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Income Tax - Case Laws
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2021 (7) TMI 1450
TDS u/s 195 - Disallowance u/s. 40(a)(i) - payment towards communication and connectivity charges in Form 3CEB - CIT(A) deleting the disallowance made holding that the expenses involved therein as reimbursement cost - HELD THAT:- We note that the assessee made its contentions before the CIT(A) vide its submissions wherein the CIT(A) reproduced the relevant part of such submissions in his impugned order but however the CIT(A) did not discuss the same in detail while recording reasons for holding such payment cannot be considered as fees for technical services. He simply held the said payment was in the nature of reimbursement of cost allocation made by the BBPLC in respect of providing IT support services to assessee i.e. BSS so therefore, as rightly contended by the ld. DR, as agreed by the ld. AR, we find no reasons recorded by the CIT(A) in support of his finding in deleting the disallowance made by the AO u/s. 40(a)(i) of the Act is not justified.
Thus, we deem it proper to remand the matter to the file of CIT(A) for its fresh adjudication. The assessee is liberty is file evidences, if any, in support of its claim. Thus, the grounds raised by the Revenue are allowed for statistical purpose.
Cross objection of assessee - As contended that if at all the disallowance u/s. 40(a)(i) is sustained, without prejudice to such disallowance the assessee contended that it is entitled for enhanced deduction to the extent of disallowance u/s. 10A - HELD THAT:- Since, we have taken our view in the aforementioned paragraphs in remanding the matter to the file of CIT(A) for its fresh adjudication in respect of the issue u/s. 40(a)(i) of the Act, in our opinion, the issue raised in cross objection does not survive before this Tribunal but however the liberty is afforded to the assessee to raise the same before the CIT(A). The CIT(A) shall take up the issue while deciding the issue u/s. 40(a)(i) of the Act and pass order in accordance with law. Cross objection filed by the assessee is dismissed.
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2021 (7) TMI 1447
Income from house property - notional ALV u/s 22 - AO bringing to tax the notional ALV of the unsold properties being vacant commercial, residential/self-occupied assets in terms of Section 22 - Difference between the original Grounds of Appeal and the revised one - HELD THAT:- As fresh plea of the assessee based on the judgment of Neha Builders P. Ltd. [2006 (8) TMI 105 - GUJARAT HIGH COURT] and also Chennai Properties & Investments Limited [2015 (5) TMI 46 - SUPREME COURT] for the proposition that the income from the properties in the instant case be held to be assessable under the head ‘income from business or profession’ and that, if it is so held, the same would oust the charge made by the Assessing Officer by invoking Section 22 of the Act under the head ‘income from house property’. Even if it is taken that the aforesaid plea is the new plea raised by the assessee, it is quite clear that all the facts necessary to adjudicate the same are available on record and, therefore, we had made known to the parties that the said plea is admissible, and accordingly, both sides had addressed us on the merits of the same also.
Addition u/s 22 - We are in concurrence with the assertion made by the learned CIT-DR that the matter stands fully covered in favour of the Revenue even with regard to the plea of the assessee based on the judgment of Neha Builders P. Ltd. (supra). In fact, in the case of Ansal Housing Finance & Leasing Company Ltd. (2016 (11) TMI 208 - DELHI HIGH COURT] considered the ratio of the judgment Chennai Properties & Investments Limited (supra) and held that the same was not applicable to the facts of the case and, accordingly, had reiterated its earlier judgment on the instant issue in the case of Ansal Housing Finance & Leasing Company Ltd. (supra). Notably, assessee’s own case was also clubbed with the case of Ansal Housing Finance & Leasing Company Ltd. (supra) before the Hon’ble High Court. Therefore, in this view of the matter, we find no merit in the plea raised by the assessee. Accordingly, the order of learned CIT(A) is liable to be affirmed.
Disallowance of deduction u/s 80IA(4)(iii) - HELD THAT:- Action of the lower authorities in denying the claim of the assessee for deduction u/s 80IA(4)(iii) cannot be faulted for the reasons ascribed in their respective orders. The requisite notification entitling the assessee for the deduction has been rejected by the CBDT, as is emerging from the record and therefore, we find no reason to interfere with the action of the lower authorities. The plea of the assessee that in case the notification is received in future in pursuance to assessee’s review petition pending before the CBDT, it is sufficient to direct the AO that in case, he is approached by the assessee with the requisite notification on a later date, he shall deal with the same in accordance with law.
Nature of expenses - Expenses incurred in connection with issue of equity shares to Qualified Institutional Buyers (QIBs) - Assessee raising alternative plea for deduction of the impugned expenditure based on Section 35D - HELD THAT:- So far as the plea of the assessee for deduction of the impugned expenditure incurred on issue of shares to QIBs in terms of Section 37(1) of the Act is concerned, the same is liable to be decided against the assessee following the precedents in the assessee’s own case.
Assessee raising alternative plea - We find no reasons to restrict the assessee from raising a plea for deduction of the impugned expenditure based on Section 35D of the Act.
