointing the firm took it back at the time of retirement at the same value - HELD THAT:- We find that the assessee has suo motu offered to tax the amount of gain that arose on this transaction of retirement of partners under the head “long-term capital gains”. It is not a case where the assessee claims that the partners of the assessee- firm retired and consequent to settlement of accounts these retiring partners had withdrawn such land from the firm. The ld. Counsel for the assessee states that the land contributed to the assessee-firm by the partners at the time of formation of the firm had withdrawn by the partners at the time of retirement from the firm. This cannot be a case of settlement of accounts on retirement. It is not a case where retiring partners are merely releasing or relinquishing all their rights and interest in the firm on retirement and receiving the value of one’ s interest in the firm. No such documentary evidence was produced before us or before the lower authorities. No relief can be granted to the assessee in the absence of any details. This issue requires investigation into fresh facts which are not on record. Hence this additional ground cannot be admitted. Under these circumstances, we dismiss this ground of Cross Objection.
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2021 (4) TMI 1188
Addition on account of the amount deposited in the saving bank account of the assessee maintained with Punjab National Bank - as per CIT-A substantial deposits both in cash and cheque and the agriculture income had been found to be deposited in the assessee's bank account by means of account payee cheques, in these circumstances, there was an onus on the assessee to explain the sources of deposits in cash which had not been cogently done. He therefore sustained the addition - HELD THAT:- As the assessee was an aged person who was an agriculturist at the relevant time and was selling the agriculture produce therefore his source of income was only the agricultural income which has been accepted by the Department. The assessee was not having any other source of income or doing any other business/profession, therefore the explanation given by the assessee for depositing the amount of ₹ 48,56,000/- out of withdrawals of ₹ 68,00,000/- appears to be plausible. In that view of the matter the impugned addition made by the A.O. and sustained by the Ld. CIT(A) is deleted. Appeal of the Assessee is allowed.
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2021 (4) TMI 1187
Rejection of books of accounts - Estimation of profit - AO estimated the profit at 15% of gross receipt - CIT(A), on the basis of the offer given by the assessee to buy peace and to avoid future litigation, sustained the addition of 1% of the turnover over and above the returned income - HELD THAT:- When, in the preceding three years the net profit rate had varied from 4.26% to 5.94%, it is not understood as to how and why the ld.CIT(A) has accepted the offer given by the assessee of additional income of 1% of the turnover which makes the net profit rate of 2.84%. Considering the totality of the facts of the case and considering the fact that net profit rate from A.Y. 2007-08 to 2009-10 varied from 4.26% to 5.94% and the net profit rate for the current year was shown at 1.84%, estimation of net profit rate of 4.5% under the facts and circumstances of the case will meet the ends of justice. Accordingly, the order of the CIT(A) is modified and the AO is directed to adopt the net profit rate of 4.5% on the turnover of ₹ 14,85,42,058/- as the net income of the assessee. The grounds raised by the Revenue are accordingly partly allowed.
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2021 (4) TMI 1186
Addition of provisions for liquidated damages - HELD THAT:- Since, the matter stands adjudicated and allowed for several years prior, in the absence of any material change, we hereby hold that the addition made by the AO cannot be sustained.
Advance and deposits written off - HELD THAT:- We are in agreements with the fundamentals argued that it is a generally accepted principle that losses, other than capital losses, which arise out of and are incidental to the business of assessee must be necessarily deducted in the ascertainment of profits of the business u/s 28 - Section 28 of the Act provides for taxation of ‘profits and gains’ of any business or profession. From the charging provisions of the Act, it is discernible that the words ‘income’ or ‘profits and gains’ should be understood as including losses also, so that, in one sense ‘profits and gains’ represent ‘plus income’ whereas losses represent ‘minus income’. In other words, loss is negative profit. Both positive and negative profits are of revenue character. Both must enter into computation, wherever it becomes material, in the same mode of the taxable income of the assessee. Therefore, the trading loss of a business is deductible in computing profits earned by the business even though there is no specific provision for allowance thereof.
