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Income Tax - Case Laws
Showing 21 to 40 of 7776 Records
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2021 (12) TMI 1467
Nature of expenses - Product Registration Charges - Revenue or capital expenditure - mercantile method of accounting followed as in the business of manufacturing of pharmaceutical products - whether product registration expenses have been charged off in the accounts constitutes as an expenditure allowable u/s 37(1) and hence disallowance is ought to be deleted? - HELD THAT:- On perusal of ledger accounts revels that payments have been made to statutory bodies either for approval or as statutory maintenance in foreign nations. Assessee has also made payments being annual fees to the Medical agencies in foreign nations. All these are recurring in nature. These payments are inextricably linked to the business of the assessee.
In respect of Patent expenditure, it is submitted that assessee has to get the patent registered in various regions in order to safeguard its product from any infringement. Further nothing has been placed on record to establish that the patent expenditure has been incurred by assessee on a new product. One aspect cannot be ignored that assessee incurs these expenses every year.
Coming to the expensed incurred by assessee in respect of the drug called ‘Dolenio’, we note that it is sold by assessee in many countries. The expenses incurred by assessee towards Mutual recognition process variation is necessary based on any change in the packing of the drug like change in color etc., or shape of the drug, or even the change of supplier.
The expenses incurred by assessee in respect of Dolenio during the years under consideration towards Mutual recognition process variation, Patent and Trade mark and other registration expenses, are be considered as revenue expenditure, allowable under section 37(1) of the Act.
Annual fee/license fees paid the ledger account revels that these are recurring in nature, and hence cannot be treated to be one time payment. These are in respect of renewal of licence with the drug authorities in respective countries to continue to hold the licence to export and sell the products developed by assessee. Accordingly we do not find any infirmity in the observation of CIT(A) to treat the payments to be revenue expenditure allowable u/s 37(1)
Disallowance u/s 14A r.w.s. D(2) (ii) - Assessee suo moto disallowed u/r 8 D(2)(iii) - AR submitted that the nature of dividend, was from investment in Mutual Funds (MFs) and that the investment was made out of surplus funds and funds from other sources and that no part of the borrowed funds was utilised for making the investment in MFs - HELD HAT:- If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest-free funds available. However this needs verification as on the date of investment. The cash flow statement would disclose as on the date of making investments, which had given rise to the exempted income, that the assessee had interest free funds available with it. In the interest of justice and equity, we deed it fit to remand the case to the Assessing Officer for fresh consideration. AO shall afford reasonable opportunity of being heard to the assessee. The assessee shall prove its case that it is having interest free funds for making investments, by furnishing cash flow state for the respective assessment years.
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2021 (12) TMI 1463
Assessment u/s 153C - usurpation of jurisdiction u/s 153C by the AO without first satisfying the essential condition precedent in the fourth proviso to Section 153A read with Explanation 2 of the Act - assessee had specifically objected to the AO’s action of reopening the unabated assessment for AY 2011-12 u/s 153C of the Act and had requested the AO to give details of the purported ‘assets’ (undisclosed/unaccounted assets unearthed during search qua the assessee qua the AY 2011-12) - HELD THAT:- Perusal of the assessment order impugned before us, shows that that AO did not make any addition/s in respect of escaped/undisclosed asset in the relevant AY 2011-12. Neither was the investments held in shares by the assessee found to be unaccounted/undisclosed nor was its source of acquisition disputed or held to be unexplained by the AO. We therefore find ourselves in agreement with Shri Dudhwewala that, unless the AO made addition/s of Rs. 50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. credit entries in bank account etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153C of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, for which he seeks to re-assess the income of the assessee for the 7th to 10th AY.
When the AO fails to make any addition for the ‘undisclosed asset’, then it tantamounts to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153C for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option but to drop the assessment proceedings.
For this conclusion of ours, we rely on the ratio laid down in the judgments of CIT Vs Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] & Ranbaxy Laboratories Ltd. [2011 (6) TMI 4 - DELHI HIGH COURT] Though these judgments were rendered in the context of reopening u/s. 147 of the Act, however the ratio decidendi will apply in the present case, because, like Section 147/148 of the Act, the AO gets the authority to assess/reassess the income of a searched person or other person u/s 153A/153C for the extended assessment years (7th to 10th AYs) only if he has in his possession the jurisdictional fact, as discussed.
