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Income Tax - Case Laws
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2021 (7) TMI 1401
TP Adjustment - Comparable selection - HELD THAT:- Referring to Appellant's international transactions in respect of software development services, companies functionally dissimilar with that of assessee need to be deselcted as comparable.
Working capital adjustment - As decided in own case [2018 (10) TMI 1796 - ITAT BANGALORE] no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore in keeping with the OECD guidelines, endeavor should be made to bring in comparable companies for the purpose of broad comparison. Therefore the working capital adjustment as claimed by the Assessee should be allowed. Thus we are of the opinion that this issue has to be remitted back to the file of AO/TPO for fresh consideration in accordance with the above order of the Tribunal in assessee’s own case for AY 2012-13
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2021 (7) TMI 1400
Benefit of DTVSV Scheme - Petitioner’s application has been rejected for the reason that assessee had not filed any appeal against the order in respect of which he wishes to avail benefit, while an assessee has to file appeal on or before 31st January, 2020 and since the appeal had not been filed, it does not fulfill the criteria prescribed under the DTVSV Act - HELD THAT:- This is a peculiar case wherein assessment order of 22nd December, 2019, had not been served upon the Petitioner until Petitioner obtained a copy on 15th December, 2020 and as can be seen from the aforesaid discussion, Petitioner as such had suffered handicap to lodge an appeal before the specified date i.e. 31st January, 2020 for no fault of his. In the circumstances, it would emerge that Petitioner would be able to avail benefit of the term ‘Appellant’ under Section 2(1) (a)(ii) of the DTVSV Act.
In circular bearing No.9 of 2020 dated 22nd April, 2020 in its reply to Questions No. 1 and 23, it has been referred to that where any order has been passed under the I.T. Act and time limit to file appeal has not expired on 31st January, 2020, then the assessee can be very well opt for the said Scheme. The purpose and object underlying bringing in under DTVSV Act is to provide resolution of the disputed tax and matters connected therein and to put an end to litigation and unlock revenue detained under litigation.
It would be expedient that present Petition be allowed. As such, impugned order of Respondent No.3, (Exh. ‘K’ - page 107 of writ petition) rejecting application in Form Nos.1 & 2 under the DTVSV Act and the Rules, is set aside. Respondents are directed to consider Petitioner’s application made in Forms 1 & 2 and issue proper order in the Form 3 in accordance with the provisions of the DTVSV Act and Rules within a period of two weeks from the date of this order.
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2021 (7) TMI 1399
Treatment of advertisement revenue as Business income taxable in India - AR emphasized that the alleged permanent establishment (PE) by the income tax department has been remunerated on an ALP basis and is evident from the transfer pricing order of the assessee wherein all its international transactions have been accepted at ALP with no TP adjustments - HELD THAT:- We find the Hon’ble ITAT in Assesses own case for the A.Ys 2000-01 to 2004-05 [2021 (1) TMI 125 - ITAT MUMBAI] has dealt on this disputed issue and decided in favour of the assessee
We find in the present case the facts are similar and the assessee has paid Arms Length Commission to its Agent and TPO has accepted the payments and no transfer pricing adjustment was made considering it as fair and reasonable. We respectfully fallow the judicial precedence and the ratio of the decision on the advertisement revenue treatment and direct the assesseing officer to delete the addition and allow the grounds of appeal in favour of the assessee.
Income accrued in India - distribution revenues earned by the assessee falls within the meaning of Royalty under Article 12 of India - USA DTAA is taxable in India - HELD THAT:- The distribution rights granted by the assessee is only a Broad Casting right and cannot be brought under the purview of Copy right. We fallow the judicial precedence [2021 (1) TMI 125 - ITAT MUMBAI] and direct the assesseing officer to delete the addition as per the ratio of the decision discussed in the above paragraphs and allow the grounds of appeal in favour of the assessee.
Short of TDS credit - HELD THAT:- We are of the opinion that the assessee should not be deprived of its legitimate right for TDS credits and direct the A.O. to verify the claim and grant the TDS credit.
We find the assessee has claimed additional TDS credit (only in the A.Y.2010-11) in the DRP proceedings and the directions were issued to the Assessing officer (A.O).The asseesse has submitted the supporting claim of evidences before the A.O. Accordingly, the assessing officer is directed to verify and examine the documents filed in support of TDS claim.