The impugned expenditure incurred in connection with issue of shares be considered in terms of Section 35D of the Act even if before the lower authorities, the claim revolved around Section 37(1) of the Act only. In fact, in the case before the Hon'ble Supreme Court, the matter by the lower authorities was considered in the light of the earlier judgment in the case of Brooke Bond India Limited [1997 (2) TMI 11 - SUPREME COURT] an approach which was not approved by Hon'ble Supreme Court having regard to the fact that Section 35D of the Act came on the Statute after the rendering of the decision in the case of Brooke Bond India Limited (supra). Therefore instant claim of the assessee would fall for consideration in terms of Section 35D of the Act provided of course, the expenditure is in connection with issue of ‘Public subscription’ of shares as per Section 35D(2)(c)(iv) of the Act.
QIBs qualify to be treated as public shareholders in terms of the SEBI listing requirements. Therefore, the most pertinent condition prescribed in Section 35D(2)(c)(iv) of the Act, i.e., the expenditure is in connection with ‘public subscription’ of shares stands fulfilled.
Whether matter may be remanded back to the Assessing Officer to ascertain whether QIBs are public shareholders or not? - In our considered opinion, remanding the matter on this aspect to the Assessing Officer would only prolong the litigation and not achieve any substantive purpose.
It is not a case where the fresh alternate plea of the assessee, based on Section 35D of the Act, is required to be examined on the basis of any fresh facts or material, which was hitherto not before the Assessing Officer. The short point is as to whether the ratio of the judgment of Hon'ble Supreme Court in the case of Brooke Bond India Limited (supra) would apply in the context of claim under Section 35D or not? This aspect is clearly answered in the case of Shasun Chemicals & Drugs Limited (2016 (9) TMI 1199 - SUPREME COURT). Furthermore, on the issue of classification of QIBs as a part of ‘public shareholders’ is concerned, the said issue is covered by the decision of our Coordinate Benches. Thus, the alternative plea of the assessee with regard to the allowability of expenditure incurred on issue of shares to QIBs is allowable in terms of Section 35D.
We reiterate that so far as the claim of deduction under Section 37(1) of the Act is concerned, the same is decided against the assessee but the claim under Section 35D of the Act is allowed in terms of our above discussion. Thus, assessee partly succeeds in this Ground of appeal.
LTCG - Surplus arising on transfer of its capital asset, viz., infrastructure assets to its wholly owned subsidiary - primary dispute on this aspect is with regard to Section 47(iv) of the Act whereby the claim of the assessee is that the “transfer” in question is not exigible to the charge of capital gains under Section 45 - HELD THAT:- The terms of the agreement bring out that the development and maintenance of the Trunk Infrastructure was the responsibility of the assessee in terms of the project awarded by the Government of Uttar Pradesh. The assessee was to earn user charges etc. from this asset in terms of the Award by the Government of Uttar Pradesh. This Trunk Infrastructure was transferred to AAIL for the reason that the assessee desired that the infrastructure related work and its maintenance and servicing to end users by a Special Purpose Vehicle. The supporting infrastructure for linking the Trunk Infrastructure to end users was being developed by the assessee itself but through AAIL. Another important feature was that AAIL was not permitted to transfer the Trunk Infrastructure to any third party.
Notably, Section 45 of the Act provides that any profits and gains arising from a transfer of a capital asset effected in the previous year will be chargeable to income tax under the head ‘capital gains’. Such capital gains are deemed to be the income of the previous year in which such transfer took place. Section 47 enumerates a list of transactions which would not be considered as a transfer under Section 45(1) of the Act, which, interalia includes Sub-section (iv) prescribing for transfer of a capital asset by a company to its wholly-owned Indian subsidiary. From the aforesaid legal position and the terms of arrangement available before us, it is evident that the transfer in question is of a capital asset under development i.e., capital work-in-progress and such transfer being to a 100% subsidiary, cannot be treated as a transfer for the purpose of Section 45 of the Act in view of Section 47(iv) of the Act. The reliance placed by assessee on the decision of our Coordinate Bench in the case of Mother Diary Fruits & Veg.(P) Ltd. (2011 (1) TMI 66 - ITAT DELHI) is quite apt under the present circumstances.
The case of the Income-tax Authorities, that it was a transfer of ‘an asset employed in the business’ and therefore Section 47(iv) is not attracted, is quite unjustified and untenable. It is a well-settled legal proposition that the claims made by the assessee have to be examined in the light of the applicable factual and legal position and not merely on the basis of the position taken in the financial statements or otherwise. In this view of the matter, we do not find the stand of the CIT(A) or the Assessing Officer to be tenable in this regard. Insofar as the plea of the learned DR to remand the matter back to the lower authorities is concerned, the same, in our view, is not, at all, merited. It has been demonstrated by the assessee before us, and which has not been controverted by the learned DR, that the entire material was before the lower authorities and there is nothing to show that the same has not been examined by the lower authorities. Therefore, considering the entirety of the circumstances, and in view of the aforesaid discussion, we hereby allow the claim of the assessee.