If the AO is found to have assumed jurisdiction erroneously on mistaken belief about the existence of jurisdictional fact or ultimately drops it (after making enquiries in the course of assessment) while framing the reassessment order; then the AO cannot legally proceed further with the assessment/reassessment and/or make any other items of additions/disallowances, for the reason that the jurisdictional fact is absent or not in existence at the first place when he usurped the jurisdiction. In the light of the aforesaid discussion, and in our considered opinion, this submission of Shri Dudhwewala is well founded and deserves to be accepted.
In view of the above and on perusal of the impugned re-assessment order, we note that the only addition made by the AO in AY 2011-12 was on account of unexplained cash credit represented by sale proceeds u/s 68 of the Act. As noted earlier, the additions on account of unexplained ‘cash credit’, could not have been made by the AO, unless he first made an addition of undisclosed ‘asset’ valued at Rs. 50 Lakhs or more.
So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO’s hand or in his possession when he assumed jurisdiction u/s 153C for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153C of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO’s action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed. The assessee thus succeeds on the first legal challenge raised in the cross objections. Hence, Ground No. 2 of the cross objections stands allowed.
Determining the abated/unabated assessment u/s 153C - date of search as ascertained - HELD THAT:- As we hold that in the case of unabated assessments of an assessee, no addition is permissible in the order u/s 153C of the Act unless it is based on any incriminating material found during the course of search.
The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion, but should be of such nature which would prima facie indicate that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to the transactions reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be ‘incriminating’ in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document is incriminating in nature, justifying the additions in unabated assessments.
We thus hold that the assertion of the AO in the 'Satisfaction Note' that having a bearing on the ‘total income’ of the assessee is perverse and erroneous. The alleged documents relied upon by the AO to usurp jurisdiction u/s 153C of the Act and justify the impugned addition did not constitute ‘incriminating material’ found in the course of search, from which any undisclosed/unexplained income could be inferred in the hands of the assessee. Hence, as there was no incriminating material against the assessee which was unearthed/seized during the search conducted on 22-12-2017 from the premises of Sagar Group, the satisfaction note prepared by the AO did not meet the condition precedent stipulated u/s. 153C of the Act, as the ‘document’ referred to, did not have any bearing on the total income of the assessee for AY 2011-12. In that view of the matter, the very assumption of the jurisdiction for AY 2011-12 is held to be bad in the eyes of law as held by the Hon'ble Supreme Court in the case of Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] and, accordingly the consequent order dated 3112-2019 is quashed.
We are of the view that based on the sole statement of Shri Agarwal, the AO could not have usurped the jurisdiction u/s 153C of the Act. Even otherwise, based on the discrepancy as discussed about ‘Annexure -1’ it is not safe to rely on it and above all, as discussed it did not contain anything which incriminated the assessee. Hence, such statement could not be the basis for drawing adverse inference against the assessee and therefore, no addition could have been made on the basis of such unreliable statement. We thus find that the contentions raised by the Ld. CIT DR are devoid of merits and is therefore rejected
AO had invalidly usurped jurisdiction u/s 153C of the Act as there was no incriminating material pertaining to the assessee seized in the course of search. Even the addition made in the unabated assessment for AY 2011-12 was unsustainable since it was not based on any incriminating material found in the course of search. In that view of the matter, the order dated 31-12-2019 passed by the AO is held to be a nullity and is accordingly quashed. Hence, Ground No. 1 of the cross objections also stands allowed.