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2021 (7) TMI 1396
Disallowance u/s 14A r.w.r. 8D - Suo moto disallowance by assessee - Necessity of recording satisfaction - CIT(A) deleted the addition made by the AO with respect to interest disallowance observing that the amount of interest income shown by the assessee exceeds the amount of interest expenses and therefore there cannot be any disallowance - whether the AO can resort to the provisions of section 14A read with rule 8D without rejecting the suo-moto disallowance made by the assessee? - HELD THAT:- We find that the provisions of section 14A of the Act requires that the AO has to record the satisfaction after having regard to the accounts of the assessee as well as correctness of the claim of the assessee in respect of the expenditure incurred in connection with the exempted income. Admittedly, there was the disallowance made by the assessee against the exempted income. But the AO has not pointed out any defect in the disallowance made by the assessee. Thus in our considered view such act of the AO is in violation of the provisions of section 14A read with rule 8D of Income Tax Rule. As such, the AO was under the obligation to record the dissatisfaction about the correctness of the claim of the assessee.
We find support and guidance from case of DCIT v/s Pidilite Industries Ltd. [2019 (6) TMI 470 - ITAT MUMBAI] wherein it was held that the AO has to form an opinion as to why the disallowance offered by the assessee, having regards to its accounts, was not satisfactory or correct. The aforesaid satisfaction of the AO is sine-qua-non, before acquiring jurisdiction under section 14A r.w. rule 8D - we are not convinced with the order of the ld. CIT-A and thus, we direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
Nature of expenses - business development expenditure - Revenue or capital expenditure - HELD THAT:- As decided in assessee own case[2016 (11) TMI 1730 - ITAT AHMEDABAD] business development expenditure to be Revenue in nature - accordingly, we dismiss the ground of appeal of the Revenue.
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2021 (7) TMI 1394
MAT computation applicability - Tribunal held that the assessee is governed by the different Acts and Rules and is not required to prepare its profit and loss account and balance sheet as per Part II and III of Schedule VI of the Companies Act, hence the provisions of Section 115JB cannot be invoked in the instant case - HELD THAT:- When the matter was taken up today, the learned senior counsel for the assessee submitted that the aforesaid substantial question of law involved in this appeal has already been answered in favour of the assessee for the previous assessment year namely 2005-2006, by this Court vide judgment[2017 (12) TMI 1631 - ITAT BANGALORE]
The aforesaid submission could not be disputed by the learned counsel for the revenue.
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2021 (7) TMI 1391
Allowability of interest on refund u/s 244A - delay attributable to the assessee - period for which interest is to be allowed - refund in relation to interest reimbursement under TUFS ( Technology Upgradation Fund Scheme) - contention of the assessee is there is no delay attributable to the assessee at all and that the only delay recognized by section 244A(2) of the Act relates to delay in proceedings attributable to the assessee - HELD THAT:- In the case of Chetan N. Shah vs. M. K. Moghe Commissioner of Income Tax [2014 (9) TMI 1177 - BOMBAY HIGH COURT] the Hon’ble Bombay high court held that there is no provision for rejecting the claim of interest on account of a mistake by the assessee. That such a proposition would render the section otiose since excess taxes paid originate on account of some mistake either on fact or law on the part of the assessee. That it is only delay in disposal of proceedings resulting in refund attributable to the assessee which are not to be compensated with interest.
The delayed claim of the assessee therefore cannot be said to tantamount to delay in proceedings resulting in refund attributable to the assessee.
In the case of HHA Tank Terminal( P) ( ltd) [2019 (2) TMI 1515 - KERALA HIGH COURT] the assessee had already been granted refund on processing of its return u/ s 143 ( 1 ) of the Act and subsequently it had filed a revised return claiming further refund. In this backdrop of facts the Hon’ble court held that the later refund could only relate back to the filing of revised return.
We have no hesitation in holding that the assessee was entitled to interest on the refund generated for the entire period of delay as envisaged under the provisions of section 244 A (1) (b) of the Act that there was no delay attributable to the assessee in the proceedings resulting in refund and, therefore, the provisions of section 244 A( 2 ) of the Act were not attracted in the present case. The order of the Ld. CIT( A) holding so is held to be not in accordance with law.