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2021 (7) TMI 1445
Income tax proceedings against company dissolved / insolvent - Revision u/s 263 against company wherein proceedings u/s 7 of Insolvency and Bankruptcy code, 2016 has already been initiated against - HELD THAT:- Admittedly, the proceedings under section 7 of Insolvency and Bankruptcy code, 2016 have been initiated by the National Company Law Tribunal in CP(IB) 307 of 2020 vide order dated 9 March 2021. The copy of the order is placed on record. There are prohibitions for the institution of fresh proceedings under section 14 of the Code 2016 against such company which overrides the provisions of Income Tax Act. As per section 14 of the Code, the order of the NCLT for initiation of liquidation of the Corporate Debtor would result in a moratorium on the initiation or continuation of legal proceedings by or against the corporate debtor being the assessee.
We hold that the order passed under section 263 of the Act is not maintainable and liable to be quashed. Before parting, it is pertinent to note that AO is at liberty to make an application for re-institution of this appeal after the resolution process ends under IBC 2016. Ground of appeal of the assessee is allowed.
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2021 (7) TMI 1442
Addition u/s 68 - non-genuine/unexplained share capital/share premium - as alleged assessee company received share premium of Rs. 90 per share from related persons - CIT (A) deleted the addition on the grounds that once Rule 11UA has been notified by the CBDT, the rule would be applicable for the entire assessment year and not for the transactions done after 29.11.2012 - as submitted that the amounts have been received as loans initially which were subsequently converted into share capital
HELD THAT:- The amounts have utilized for purchase of land and if the cost of the land is taken into consideration, the share premium would stands substantiated. It was argued that even otherwise as on 06.03.2013, the date on which the share capital has been received in the books of the company, the valuation under Rule 11UA as per the DCF method is acceptable valuation method for the purpose of clause (viib) of Section 56(2). The valuation report submitted to the CIT (A) as additional evidence has been accepted by the revenue and no inconsistencies in the valuation report has been brought out by the revenue.
Since, the source of the amounts received has not been the issue before us, since the valuation report as per the DCF method is an acceptable method prescribed under Rule 11UA in relation to Section 56(2)(viib) and since the valuation report has been found to be in order by the revenue authorities, we hereby decline to interfere with the order of the ld. CIT (A). Decided against revenue.
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2021 (7) TMI 1441
Condonation of delay 516 days rejected - Short credit for tax deducted at source - above reasonable cause for the delay 516 days was not accepted by CIT(A), who dismissed the appeal in limine, as he was of the opinion that assessee has consciously chosen not to file appeal against the order - HELD THAT:- The inference of CIT(A) is apparently correct that assessee has consciously chosen not to file appeal before CIT(A) against the order dated 24.03.2014. The plea before Ld.CIT(A) was that on advice of a counsel, the appeal was filed as assessee was also contesting similar issues before ITAT for AY 2010-11. The assessee's plea for liberal approach was rejected by the CIT(A).
In our considered opinion, the assessee's plea of a liberal approach on the facts narrated above deserves to succeed. Accordingly, we direct that the delay be condoned and appeal admitted by Ld.CIT(A).
Assessee has pleaded that since identical issue on merits was decided by ITAT, in earlier year this appeal on merits should also be decided in favour of the assessee also. In this regard, we note that after only applying a liberal approach, we have directed that the delay be condoned and appeal admitted by CIT(A), although, nowhere it has been pleaded that delay of 615 days was owing to wrong legal advice. In the interest of justice and fare play, the CIT(A) should have an opportunity to examine the order of AO for this year, in light of the ITAT order for AY 2010-11 and the assessees submission thereon.
This is more so when even the AO did not had the ITAT order before him to examine when he framed the assessment order. Accordingly, we remit the appeal on merits to file of Ld.CIT(A) after condoning the delay of 516 days, which was not condoned by the Ld.CIT(A). The additional ground referred by the assessee may also be considered by Ld.CIT(A). Needless to add, in deciding the appeal on merits, the Ld.CIT(A) should grant adequate opportunities of being heard to the assessee. Assessee appeal is stands allowed for statistical purpose.
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2021 (7) TMI 1440
Income taxable in India - PE in India - Royalty receipts - Alleged Permanent Establishment (‘PE’) in India of the Appellant under Article 5(1) and 5(2)(T) of the India - UAE Tax Treaty (‘Tax Treaty’) - HELD THAT:- We find that identical issue raised in the present appeal has been adjudicated for Assessment Year 2013-14 [2021 (3) TMI 1440 - ITAT DELHI] we find that the assessee has met the twin criterion of existence of a fixed place of business and carrying out of business from such fixed place of business as enunciated of the judgment of Hon'ble Supreme Court in the case of Morgan Stanley & Co. [2007 (7) TMI 201 - SUPREME COURT] The claim of the assessee that they did not have a place at their disposal cannot be accepted in view of the judgment of Hon'ble Supreme Court in the case of Formula One World Championships Ltd. [2017 (4) TMI 1109 - SUPREME COURT] in the case of Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] and also E-funds IT Solutions [2017 (10) TMI 1011 - SUPREME COURT] The facts on record undisputedly prove that the premises AHL are at the disposal of the assessee for conduct of their business. While coming to the issue of "at the disposal" in the premises is available for the assessee for running of their business even for a limited time it constitutes a PE - Decided against the assessee.