As decided in MYSORE SUGAR COMPANY LIMITED [1962 (5) TMI 3 - SUPREME COURT] while computing the ‘assessable profits and gains’, an appellant is entitled to claim incurred for the purpose of its business but not covered under any specific clause.
On going through the facts and circumstances of the instant case, keeping in view the judgments of Hon’ble Supreme Court since the amount has been incurred during the regular course of business, the same is allowed to be claimed under expenses for the year.
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2021 (4) TMI 1185
Revision u/s 263 - subsidy amount received by the assessee attracts the provisions of Explanation 10 to section 43(1) of the Act is not proper - HELD THAT:- As subsidy is for cost of plant & machinery and technical civil works. Therefore, we are not inclined to accept the submission of the ld. AR that the subsidy was not for the cost of the particular assets and as per the above scheme, there is a restrictive clause that the subsidy shall be kept by the beneficiary in the form of fixed deposits without any interest which has been complied by the assessee. It is clear from the financial statements under Schedule XIV that the deposits with the bank (against subsidy received) ₹ 50 lakhs. The assessee cannot utilize the funds till the locking period as framed by the Govt. of India for enjoying the subsidy to the beneficiary.
There is no doubt that as per the section 43(1) Explanation 10, the assessee should reduce the cost of the fixed assets from the subsidy amount, but, in the impugned AY, the assessee has been barred by limitation as provided in the scheme. Considering the above scheme framed by the Govt. of India, under which, the assessee has received the subsidy, ld. Pr. CIT has not justified for this impugned AY revising the assessment framed u/s. 143(3) of the Act by exercising powers u/s. 263 of the Act. Therefore, the finding of the Pr. CIT that the subsidy amount received by the assessee attracts the provisions of Explanation 10 to section 43(1) of the Act is not proper and the same is not applicable to the case of the assessee. Therefore, we set aside the order passed by the Pr. CIT and restore the order of the AO. Appeal of the assessee is allowed.
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2021 (4) TMI 1176
Assessment of trust - disallowing depreciation claimed on the premise that the cost of the assets were already claimed as application of income - HELD THAT:- Issue decided against revenue as relying on M/S. SRA SYSTEMS LTD. [2021 (3) TMI 977 - MADRAS HIGH COURT].
Set off to excess application of income of previous Assessment Years - HELD THAT:- When the assessee-Trust applies 85% of its income received by way of voluntary contributions other than the voluntary contributions received with specific directions and the income derived from property held under Trust, then, such income shall not be included in the total income of the Trust. Further, the balance 15% of such income even if accumulated or set apart shall also not be included in the total income of the Trust.
The Tribunal, while dismissing the appeal, observed that when the Trust applies its fund from its corpus, accumulated fund, sundry creditors or from the loan obtained by the trust, then, such funds which are applied cannot be said to be funds applied from the income of the Trust. Further, the Tribunal held that there cannot be a case where the Trust can apply its income more than the income received by it for the purpose of section 11(1)(a) and (b) of the Act.
In the Judgment reported in MATRISEVA TRUST [1999 (3) TMI 34 - MADRAS HIGH COURT] the Hon'ble Division Bench of this court, while deciding the substantial questions of law as to the set off of the deficiency of funds of this year against the earlier year surplus is concerned, categorically decided the same in favour of the assessee and against the Revenue. Though the appellant-assessee relied upon the said Judgment before the Income Tax Appellate Tribunal, the Tribunal did not consider the same. The Commissioner of Income Tax (Appeals), went beyond its jurisdiction and commented on the Judgments of the High Courts.
Commissioner of Income Tax (Appeals) is bound by the Judgments/Orders of the High Courts. The Commissioner of Income Tax (Appeals) was not sitting over appeal on the Judgments of the Hon'ble High Courts. If the Judgments/Orders of the High Courts are applicable to the facts and circumstances of the case pending before the Commissioner of Income Tax (Appeals), he must follow the Judgments/Orders of the Hon'ble High Courts without any deviation. The observation made by the Commissioner of Income Tax (Appeals) is unwarranted and cannot be appreciated in any manner.