Argument of the assessee that the Ld. CIT( A) had no power to restore the matter to the AO, we do not find any merit in the same since the Ld. CIT( A) has only given a direction to the AO to refer the matter to the Ld. Pr. CIT, which surely does not tantamount to restoring the issue to the AO. This argument of the Ld. Counsel for the assessee is therefore dismissed.
Contention of the Ld. DR that since the Ld. CI T( A) had not adjudicated the issue, having directed the AO to refer the matter to the Ld. Pr. CIT, no appeal lay against this order, we do not find any merit in the same. The limited scope of the power with the Ld. Pr. CIT, as per sub section (2) of section 244 A, is determination of period of delay attributable to the assessee. He has no power to decide the entitlement of grant of refund. The direction of the Ld. CIT( A) to the AO to make a reference is only to this limited extent, which arises and could have arisen only while holding the assessee not entitled to grant of interest for the entire period of delay. I t is this order of the Ld. CIT( A) which has been challenged before us. The argument of the Ld. DR therefore that the order of the Ld. CIT( A) could not have been challenged is clearly devoid of any merits and is thus dismissed.
Assessee appeal allowed.
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2021 (7) TMI 1390
Non deposit of TDS - Employer had deducted TDS from salary but the same has not been deposited in the Government account - HELD THAT:- As per the learned counsel, the TDS has been deducted from the salary of the employee but the same has not been remitted back to the account of Central Government by the employer. Therefore, there is an outstanding demand on the employee (including interest).
We note that assessee has not explained these facts before CIT(A). We make it clear that if TDS has actually been deducted, then assessee (deductee) cannot be called upon to pay tax in terms of provisions of Section 205 of the Income Tax Act.
We direct the assessee to produce before the learned CIT(A) the salary slip, copy of income tax return and the proof that the TDS has been deducted by the employer company but not deposited to the account of the Central Government. Therefore, we set aside the order of the learned CIT(A) and remit the issue back to the file of the learned CIT(A) with the direction to examine the salary slip, amount deducted as TDS from the salary but not deposited to the Government account and examine the income tax return filed by the assessee and thereafter credit for TDS may be allowed to the assessee in accordance with law. Statistical purposes, the appeal of the assessee is treated to be allowed.
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2021 (7) TMI 1389
Income from other sources - Interest earned on FD made out of unutilised grants - HELD THAT:- As decided in own case [2021 (6) TMI 212 - ITAT MUMBAI] Government directive which has been relied upon by him is duly applicable for the current assessment year. As per the said direction the interest on unutilised grant has to be treated a part of the grant itself. Hence, it cannot be subject to tax by the Revenue.
Disallowance revenue grant received by the assessee company - HELD THAT: - We noted that this revenue grant in aid is already covered by Tribunal’s decision in assessee’s own case [2021 (6) TMI 212 - ITAT MUMBAI] for earlier assessment years. The facts being similar and Revenue now before us could not point out any different in facts or legal position. Nothing contrary was brought to our notice, we uphold the order of CIT(A). This issue of Revenue’s appeal is dismissed.
Bad debts written off disallowed - HELD THAT:- DR could not controvert the finding of CIT(A) but argued that the assessee has made mere provision for bad debts which is not deductible and for this, she relied on the assessment order. Before us assessee stated one fact that the assessee has obliterated the provision that bad debts in the books of accounts by reducing the same from balance of debtors and had shown the net balance of debtors on the asset side of the balance sheet. He stated that the issue is squarely covered by the decision Vijaya Bank [2010 (4) TMI 46 - SUPREME COURT] and also Jain insurance corporation of India [2000 (9) TMI 13 - BOMBAY HIGH COURT] wherein it is observed that ‘writing off’ is a technical term and means raising a debit entry to the P&L Account and the corresponding credit may be given either to debtors or to reserve for bad debts. Further the court has observed that where the assessee has debited P&L account and has credited reserve for bad debts, the same would be sufficient for claiming deduction under section 36(1)(vii) of the Act.This issue of Revenue’s appeal is dismissed.