CIT(A)’s action of holding the assessment order passed u/s 153C/143(3) to be ab initio void, for the AO’s failure to issue notice u/s 143(2) of the Act prior to completion of assessment - We find merit in the submission of the Ld. DR that issuance of notice under section 143(2) is not mandatory for finalization of assessment under section 153A/153C of the Act. We note that the Ld. CIT(A)’s had wrongly relied on the decisions of Hotel Blue Moon [2010 (2) TMI 1 - SUPREME COURT] & Laxman Das Khandelwal [2019 (8) TMI 660 - SUPREME COURT] which were distinguishable in as much as it were rendered in the context of assessments framed u/s 143(3)/158BC, where issuance of notice u/s 143(2) of the Act to assume jurisdiction over the assessee is mandatory. However, Section 153A/153C of the Act is a special provision and we find that there is no specific provision in the Act requiring the assessment to be made under section 153A/153C after issue of notice under section 143(2) of the Act.
As decided in Ashok Chaddha [2011 (7) TMI 252 - DELHI HIGH COURT]. There is no specific provision in the Act requiring the assessment made under s. 153A to be after issue of notice under s. 143(2) of the Act. Clause (b) of s. 158BC expressly provides that "the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub-ss (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply. This is not the position under s. 153A. The law laid down in Hotel Blue Moon, is thus not applicable to the facts of the present case.
Impugned order passed u/s 153C of the Act to be a nullity on the premise that it was passed consequent to the return of income filed by the assessee in response to earlier notice issued u/s 153A - We note that the Ld. DR has rightly pointed out that, the Ld. CIT(A) had erroneously observed that the AO had first issued notice u/s 153A of the Act for AY 2011-12 and thereafter without consigning/dropping the earlier notice, he had initiated fresh proceedings u/s 153C of the Act. Upon examination of the records, we note that, unlike for AYs 2012-13 to 2017-18, the AO for AY 2011-12 had issued only one notice u/s 153C of the Act dated 05-12-2019 and the assessee had also filed the return of income in response thereto, pursuant to which the assessment dated 31-12-2019 was framed u/s 153C/143(3) of the Act. We thus find merit in the Revenue’s case that this finding of the Ld. CIT(A) was erroneous. Before us, the Ld. AR was unable to controvert this fact.
Thus as the very usurpation of jurisdiction by the AO u/s 153C has been held to be bad in law and, even the seized documents referred by the AO for justifying the addition/s made u/s 68 of the Act, in the unabated assessment for the AY 2011-12, did not constitute ‘incriminating material’; the order passed u/s 153C/143(3) and the AO’s action of making addition u/s 68 of the Act therein, is held to be a nullity and is unsustainable for want of jurisdiction and is therefore is quashed.
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2021 (12) TMI 1461
Offence u/s 277 - evasion on account of misstatement or a wrong statement - non- payment of any tax before uploading of the returns - petitioners did not have money to make payment of the income tax - prosecution against all the directors of the company - reverse burden of proof - proof of willful evasion of tax or not? - HELD THAT:- We are not inclined to interfere with the impugned order and hence the special leave petition is dismissed. The dismissal of the special leave petition would not be construed as approval of the observations made in the impugned judgment - Section 202 of the Code of Criminal Procedure, 1973. Neither the dismissal nor the findings recorded in the impugned order reflect on other proceedings under the Income Tax Act, 1961.
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2021 (12) TMI 1460
Scrutiny assessment - non issuance of notice u/s 143(2) was ever issued by the Department - whether curable defect u/s 292BB? - HELD THAT:- Admittedly, no notice u/s. 143(2) was issued by the AO having jurisdiction over assessee either prior to the assessment proceedings or during the assessment proceedings. We place reliance on the decision of NITTUR VASANTH KUMAR MAHESH [2019 (5) TMI 1557 - KARNATAKA HIGH COURT] wherein Hon'ble Court took similar view. Hon'ble Court also held that provisions of section 292BB cannot cure such defect.
Based on the above discussions, we allow raised by the assessee and the order passed by the Assessing Officer u/s. 143(3) for year under consideration is held to be not legally sustainable. The assessment order dated 30.12.2016 is held to be Null in the eyes of law due to non-issuance of notice u/s. 143(2) by the Ld. AO who had jurisdiction over present assessee.