Thus we set aside and the matter is remitted back to the Assessing Officer to decide the matter afresh taking into consideration the ratio laid down in the Judgment of the Hon'ble Division Bench of this court reported in Matriseva Trust after giving opportunity of hearing to the appellant-assessee.
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2021 (4) TMI 1175
Reopening of assessment u/s 147 - non disposal of objections prior to issuance of the impugned SCN - HELD THAT:- The Court is unable to agree with the above submission on behalf of the Department. A perusal of the SCN reveals that there is no mention of the Petitioner's detailed objections given in writing on 8th October, 2013. In fact, even the counter affidavit filed by the Department is silent on disposal of such objections prior to issuance of the impugned SCN. Indeed the requirement spelt out by the Supreme Court in GKN Driveshafts [2002 (11) TMI 7 - SUPREME COURT], that an assessee's objection to the reopening of the assessment should be disposed of by the Assessing Officer by a speaking order is a mandatory requirement that cannot be dispensed with. Admittedly this mandatory requirement has not been complied with in the instant case. On this ground alone the re- assessment proceeding is vitiated.
Relying on the decision in Principal Commissioner of Income Tax, Kerala v. N.C. Cables Ltd [2017 (1) TMI 1036 - DELHI HIGH COURT], Mr. Ray submitted that there was a failure by the competent authority in terms of Section 151 of the IT Act to authorize the reopening of the assessment. Factually, the above position has not been able to be disputed by Mr. Mohapatra, learned Standing Counsel on behalf of the Department. Indeed the impugned letter dated 10th / 20th May, 2013 issued by the Joint Commissioner of Income Tax, Rourkela Range, to the ITO simply states 'Approval is hereby accorded u/s. 151(2) of the I.T. Act, 1961 for initiation of proceeding u/s. 147 of the I.T. Act, 1961 in the case of Sri Viresh Hemani'. There is no indication of any application of mind by the authority. Moreover, the approval under Section 151 of the Act had to be granted by the Principal Chief Commissioner, or the Chief Commissioner, or the Principal Commissioner, or the Commissioner, if the reopening is beyond four years. However, the above approval in the instant case was issued by the Joint Commissioner and therefore, it was not a valid approval under Section 151 of the IT Act. - Decided in favour of assessee.
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2021 (4) TMI 1173
Default u/s 201(1) and 201(1A) - Petitioners submits that impugned order is misconceived, untenable and grossly delayed and is barred by limitation - HELD THAT:- As respondents submits that insofar as GIA US is concerned, while the tribunal had held that GIA US has no permanent establishment in India and the Revenue has preferred an appeal in these writs and the same is pending.
With regard to the submission on behalf of the Petitioners about limitation, he submits that the limitation for passing order under Section 201 is governed by Section 201(3) therefore, submits that the notice dated 08.03.2021 is within the prescribed period of limitation of seven years as above.
As submitted on behalf of the petitioners that the Respondents have not been able to show, as to how this provision would hold the present facts and circumstances when reference herein is to payment to non-residents and not to residents as contemplated in the said sub-section.
In view of aforesaid, prima facie, there appears to be some substance in the Petitioners’ submissions. Hence, rule. Rule is made returnable early.
Put up the matters for hearing in the 2nd week of July, 2021. In the meanwhile, there shall be no coercive action pursuant to impugned order/notices.
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2021 (4) TMI 1171
Reopening of assessment u/s 147 - petitioner had declared the loss of income from business - HELD THAT:- In the assessment order dated 30.03.2006 passed under Section 143(3) of the Income Tax Act, 1961, it has been merely stated that the petitioner company had been leased out to M/s.Paharpur Industries Ltd. and a lease rent charges has been treated as conversion charges and that the assessment was completed treating the conversion charges as rent and the expenditure relating to the manufacturing activity was reimbursed by M/s.Paharpur Industries Ltd.