Employees contribution to provident fund beyond due date of respective statute - HELD THAT:- As decided in SALZGITTER HYDRAULICS PRIVATE LIMITED [2021 (6) TMI 1059 - ITAT HYDERABAD]provident fund contribution received from employees deposited by assessee before the due date of filing of return under section 139(1) of the Act but after the due date prescribed in the relevant statute of provident Fund Act is to be allowed despite the fact that legislation has not only incorporated necessary amendment in section 36(1)(va) of the Act by inserting explanation 2 as well as explanation 5 to section 43B vide Finance Act, 2021 with effect from 01.04.2021, wherein it is clarified that the provisions of section shall not apply and shall be deemed to have been applied to a sum received by assessee from any of his employees covered by section 2(24)(x) of the Act because this explanations are prospective and not retrospective.
We are of the view that the legislative amendments incorporated in section 36(1)(va) and 43B of the Act by the Finance Act, 2021 by inserting explanation 2 and explanation 5 to the respective provisions, are prospective in application with effect from 01.04.2021. Hence, we find no infirmity in the order of Commissioner of Income Tax (Appeals). Hence, the appeal of the Revenue is dismissed.
Penalty u/s 271(1)(c) - addition of interest on unutilized grant in aid - HELD THAT:- As quantum addition is deleted, hence, the penalty will not survive. Therefore, CIT(A) has rightly deleted the penalty and we confirm the same. The appeal of Revenue is dismissed.
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2021 (7) TMI 1388
Validity of faceless assessment u/s 144B - no show cause notice-cum-draft assessment order was issued - HELD THAT:- As revenue states that the record presently placed before the Court would show that though no show cause notice-cum-draft assessment order was issued, yet several opportunities had been granted by the respondents/revenue to the petitioner, before the said date, to explain its case, this argument of the respondent/revenue is contrary to the statutory scheme, as provided in Section 144B of the Act.
In our opinion, petitioner is correct in submitting that Section 144B of the Act has been violated and the assessment proceeding has been completed in the present case in violation of the principles of natural justice.
The impugned assessment order dated 22nd April, 2021 issued under Section 144 read with Section 144B of the Act for the assessment year 2018-2019 as well as demand notice issued under Section 156 of the Act and notice for initiating penalty proceedings issued under Section 270A and 271AAC(I) of the Act are set aside. However, the respondent/revenue is given liberty to pass a fresh assessment order in accordance with law. The petitioner is also given liberty to challenge any action of the respondent/revenue in accordance with law, in the event she is aggrieved by the same.
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2021 (7) TMI 1387
Deduction u/s 80IA - Whether DG Power Generation units 1 and II are entitled to the benefit of Sec. 80IA? - ITAT held that DG Power Generation Units 1 and II constituted an "undertaking" under Sec. 80 IA of the Income tax Act - HELD THAT:- By following the reasoning and conclusion recorded [2019 (3) TMI 1549 - KERALA HIGH COURT] the substantial questions of law raised as question nos.3 and 4 are answered in favour of the assessee and against the Revenue.
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2021 (7) TMI 1384
Validity of reopening of assessment u/s 147 - as no assessment orders are passed under sub clause (4) to section 144C - Assessee case was referred to the TPO u/s 92CA and the TPO inturn, passed an order under section 92CA (3) - HELD THAT:- The order of the TPO is independent and unconnected with the powers conferred on the Assessing Officer under section 147 of the Act. Therefore, the report of the TPO cannot be conclusive for the purpose of its acceptance by the Assessing Officer, who is empowered to go into the contents of such report and make an assessment and if any materials are available, he is at liberty to invoke section 147 of the Act.
Reference to the Transfer Pricing Officer more specifically sub-clause (4) reveals that on receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) to section 92C so as to determined by the Transfer Pricing Officer.
The above provision unambiguously clarifies that on receipt of the order passed by the TPO, the Assessing Officer shall proceed to compute the total income of the assessee and in confirmity with the Arm's length price. Therefore, the Assessing Officer is empowered to pass draft assessment order with reference to section 144C by taking into consideration the report of the TPO and the other aspects of the matter. In other words, the draft assessment order is not confined actually to the report of the TPO and therefore, there is a scope for reassessment.