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2021 (12) TMI 1459
Assessment u/s 153A - Addition u/s 68 - Whether the AO had validly assumed jurisdiction to issue notice u/s 153A of the Act upon the assessee for AY 2011-12 in terms of fourth proviso to Section 153A of the Act read with Explanation 2 of the Act ? - HELD THAT:- Only upon valid assumption of jurisdiction, the AO ought to have proceeded against the assessee to assess the escaped asset of the assessee and thereafter other undisclosed income if any as per law. And when he does that, he first has to make addition in respect of the escaped asset [based on which AO initiated section 153A proceedings] and then only based upon the incriminating documents unearthed in the course of search, that he can make additions/disallowances in respect of other items of escaped income/credit/expense etc., if any (for unabated assessment years); in the event if no addition could be made by AO in respect of undisclosed asset [based on which AO initiated section 153A proceedings] then the AO has to drop the section 153A proceedings because, he has assumed jurisdiction on a wrong/non-existing undisclosed asset and can resume only u/s 153A only on satisfaction of new/fresh undisclosed asset/jurisdictional fact, which principle will discuss separately.
Pre-requisite condition to issuance of notice u/s 153A for the 7th – 10th AY - The extended jurisdiction to invoke/assess 7th – 10th AY is conferred on the AO by authority of law and the AO cannot confer to himself the jurisdiction in a casual manner by stating/substituting the specific jurisdictional fact to encompass all seized material. It is common knowledge that, seized material may contain both disclosed & undisclosed assets, liabilities, expenses & income. So, it is imperative that before issuance of notice u/s 153A [for the extended period], the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in his possession qua the assessee for AY 2011-12 valued Rs. 50 lakhs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s 153A for 7th to 10th AY.
For this, we rely upon the dictum of the Privy Council in Nazir Ahmed Vs. King Emperor [1936 (6) TMI 11 - PRIVY COUNCIL] that when a statute requires a thing to be done in a particular manner, it must be done in that manner or not at all. As discussed the language of the fourth proviso to section 153A of the Act show that issuance of notice can be resorted to by the AO only after he is in possession of the jurisdictional fact, which is found to be absent in the present case. Therefore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153A of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153A dated 11.09.2019 was issued by the AO without authority of law and without satisfying the essential jurisdictional fact, and hence the issuance of notice u/s. 153A is held to be bad in law.
Thus according to us, the pre-requisite condition for conferment of jurisdiction under section 153A for the assessment of AY’s falling from seventh (7th) to tenth (10th) assessment years preceding the searched assessment year being the jurisdictional fact in this case is absent and the AO without fulfilling this essential jurisdictional fact erroneously invoked jurisdiction u/s 153A of the Act for AY 2011-12, which is a serious flaw and a jurisdictional defect, that cannot be cured.
Additions on account of unexplained cash credit and that too share capital, which is in the nature of ‘liability’ could not have been made by AO, unless he first made an addition of undisclosed ‘asset’ valued at Rs. 50 Lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO’s hand or in his possession when he assumed jurisdiction u/s 153A for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153A of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO’s action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed.
Whether in absence of any incriminating material found in the course of search at the premises of the assessee, the additions/disallowances made in the assessments of the assessee, which were unabated/ non-pending on the date of search, could be held to be sustainable on facts and in law? - We find ourselves in agreement with the above findings of the Ld. CIT(A) that this document was a share-holding pattern document prepared by way of secretarial compliance report, which as the assessee has shown, was filed along with the company’s annual return in Form MGT-7 on 28-11-2017 with the Registrar of Companies and was therefore available in the public domain (much prior to the date of search). It is found to contain the details of the name of shareholders, their amount and percentage of shareholdings.
In our considered view, this document was a regular business document having no incriminating content whatsoever. Nothing whatsoever has been brought on record by the Revenue to correlate or link as to how the contents of this statement led to unearthing of unexplained cash credit by the AO and therefore the aforesaid factual finding of the Ld. CIT(A) remains uncontroverted. Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) on this aspect and hold that the seized document GCL-HD-1 did not constitute incriminating material or evidence.
For the reasons discussed we hold that the seized document GCL-HD-1 referred by the AO for justifying the addition/s made u/s 68 of the Act in the orders impugned before us, did not constitute ‘incriminating material’ and therefore no addition/s was legally permissible in the assessments framed u/s 153A for the AYs 2011-12 to 2015-16 for which the assessment did not abate, when the search was conducted on 22-12-2017. The assessee thus succeeds on Question (B) as well.