Attribution of profits to alleged PE of the Appellant in India inspite of entity level operating losses - alternative taxation of India source income as ‘Royalty’ under Section 9(l)(vi) of the Income Tax Act, 1961 (‘the Act’) and Article 12 of the Tax Treaty - We find that the identical issue raised in the present appeal, has already been adjudicated for Assessment Year 2013-14. [2021 (3) TMI 1440 - ITAT DELHI] to hold that the revenue's earned by the assessee are taxable under Article 12 of the DTAA. Regarding the determination of the profit, taken up at ground No. 4 by the assessee, we hereby hold that the taxable profits may be computed in accordance with the provisions of Section 44DA of Indian Income Tax Act and Article 12 of Indo-UAE, DTAA.
During the arguments, it was also submitted that the assessee has incurred losses in the assessment year 2008-09. The assessee be given an opportunity of submitting the working of apportionment of revenue, losses etc. on financial year basis with respect to the work done in entirety by furnishing the global profits earned by the assesse, so that the profits attributable to the work done by the PE can be determined judiciously. The same may be considered while determining the taxable profits in India in accordance with the provisions of Section 90(2).
Thus the issue of attribution of profit to the Permanent Established (PE) is accordingly restored to the file of Assessing officer for deciding in the light of the direction of the Tribunal in AY 2013-14, as reproduced above. Appeal of the assessee is allowed partly for statistical purposes.
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2021 (7) TMI 1439
Bogus LTCG - sale proceeds of sale of shares u/s 68 - huge jump in the sale price of the scrip - assessee had purchased 20000 shares @ Rs. 1/- per share in October, 2011 and has sold them at Rs. 310/Rs. 311 in July, 2014 - HELD THAT:- As stated earlier, none appeared on behalf of the assessee. We heard Ld. D.R. who supported the orders passed by the tax authorities. We notice that the assessee has not filed any evidence/material to controvert the findings given by Ld. CIT(A). Under these set of facts, we have no other option but to confirm the order passed by Ld. CIT(A).
Appeal filed by the assessee is dismissed.
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2021 (7) TMI 1434
Carry forward of the deficit/loss for trust - assessment of trust - as per AO CIT(A) has erred in law in allowing the assessee’s claim of carry forward of current year’s loss and set-off of excess deficit pertaining to earlier years without appreciating the fact that the scheme of taxation of charitable or religious trust/institution as codified u/s 11,12 and 13 there is no provision for computing loss from property held under trust/institution on account of excess application of income/funds of the trust - HELD THAT:- In the case of DIT v. Raghuvanshi Charitable Trust [2010 (7) TMI 158 - DELHI HIGH COURT] held that a trust can be allowed to carry forward deficit of current year and to set of same against income of subsequent years. It was further held that adjustment of deficit of current year against income of subsequent year would amount of application of income of trust for charitable purposes in subsequent year within meaning of section ll(l)(a). It has been held that excess of expenditure over income of charitable or religious nature incurred in earlier years can be adjusted against the income of the current year.
This issue was debated in CIT v. Maharana of Mewar Charitable Foundation [1986 (7) TMI 56 - RAJASTHAN HIGH COURT] and it was opined that application could be considered to have taken place in the year of adjustment, where the earlier year's income was not adequate to absorb the actual expenditure made. It would be incorrect to view the term 'application' from a narrow perspective so as relate it with the actual movement of funds.
In CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT] held that there is nothing in section 11(l)(a) which indicates that the expenditure incurred in the earlier year cannot be met out of the income of subsequent years.
The Hon'ble Bombay High Court in CIT v. Institute of Banking Personnel Selection [2003 (7) TMI 52 - BOMBAY HIGH COURT] held that income derived from a trust property should be computed on sound commercial principles and this included carrying forward and set-off of deficit in the earlier years.
In our opinion, there is no infirmity in the order of the Ld. CIT(A) on the issue in dispute in following binding judgments of Hon’ble High Court and judgment of the Tribunal in the case of the assessee itself for assessment year 2008-09 - Accordingly, we uphold the order of the Learned CIT(A) on the issue in dispute and the grounds raised by the Revenue are dismissed.
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2021 (7) TMI 1428
TP Adjustment - Comparable selection - functional dissimilarity - HELD THAT:- As based on functional dissimilarities and also in the absence of segmental details for marketing support service exclusion of Aptico Ltd.,BVG India Ltd., Axis Integrated System Ltd.,Killick Agencies and Marketing Ltd. and include Quadrant Communication Ltd., which was included as a comparable company by the assessee and upheld by the ld. DRP, more so, when the revenue is not in appeal before us, against such inclusion. The ground Nos. 2.1 to 2.9 raised by the assessee are disposed of in the above mentioned terms.