As far as determination of Arm's Length Price or consideration of other disallowance, etc. in the draft assessment order are to be considered at the time of adjudication of reopening proceedings and the assessee is at liberty to raise any further ground in respect of those aspects which all are relatable to the merits and with reference to the documents and evidences to be scrutinized.
Mere consideration of Arm's Length Price and other disallowance in the draft assessment order would not preclude the Assessing Authority for reopening of assessment under section 147/148 of the Act as the spirit of the above provisions are providing wider scope to reopen the assessment and the only object is to ensure that the income chargeable to tax escaped assessment is brought within the tax net. Thus the object plays a pivotal role in the matter of reopening proceedings and the other procedures contemplated in Chapter XIV of the Act must be read cogently along with the purpose for which such procedures are contemplated and any interpretation overlapping the provisions would defeat the object and thus, this Court is of the opinion that the power of reopening under section 147 of the Act cannot be restricted, even in such circumstances, the TPO submitted a report and a draft assessment order is passed, with reference to certain materials available, and the AO has reason to believe that the income chargeable to tax escaped assessment, then he is well within his powers to invoke section 147/148 of the Act. Accordingly, the issues raised are answered in favour of the revenue.
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2021 (7) TMI 1382
Estimation of Income - bogus purchases - CIT(A) restricting the addition to 12.5% of the bogus purchases as against 100% made by the AO - HELD THAT:- As we observe that Ld. CIT(A) has passed the appellate order after following the decision of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] wherein it has been held that in case of bogus purchases only profit element embedded in the bogus purchases is to be assessed.
We note that the co-ordinate benches of the Tribunal have been taking a consistent view that in case of bogus purchases only a GP rate ranging between 2% to 12.5% whereas the CIT(A) has directed to assess the income @ 12.5% which is quite justified and reasonable and therefore we do not find any reason why the Revenue is aggrieved by this order. Accordingly, we uphold the order of the ld CIT(A) by dismissing the appeal of the revenue.
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2021 (7) TMI 1381
Admission of additional ground of appeal - Failure in issuing section 143(2) notice “within a specified time factor of six months from the end of financial year of furnishing of its return" - HELD THAT:- We find merit in assessee's instant additional ground petition as per All Cargo Global Logistics Ltd. Vs. DCIT [2012 (5) TMI 466 - ITAT MUMBAI] holding in light of hon'ble apex court’s judgment in NTPC Ltd[1996 (12) TMI 7 - SUPREME COURT] that this tribunal can very well entertain a pure question of law, in order to determine correct tax liability of an assessee provided all the relevant facts are already on record.
Valid notice u/s 143(2) - assessment on fringe benefits - whether notice issued for the purpose of assessment on fringe benefits? - HELD THAT:- We find no merit in Revenue’s foregoing arguments since the said notices pertained to section 115WE(2) Fringe Benefit Tax “FBT” proceedings (abolished w.e.f. A.Y. 2010-11) than assuming jurisdiction for determining the assessee's correct taxable income despite the fact that it had duly filed its return on 29.09.2008. We thus quote Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] and hold that the impugned assessment is not sustainable in law since framed in absence of a valid section 143(2) notice issued within the prescribed time period. The same stands quashed therefore. All other pleadings on merits are rendered academic.
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2021 (7) TMI 1380
Disallowance of interest due and payable to the Government of India - assessee acquired helicopters from Government Company setup to meet the long term requirements of ONGC to provide the helicopter services in its critical offshore exploration work - Ministry of Finance releases payment in Foreign Exchange on behalf of the assessee and assessee company was required to deposit the rupee equivalent of these Foreign exchange payments so released along with the commission and incidental charges of 1% ad valorem and crown agent charges payable to Ministry of Finance and for any delay in deposit of the amount due, the Ministry of Finance claims interest - assessee did not claim the amount of interest in the profit and loss account as the Ministry of civil Aviation (MCA) had requested the Ministry of Finance for the waiver of interest and shown the same as contingent liability - CIT-A directing that the deduction be allowed not on accrual but on actual payment of the interest.