Thus, the focus was only on the income derived from the said company. It was not on the method of computation of the income. There is no discussion on the issues relating to the computation of the loss. The said order aslo does not indicate as to whether there was any discussion regarding the reasons given for reopening of the assessment in a communication dated 30.06.2010 while passing the aforesaid assessment order.
Correctness of the computation of net loss for the purpose of arriving at the book loss and for the purpose of Minimum Alternate Tax in contrast with the returns filed under Section 139 of the Income Tax Act in a refund cannot be tested under Article 226 of the Constitution of India. Scope of enquiry under Article 226 of the Constitution of India is limited. It is best left to the Assessing Officer/Authorities in the hierarchy prescribed under the provisions of the Income Tax Act, 1961 to look into it.
Mere declaration in the Auditors Report to the shareholders of the petitioner that as on 03.09.2003, the secured loans and the losses of the company have been understated to the extent of interest written back and the balance sheet and the profit and loss account dealt with in the said report were in compliance with the Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956 is not sufficient to conclude that there was true and full disclosure by the petitioner at the time of filing of income tax returns for the purpose of assessment.
The computation of income as per the Companies Act, 1956 seems to indicate that the petitioner had a whooping loss of ₹ 13,99,07,652/- which was carried forward into the Assessment Year 2002-03 apart from the loss incurred during the financial year 2001-02 amounting to ₹ 3,33,28,163/-. Therefore, it is not clear as to how the petitioner is aggrieved by the impugned re-opening of the assessment vide notice dated 17.03.2010 and the impugned speaking order dated 03.09.2010. Even according to the petitioner, the entire exercise was an academic exercise and a harassment as no additional tax was to be paid by the petitioner. It is therefore not clear why the petitioner is fighting shy from participating in the aforesaid proceedings. After all, the speaking order merely shows a prima facie view of the Income Tax Department to justify the re-opening of the assessment. It is not conclusive and it is open for the petitioner to meet of the points before the respondent by participating in the proceeding and persuade the respondent Income Tax Officer to drop the proceedings.
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2021 (4) TMI 1169
Validity of recovery proceedings - Intimations under Section 143 (1) - challenge to the intimations is on the ground that they do not confirm to the prescription of Section 143(1) - Revenue would argue that the error arises from the fact that the returns of income have been filed belatedly and beyond the dates stipulated under Section 139 of the Act. There is no doubt or dispute in this regard. Hence, the claim under Section 80P could not have been putforth in the light of provisions contained in Section 80AC(ii) as it stood post amendment with effect from 01.04.2018 - HELD THAT:- The scope of an 'intimation' under Section 143 (1) (a) of the Act, extends to the making of adjustments based upon errors apparent from the return of income and patent from the record.The explanation cannot curtail or restrict the main thrust or scope of the provision and due weightage as well as meaning has to be attributed to the purposes of Section 143(1)(a)
The provisions of Section 80AC(ii) make it clear that any deduction that is claimed under Part C of Chapter VIA would be admissible only if the return of income in that case were filed within the prescribed due date. Thus no claim under any of the provisions of Part C of Chapter VIA would be admissible in the case of a belated return. There is no dispute on this position. The date of filing of a return of income would be apparent on the face of return and upon a perusal thereof, it would be clear as to whether the return is a valid return, having been filed within the statutory time limit, or a belated one. This is mechanical exercise and one that can be carried out by the CPC, very much within the scope of Section 143 (1) (a) (ii) of the Act.
The conduct of the petitioners is also relevant. Not only have the returns been filed belatedly but the petitioners have also chosen not to co-operate in the conduct of assessment. They are admittedly in receipt of the defect notices from the CPC, but have not bothered to respond to the same. The writ petitions have themselves been filed belatedly and after the elapse of more than six to eight months from the dates of impugned orders, in all cases. It is only when the Revenue has initiated proceedings for recovery by attachment of bank accounts have the petitioners approached this Court. This factor also strengthens my resolve that these are not matters warranting interference in terms of Article under Section 226 of the Constitution of India, quite apart from the decision that I have arrived at on the legal issue.
These writ petitions are dismissed and connected Miscellaneous Petitions are also closed.
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