Addition made on account of marketing service fees - HELD THAT:- We find that the ld. DR argued that assessee is a low level marketing service provider and as such should have operated at cost plus margin model and hence, ought not to have incurred in loss of ₹ 2 Crores in the incentives given to travel agents. We find that this is not even the case of the lower authorities and hence, the argument of the ld. DR could not be appreciated at this stage. Respectfully following the aforesaid decision in assessee‟s own case for A.Y.2012-13 the addition made on account of income from marketing service fees is hereby directed to be deleted.
Disallowance made on account of foreign exchange loss - HELD THAT:- We find that the same issue was the subject matter of adjudication in assessee‟s own case by this Tribunal for A.Y. 2012-13 thus we direct the ld. AO to grant deduction towards foreign exchange loss.
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2021 (7) TMI 1427
Additional substantial questions of law - Computation of tax on capital gains in terms of S. 45 r/w S. 48 - Whether unregistered agreement can be construed as a document effecting transfer of the subject properties in terms of S. 2(47)? - HELD THAT:- According to us, the aforesaid additional substantial questions of law appear to be involved and therefore, the same are framed as additional substantial questions of law (2) and (3), in addition to the substantial question of law framed on 21.06.2016 whilst admitting this appeal.
After framing the aforesaid additional substantial questions of law, we post this matter for final disposal on 22.07.2021 subject to overnight part heard, so that the Respondents have reasonable opportunity of dealing with the aforesaid additional substantial questions of law.
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2021 (7) TMI 1423
Validity of assessment order passed u/s 144B - shorter period granted to respond to SCN - HELD THAT:- As timeframe provided, to respond to the show cause notice-cum-draft assessment order dated 16.04.2021, was far too short, having regard to the fact that the pandemic was raging in the city at that juncture. In fact, the pandemic continues to prevail even now, although its severity may have lessened.
Therefore, as prayed, the impugned assessment order and consequential notices are set aside with liberty to respondent no. 1/revenue to pass a fresh assessment order and consequential orders, if any, after considering the reply dated 22.04.2021 filed by the petitioner.
Respondent no. 1, before passing the fresh assessment order, will accord a personal hearing to the authorised representative of the petitioner. For this purpose, respondent no.1/revenue will take recourse to the videoconferencing ('VC’) mechanism. In this behalf, respondent no.1/revenue will issue a written notice, indicating the date and time of the hearing, and transmit the VC link, albeit, to the registered e-mail id of the petitioner.
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2021 (7) TMI 1421
Validity of assessment u/s 143(3) - principal addition in this case is on account of a valuation difference (of a storage Godown) based on the report by the Departmental Valuation Officer (DVO) to whom reference was made by the AO during assessment proceedings - as argued appellate order is without proper application of mind by the first appellate authority and there has been no consideration of the assessee’s replies and explanations furnished during the assessment proceedings for which reference was made - HELD THAT:- ‘Valuation’ being a technical matter, while the AO is not a technical person, the statute provides for a reference by him to the DVO where he seeks to verify the veracity of the assessee’s claim with regard to the cost of acquisition/construction of an asset incurred during the relevant previous year (s.142A). The law accordingly obliges an appellate authority (including the Tribunal) to hear the DVO in adjudicating an appeal agitating an addition based on his valuation report. This has not been observed by the ld. CIT(A), which procedure he shall accordingly comply with in the set aside proceedings, dilating on and issuing specific finding/s qua each item of valuation being contested by the assessee before him.
Whether a rejection of accounts has to necessarily precede a reference to the DVO u/s. 142A? - As the cost met by the assessee, or otherwise proved to have been incurred, or even not incurred by the assessee, as in the case of gift, inheritance, etc., and irrespective of its reflection in his accounts, where maintained, forms part of the assessee’s explanation, and it is only the balance, excess cost, which is unexplained with any evidence, for which the rule of evidence (ss. 69/69A) deems it to be his income for the relevant year.
Where, then, one may ask, is the question, i.e., for invocation of this rule of evidence, of the rejection of the books of account of the assessee’s business, which may not even be maintained or even not bear the said cost, and which (rejection) is for the purpose of properly deducing the business income, which is not a concomitant of the said invocation, and may even be independent of it? Why, the business itself may not have commenced, as in the case of Warehouse business in the instant case. The question begs an answer before the decision in Sargam Cinema [2009 (10) TMI 569 - SC ORDER] holding a reference without rejection of accounts as bad, could be relied upon.
As seen, the clear and settled law does not require the rejection of accounts and, where so, is deemed irrelevant where specific adjustments to the returned income are made on the basis of the satisfaction of the relevant provisions of law, even though the said adjustments pertain to the entries in those accounts, while for an addition u/s. 69/69A the accounts are in fact being accepted to the extent of the relevant entries therein.