HELD THAT:- The assessee has taken the loan in the year 1986-87 and interest during that period was also allowed to the assessee as is evident from the assessment order and no disallowance has been made by the revenue. Further, no disallowances were made in A.Y. 1988-89 and A.Y. 1989-90 as is evident from the assessment orders. It is only then in AY 1990-91, in the impugned assessment year the AO has made the disallowance. It is also pertinent to note that subsequently also in A.Y. 1993-94, A.Y. 1994-95, A.Y. 2000-01 and A.Y. 2001-02 similar expenditure claimed by the assessee have been allowed as is evident from the assessment orders.
This issue has been going on with the Ministry of Finance and from the correspondences it can be seen that the interest due to the government is payable and request for the waiver have been rejected repeatedly by the Ministry of Finance. Thus, the liability pertains to the current year only and the assessee is following the mercantile system of accounting and thus the interest claimed by the assessee has to be allowed. The assessee has claimed similar expenditure in the following preceding assessment years as well as succeeding assessment years which have been allowed by the department and there being no deviation in the facts of the case in the present assessment year and the claim of interest expenditure made by the assessee has to be allowed.
On going through the entire factum of the case, we hereby hold that no disallowance is called for on account of interest payable to the Ministry of Finance.
Disallowance of depreciatiion on Westland Helicopters - depreciation on the "Block of Assets" - claim not allowable since the asset was not used in the current year - HELD THAT:- Once an asset is part of the block of assets and depreciation is granted on that block, it cannot be denied in its subsequent year on the ground that one of the assets is not used by the assessee in some of the years. The concept "user" of assets has to apply upon block as a whole instead of an individual asset.
As in the case of Sony India (P.) Ltd. [2017 (1) TMI 1442 - DELHI HIGH COURT] held that the assessee would be entitled to depreciation in respect of assets which were part of block of assets even if said assets had not been put to use during relevant assessment year and had been sold prior to end of accounting year. Similarly, in the case of CIT vs Oswal Agro Mills Ltd. [2010 (12) TMI 947 - DELHI HIGH COURT] as per amended Section 32, deduction is to be allowed in the case of any block of assets, such percentage on the WDV thereof as may be prescribed as per Circular No. 469, dated 23.09.1986 thus it is difficult to accept the submission of the Revenue that for allowing the depreciation, user of each and every asset is essential even when a particular asset forms part of 'block of assets'. The Hon'ble High Court held that the Revenue is not put to any loss by adopting such method and allowing depreciation on a particular asset, forming part of the 'block of assets' even when that particular asset is not used in the relevant assessment year.
Thus, keeping in view, the judgments on allowability of depreciation on the "Block of Assets", we hereby hold that the assessee cannot be denied the benefit of depreciation claimed u/s 32 with regard to the Westland Helicopters.
Both Appeal of assessee allowed.
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2021 (7) TMI 1374
Rectification u/s 254 - period of limitation - HELD THAT:- As noted that delay of 195 days in filing MA before the ITAT is attributed to the Covid-19 pandemic. The assessee has also referred to Hon’ble Supreme Court decision dated March 8th 2021 wherein it has been expounded that in computing the period of limitation for any suit, application or proceedings, the period from 15.03.2020 till 14.03.2021 shall be excluded - MA is duly admitted.
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2021 (7) TMI 1373
Levy of late fee u/s 234E - Levying late fee charges for delay in furnishing statement of tax deducted at source (TDS) - HELD THAT:- On perusal of ground of appeal, we find that the assessee has raised multiple grounds of appeal challenging the validity of order passed by lower authorities - in our view the substantial grounds of appeal is whether the lower authorities are justified in charging late fee on late furnishing the statements of TDS of various quarters of different assessment years. There is no dispute that the assessee made TDS statement furnished by the assessee in all quarters were prior to 01-06-2015. The Hon’ble Karnataka high Court in Fatheraj Singhvi [2016 (9) TMI 964 - KARNATAKA HIGH COURT] was held that the amendment in section 200A has come into effect on 01.06.2015 and has prospective effect no computation of fee for the demand or the intimation for fee under section 234E can be made for TDS deducted prior to 01.06.2015, hence the demand of fee under section 234E is without authority of law.