The said decision does not cite the precise question of law raised before it for being answered, and indeed that admitted and answered by the Hon’ble Court. Further still, the judgment is sans any discussion of or on the law in the matter or reference to any precedents. The issue that therefore arises for being answered first is if, in view of the clear provisions of law and the scheme of the Act, and as further explained and expounded by the Apex Court per its several decisions, including by its’ larger Benches, could the said judgment be regarded as a complete statement of law in the matter and, where considered so, the basis thereof, as also the specification of the said statement.
Before parting, it may be clarified that the various issues discussed with reference to the invalidity of the AO’s reference to the DVO are only with a view to emphasize the several aspects/dimensions of the matter on which, therefore, adjudication, where sought, may be required – upon considering all the factual and legal aspects, including those, not discussed, as are agitated or otherwise deemed relevant, per a speaking order. No final opinion in the matter is expressed or may be construed as such. That is, is a case of an open set aside.
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2021 (7) TMI 1419
Stay petition - petitioner’s prayer confined to the relief of directing the AO to dispose of the petitioner’s application under Section 220(6) of the Act relating to the relevant Assessment Year - HELD THAT:- We are not inclined to entertain this writ petition for the relief of direction upon the Assessing Officer to consider the petitioner’s application u/s 220(6) of the Act, which was filed in September, 2018 and the petitioner has filed this writ petition in July, 2021 without explaining the delay in approaching this Court, if at all the petitioner was so seriously prejudiced by the demand notices raised in 2018. Instead of approaching this Writ Court, the petitioner should have taken steps for expediting the pending appeal in question arising out of the impugned Assessment Order and the demand. WP dismissed.
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2021 (7) TMI 1415
Disallowing agricultural income claim u/s. 10(1) - HELD THAT:- Revenue sought to highlight the fact in CIT(A)’s lower appellate proceedings in para 4 that he had issued several notices to the assessee. We note that there is no indication at all in the said para 4 and 3; respectively that the CIT(A) hearing notices had been actually served on the assessee.
Faced with this situation, we deem it appropriate to restore the instant latter twin appeals back to the CIT(A) for his afresh appropriate adjudication as per law within three effective opportunities of hearing. It is made clear that the assessee or his learned authorised representative shall appear before the CIT(A) on or before 30-11-2021 with all the relevant evidence; at his own risk and responsibility only, to be followed by three effective opportunities of hearing.
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2021 (7) TMI 1412
Addition u/s 68 - Cash deposits in bank account unexplained - non rejection of books of accounts - HELD THAT:- As not disputed that the cash deposits made out of book balance should be considered as explained when the books of accounts of the assessee were not rejected.
As notice that neither the AO nor CIT(A) has examined the cash book of the assessee. We notice that both the authorities have rejected the claim of the assessee that the cash deposits have been made out of earlier cash withdrawals made from the bank account on the reasoning that the earlier cash withdrawal has not been proved.
Cash withdrawal could have very much been verified from the bank account of the assessee as well as from the entries made in the books of account.
In the instant case, the books of account maintained by the assessee have not been rejected and it is the submission of the assessee that the cash withdrawals have been recorded in the books of account. In that case, if the cash has been deposited into the bank account from the cash balance available in the books of account, then it should be held that the cash deposits have been explained. However, as noticed earlier, the tax authorities have not examined books of account also.
This issue needs to be set aside to the file of the AO for the limited purpose of examining as to whether the impugned cash deposits have been made out of cash balance available in the books of account. Accordingly, I set aside the order passed by Learned CIT(A) on this issue and restore the same to the file of the AO for the limited purpose of examining as to whether the impugned cash deposits have been made out of cash balance available in the books of account. Decided in favour of assessee for statistical purposes
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2021 (7) TMI 1411
Disallowance made under the head investment portfolio - RBI guidelines were applicable to the assessee for the purposes of the I.T.Act or not ? - income recognition - Tribunal held that the assessee-Bank cannot be considered as a Company - Section 115JB applicability to assessee Bank for MAT purposes - HELD THAT:- These substantial questions of law involved in this appeal have already been answered in favour of the assessee by this Court vide judgment of COMMISSIONER OF INCOME-TAX, BANGALORE Vs. ING VYSYA BANK LTD [2020 (1) TMI 1116 - KARNATAKA HIGH COURT]
Disallowance u/s 14A r.w.r. 8D(2) (ii) and (iii) - expenditure incurred on earning exempt income - HELD THAT:- As question of law involved in this appeal also has already been answered in favour of the assessee by case of M/S QUEST GLOBAL ENGINEERING SERVICES PVT. LTD.[2021 (3) TMI 434 - KARNATAKA HIGH COURT]
TDS u/s 194H - disallowance u/s 40(a) (ia) on ATM charges of other Banks - HELD THAT:- As substantial question of law is answered by Judgment M/S. CORPORATION BANK [2020 (12) TMI 529 - KARNATAKA HIGH COURT] in favour of the assessee and against the revenue.
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2021 (7) TMI 1410
Rectification of mistake - Addition on account of depreciation on fixed assets u/s. 40a(ia) read with section 37 in respect of capitalization of professional fees capitalized of certain expenses FCCB Premium and FCCB Issue Expenses - HELD THAT:- The year before us is A.Y. 2007-08 wherein the depreciation on fixed assets is required to be allowed only as consequential effect of depreciation already allowed by the ld. AO in the A.Y. 2005-06.