So far as reliance by Ld. DR for the revenue in case of Rajesh Kourani [2017 (7) TMI 458 - GUJARAT HIGH COURT] is concern, we find that the Hon'ble High court in said case upheld the constitutional validity and also held that fee prescribed under section 234E could be levied even without regulatory provision. We further find that after the decision of Rajesh Kourani [2017 (7) TMI 458 - GUJARAT HIGH COURT] the coordinate bench of Tribunal by following the order in Fatheraj Singhvi vs UOI(supra) held that the provisions of section 234E are not retrospective, some of the case as relied by Ld. AR for the assessee, which we have referred in para- (supra). In the result the ground of appeal raised by the assessee is allowed.
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2021 (7) TMI 1372
Belated return of income accepted by condoning the delay - Condonation of delay in filing return - reasonable cause of delay - genuine hardship - HELD THAT:- Having considered the facts and circumstances due to which the respondent-assessee, at the relevant time, could not file the return of income within the time prescribed, the order passed by the High Court directing the Revenue to condone the delay and accept the belated return of income and to consider the return of income in accordance with law on merits does not warrant any interference. The facts which led to the assessee in late filing of the return of income are glaring.
Therefore, no interference of this Court is called for, in exercise of powers under Article 136 of the Constitution of India. However, at the same time, the question of law, “whether the CBDT, while exercising the powers under Section 119(2)(b) of the Income Tax Act, can direct to condone the delay in filing the return of income” is kept open to be considered in an appropriate case. It is further observed that the impugned judgment and order passed by the High Court be not treated as a precedent. SLP dismissed.
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2021 (7) TMI 1366
Nature of receipts - Securities held under 'held to maturity' have the material characteristics of capital asset rather than stock in trade and the form part of investments only - HELD THAT:- Question No.1 is covered against the Revenue in Commissioner of Income-tax, Hubli Vs. Karnataka Vikas Grameen Bank [2015 (12) TMI 1420 - KARNATAKA HIGH COURT]
Writing off entire expense as revenue - Whether expenditure towards software item is capital in nature having enduring benefit eligible for depreciation at 60%? - HELD THAT:- In [2013 (10) TMI 1225 - KARNATAKA HIGH COURT], this Court has recorded detailed reasons and held that software is an aid in manufacturing process rather than a tool itself. Though certain application has enduring benefit, it does not result into acquisition of capital asset. It merely enhances the productivity or the efficiency and therefore, it has to be treated as a Revenue expenditure. In Oriental Bank of Commerce [2018 (4) TMI 1534 - DELHI HIGH COURT] for the use of such software, the nature of expenditure otherwise incurred for streamlining its functions i.e. towards fee payable to the consultants for systems and employment of special professionals to carry on the tasks that the software in fact performs, would have fallen undoubtedly in the revenue stream. Taking these into account and the further circumstance that the software itself would have run its course or life span as it were, given that the earlier assessment year in question is 2008-09, we are of the opinion that the question of law framed is to be answered in favour of the assessee
Provision for expenses of branch offices' - AO disallowed the same on the ground that the liability is purely contingent and not an ascertained one - HELD THAT:- We have perused the said Circular. It is stated therein that in the Direct Tax Laws (Amendment) Act, 1987, the provisions of Section 36(1)(vii) of the IT act and Section 36(2) of IT Act, 1961, has been amended to rationalize the provisions regarding allowability of bad debt with effect from April 1, 1989. It is further stated that the Legislative intention behind the amendment was to eliminate the litigation on the issue of allowability of 'bad debt' by doing away with the requirement for assessee to establish that the debt had in fact, become irrecoverable. He placed reliance on Big Bags International Pvt. Ltd. [2020 (12) TMI 830 - KARNATAKA HIGH COURT] in support of this contention. In view of the said Circular and the said authority wherein, this Court has held that the Act mandates that in order to claim bad debts, the assessee has to write-off the same in his Books of accounts and he is not required to prove that the debt was irrecoverable, we answer this question in favour of the assessee and against the Revenue.
Writing off of non-banking assets - Whether losses which are contingent in nature cannot be allowed to be written off and charges against the profits of the company? - HELD THAT:- We hold that the ITAT's conclusion that the asset shall be treated as 'Stock in Trade' does not call for any interference and accordingly, this question is answered in favour of the assessee and against the Revenue
Broken period interest - Whether assessee cannot follow receipt basis of accounting for some items of income and follow accrual basis of accounting for other items of income? - HELD THAT:- This question is covered against the Revenue in Commissioner of Income-tax Vs. The Karnataka Bank Ltd [2014 (11) TMI 221 - KARNATAKA HIGH COURT] and the same is not disputed
Expenditure claimed to be incurred in connection with sale of shares - Whether assessee has failed to substantiate that the expenditure on sale of shares is a wholly and exclusively incurred for the purpose of transfer of shares? - HELD THAT:- ITAT has recorded that the terms of Compromise indicated that the payment of Rs.2.66 Crores was in connection with the transfer of Capital asset. We have also perused the portion of the compromise terms extracted in the ITAT's order. It is stated therein that parties had amicably agreed upon certain terms and the assessee had paid the said amount. The DHFL has waived all indemnities, liabilities and claims. It is settled that the Revenue shall not sit in the arm chair of an assessee and decide the exigencies of business/transactions. ITAT is the last fact finding authority and based on the facts, it has held that the expenditure had nexus with the agreement between the parties. In substance, assessee has paid money to DHFL to give quietus to the dispute between the parties. As per Section 48 of the Act, the expenditure incurred in connection with the transfer is permissible. In view of the facts recorded hereinabove, in our considered opinion, payment has nexus with the transfer of shares as per the terms of Compromise. Accordingly, this question is answered in favour of the assessee and against the Revenue.
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2021 (7) TMI 1356
Computation of profits under the presumptive provision of section 44BB - Receipts on account tools lost in hold as includible in the gross receipts - case of the assessee is that the said receipt is of capital in nature and hence not chargeable to tax - CIT held that the amount received by the assessee on account of ‘equipment lost in hole’ is not includible in the gross revenue for the purpose of computation of profits under the presumptive provisions of section 44BB of the Act, when the said provisions are a complete code of taxation in themselves and do not distinguish between revenue and capital receipts having made allowance for expenditure including depreciation on capital assets to the extent of 90% of gross revenue - HELD THAT:- This issue has been decided by the Hon’ble Uttarakhand High Court in asessee’s own case [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] which has been confirmed by the Hon’ble Supreme Court [2017 (11) TMI 78 - SUPREME COURT]
Receipts on account of services tax - Assessee has claimed that service tax has no profit element in it and is collected on account of statutory requirement and, therefore, it is not taxable u/s.44 BB of the Act. The AO took the view that service tax has the profit element and, therefore, includible in the gross turnover of the assessee. This issue has also been considered by the Hon’ble Uttarakhand High Court in assessee’s own case [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] - nce the issue is now well settled in favour of the assessee and against the revenue we do not find any reason to interfere with the findings of the CIT(A). The grounds relating to this issue are also dismissed.
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2021 (7) TMI 1345
Assessment u/s 153C - violation of Principles of Natural Justice - As contended that it is a classic case of violation of Principles of Natural Justice as the authorities competent, who is exercising the quasijudicial power, failed in their duty to provide reasonable opportunity to the assessees in the manner known to law - HELD THAT:- The manner, in which, the orders of assessment were passed by the Assessing Authority itself would establish that reasonable opportunity had not been granted to the petitioners/assessees. Opportunity to be granted is not a mere opportunity and it must be meaningful and reasonable. The assessees must have time to put forth their defense statements, examine the witnesses by engaging a counsel or for personal hearing. Undoubtedly, the allegations against the assessees emanated from and out of a search conducted in the premises of M/s.Agni Estates and Foundations Private Limited. The assessees are the 'other persons' and therefore, they require opportunity to rebut the contentions raised against them from and out of the materials collected from the premises of the 'searched person'.
This being the factum, the respondent could not able to establish that reasonable opportunity has been afforded to the petitioners/assessees to defend their case in the manner known to law. However, the allegations made against the Assessing Authority is not substantiated and became unnecessary. Therefore, such allegations made in the affidavits require no consideration. Though such an allegation is made, the respective learned Senior counsels fairly have not insisted the same. The Learned Senior counsels for the petitioners have reiterated that the petitioners are ready and willing to defend their case and reasonable opportunity is to be given.
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