We find that no expenditure was per se incurred during the year relating to this issue and hence, the provisions of Section 40(a)(ia) of the Act could not be made applicable for A.Y. 2007-08.
We find that directions of this Tribunal to examine the allowability of expenses u/s. 40(a)(ia) of the Act for A.Y. 2007-08 would only result in impossibility of performance on the part of assessee in as much as no expenditure was incurred by the assessee in A.Y. 2007-08 thereof.
The expenditure falling within the ambit of Section 40(a)(ia) had been incurred by the assessee in A.Y. 2005-06 on which depreciation is already allowed by the ld. AO in A.Y. 2005-06. Hence, the A.Y. 2007-08 is only consequential year of allowing depreciation on fixed assets and expenses falling under 40(a)(ia) of the Act. Miscellaneous Application of the assessee is allowed.
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2021 (7) TMI 1408
Disallowance of stock written-off - Assessee discontinued dealing in one of its products i.e. Aquafresh Tooth Brush and vaccine stocks nearing expiry were not capable of being sold in the market - appellant failed to produce evidence of (i) informing the excise authorities or other regulatory authorities for destruction of such goods and (ii) intimating the dealers/ stockiest for not selling Aquafresh toothpaste, to substantiate the claim - HELD THAT:- It is not that the claim was entirely unsubstantiated - despite the repeated assertion of the assessee that the vaccines written off were nearing expiry, evidenced with emails so exchanged and the stock write off sheets so mentioning, the Revenue has not brought anything on record to controvert the said claim. Without pointing out any infirmity in the explanation of the assessee duly evidenced with documents, we hold, the claim could not be denied for want of further evidence. Nothing has been pointed out regarding the insufficiency of evidences filed by the assessee. Then why further evidences were needed to substantiate the claim we are unable to understand.
We hold, the claim of the assessee as fully justified vis a vis write off of vaccines since undoubtedly such vaccines were not capable of being used beyond expiry period and had no realizable value thereafter.
As for the write off of Aquafresh tooth brush the assessee we find had explained to the CIT(A) the reasons for discontinuation of the business and the consequent withdrawal of the toothbrushes, from the market, being commercially unviable and had as evidence filed copy of the Board resolution dated 25-11-2003 to this effect. Thus, we find that the assessee has been able to establish documentarily the fact of write off of the said product and the Revenue has not proved anything to the contrary. For the reasons stated above in the context of write off of vaccines we see no reason to disallow the claim of the assessee.The claim of the assessee to write off of toothbrush also is therefore allowed.
Disallowance being 1/3rd of the expenditure on advertisement and promotion - Addition on the ground that the said expenditure resulted in promotion of brand name owned by the foreign company - HELD THAT:- Revenue claiming that the assessee has incurred brand building expenses, the onus is on the Revenue to establish the said fact. It cannot simply be derived from the fact that assessee has incurred huge expenses on advertisement and sale promotion of products the brand of which belonged to another entity, considering the clear distinction in the end objective of the said expenses and the assessee consistently claiming that it had acquired the exclusive license to manufacture and sell the products in India and thus being the sole user of the brand name in India. These contentions of the assessee have remained uncontroverted. The entire benefit, in such circumstances, inured to the assessee alone as it alone was operating in the Indian market. Benefit if any to the AE was only incidental. And on account of such incidental benefit accruing to a third party it cannot be said that the expense was not wholly and exclusively for the benefit of the assessee. As long as the objective /purpose for incurring an expenditure is to benefit the assessee solely, the expenditure can be said to be incurred wholly and exclusively for the benefit of the assessee. Any incidental benefit accruing to a third party on account of the same, being beyond the control of the assessee, does not dilute the character of the expense.
No reason or basis therefore for holding a part of the expense as pertaining to brand building. We therefore direct deletion of the disallowance made on account of brand building expenses.
TDS u/s 195 - disallowance made of amount paid to M/s GlaxoSmithKline Biological S.A., Belgium for purchase of vaccine, on account of non-deduction of tax at source thereon, holding that there was a permanent establishment of the said entity in India and, therefore, the profits attributable to the purchases made by the assessee from the said entity were liable to tax in India - HELD THAT:- As brought to our notice that the AO’s findings were based on data/information extracted from websites none of which was related to the assessee. That even the information extracted regarding conducting of clinical trials of the AO’s order did not mention the assessee as the site where trials were to be carried out. That even the Genetic Engineering Committee report did not relate to the impugned year, being dated 8th February 2006.That the findings to the effect that no other activity was being carried out by the assessee except clinical trials was incorrect as the assessee was manufacturing Eno and Crocin.
The findings of the AO therefore that the assessee was carrying out clinical trials for GSK Biologicals, we find, has been demonstrated before us to be not based on relevant facts. CIT(A) has merely reiterated the findings of the AO despite specific factual and legal contentions made by the assessee to the contrary. We have also noted that the determination of PE of GSK Biologicals SA, is pending before the Hon’ble Delhi High Court in writ petitions filed by GSK Biologicals SA against proceedings initiated u/s 148 of the Act on the basis that there exists PE, for A.Y. 2005-06 TO 2009-10.
Thus we are of the view that it would be in the fitness of matter to restore the issue back to the AO for adjudication afresh in accordance with law after giving due opportunity of hearing to the assessee and after considering all factual and legal contentions raised by it.
Admission of additional ground - whether the education cess paid by the assessee and calculated as proportion of the income tax, is allowable as expenditure? - HELD THAT:- In the present case it is not that the outcome of the entire appeal depends on the additional ground raised. On the contrary the additional ground impacts only one claim of the assessee to deduction of education cess paid, which neither requires any facts to be uncovered or even verified or investigated. There is no finding of fact to be recorded vis a vis the impugned issue and hence no impediment to the ITAT in adjudicating the issue. Therefore we find there is no reason to restore it for adjudication to the CIT(A). The contention of the Ld. D.R. therefore that the additional ground raised should be restored to the CIT(A) is accordingly dismissed.
Allowability of education cess - The education cess is an additional surcharge levied by the Union. Considering that tax on income has been so defined as including surcharge and additional surcharge, it stands settled therefore, that the education cess is in the nature of tax levied on the income from the business and profession and thus specifically not allowable as per the provisions of section 40(a)(ii) of the Act. There is no scope for any other interpretation/ view on the issue considering the decision of the apex court in K. Srinivasan [1971 (11) TMI 2 - SUPREME COURT] read with the Finance Bill levying education cess.
We therefore hold that education cess falls within the scope of amounts not allowed as deduction u/s 40(a)(ii) of the Act.
Claim of Product Development & Research Expenses - HELD THAT:- Revenue has decided the issue based on general observations without examining the nature and impact of the expenses on the existing business of the assessee. Even the decision of the ITAT in the case of Glaxo Smithkline consumer Health care Ltd.(supra), relied upon by the assessee, we find, rendered its judgment after examining the facts relating to the expenses vis a vis its nature and impact on business. The issue therefore, we hold, needs to be reconsidered by the AO for which purpose we restore it to the AO with the direction to adjudicate it in accordance with the direction of the ITAT in the case of the assessee for A.Y. 1998-99 and 1999-2000.
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2021 (7) TMI 1406
Order passed by the CIT(Appeals) ex parte - Non giving due opportunity of hearing to the assessee - as submitted that as per the return of income, the assessee has duly paid the admitted tax shown in the return filed by the assessee also Form 26AS of the respective assessment years - HELD THAT:- Admittedly, in this case, order was passed by the CIT(Appeals) ex parte without giving due opportunity of hearing to the assessee. Further, the CIT(A) has not gone through the details of payment of admitted tax which is required to be verified by him after giving opportunity of hearing to the assessee in both the assessment years. Accordingly, these appeals are remitted back to the file of the CIT(Appeals) for de novo consideration of the issues after providing opportunity of being heard to the assessee. Appeals of assessee are allowed for statistical purposes.
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2021 (7) TMI 1404
Addition u/s 41(1) - advance received by the assessee for sale of his flat originally pursuant to MOU entered into with the purchaser - since the said purchaser expressed his inability to pay the remaining part of the consideration for the property, the MOU was cancelled by the assessee AND assessee is bound to refund the advance received which he had no sufficient funds to refund the advance to the party, the same were refunded in installments - amounts received as advance for sale of property is a capital receipt and is certainly not a trading receipt - CIT-A deleted addition - whether CIT(A) was correct in accepting the proof of payments submitted by the assessee before him which were never produced before the AO in contravention to the provisions of' Rule 46A of the Income Tax Rules, 1962? - HELD THAT:- As on 31/03/2019, there were no amounts payable by the assessee to said party. This cannot be construed as any additional evidence as it is only submission of mere fact of repayments made to the said party which were submitted at the behest of the ld CIT(A). Even before us, the Revenue had not brought any contrary evidence to prove that the said liability was not repaid.
In the first instance, the addition ought not to have been made u/s.41(1) of the Act in the facts of the instant case as we have already stated hereinabove that assessee has been continuing to show it as liability as on 31/03/2015 in his balance sheet. AO having made an unwarranted addition in the hands of the assessee cannot claim recourse to Rule 46A violation by merely taking the ground before us when the said provision of Section 41(1) of the Act could not have been applied by him in the eyes of law.
CIT(A) had not granted relief to the assessee by relying on the said table. He had granted relief on the ground that no deduction has been claimed by the assessee in earlier years and hence, provisions of Section 41(1) of the Act could not be invoked in the instant case. Moreover, the ld. CIT(A) had also appreciated the fact that assessee had continued to show the liability in his books and that the liability had not ceased to exist. Hence, the ground No.1 raised by the Revenue on the alleged violation of Rule 46A of the IT Rules is hereby dismissed. In view of the aforesaid observations, both the grounds of the Revenue are dismissed.
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