Whether the Joint Commissioner of Income-tax, Guwahati had validly granted approval u/s 153D of the Act and therefore whether the consequent order passed u/s 153A/143(3) was sustainable in law or not ? - As noted that the relevant copies of the letters addressed by the AO to the Jt.CIT and the letters of approval issued by the latter are not available on record, which are necessary to adjudicate this particular issue. Moreover, since we have already held the orders passed u/s 153A/143(3) of the Act and the additions made therein to be unsustainable in law for the reasons set out above, we are not inclined to return our findings with regard to this legal issue raised in the cross objections as the same has now become academic in nature.
Whether the assessee had discharged its onus of establishing the identity and creditworthiness of the share subscribers and substantiating genuineness of the transactions and therefore whether the additions made u/s 68 on account of share application monies received by the appellant was tenable on facts and in law ? - AO’s failure to personally examine the witness and his denial to allow the assessee opportunity to cross examine the Departmental witness on whose statements he was relying upon was a serious & fundamental flaw which resulted in the additions made u/s 68 of the Act to be a nullity as held by the Hon’ble Supreme Court in Andaman Timber [2015 (10) TMI 442 - SUPREME COURT]
Whether the AO had rightly computed interest u/s 234A - We find that the AO had wrongly taken the due date of filing of return in response to the notices issued under Section 153A of the Act dated 11.09.2019 to be the original due date u/s 139 of the Act i.e. 30.09.2011 for AY 2011-12, 30.09.2012 for AY 2012-13 and so on, rather than the day following the expiry of the time limit prescribed in notice u/s 153A of the Act, resulting in erroneous and excessive levy of interest u/s 234A of the Act. The AO is accordingly directed to re-compute the levy of interest u/s 234A of the Act in terms of sub-section (3) of Section 234A of the Act i.e. from the date on which the time limit for filing of return of income in response to notices u/s 153A of the Act dated 11.09.2019 had expired. This ground therefore stands allowed for statistical purposes.
Adjustment of seized cash by way of self-assessment tax in the hands of the assessee in AY 2017-18 - HELD THAT:- AR as brought to our notice that the assessee had filed a petition dated 28-02-2020 before the AO requesting him to adjust this seized cash against their tax liability for AY 2017-18. Having regard to the provisions of Section 132B(iii) of the Act, the AO is accordingly directed to grant the credit of seized cash by way of self-assessment tax in accordance with law.
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2021 (12) TMI 1456
Revision u/s 263 - validity of scrutiny assessment u/s 143(3) - AO while passing the assessment order u/s 143(3) did not enquire about “discrepancy in turnover shown in ITR and cash deposit in bank A/c” - HELD THAT:- As in the present case we note that the Ld. PCIT has alleged lack of enquiry on the part of the AO in respect of scrutiny of the CASS item “discrepancy in turnover shown in ITR and cash deposit in bank A/c”. We note that the assessee is running petrol pump business.
From the perusal of the assessment order, we note that the AO had called for the documents/records from the assessee and has made the specific finding of fact that pursuant to his notices, the assessee had furnished the same as well as the reconciliation in respect of the discrepancy in turnover shown in ITR and cash deposit in bank account.
AO has made a finding after calling for relevant documents to scrutinize the CASS issue that the assessee has been able to explain the discrepancy by filing the reconciliation. Since the AO has made a categorical finding on the issue on which the Ld. PCIT found fault with and when this fact has been brought to the notice of the PCIT during the revisional proceedings, PCIT after taking note that A.O has made enquiry on the issue, then if he is still not satisfied with the enquiry conducted by the AO on that issue, then according to us the Ld PCIT ought to have conducted enquiry himself and demonstrated how the AO erred in accepting the reconciliation/explanation given by the assessee while explaining/reconciling the discrepancy.
According to us, without doing such an exercise in the light of the AO’s finding that the assessee has explained/reconciled the discrepancy in turnover shown in ITR and cash deposit in bank a/c, the action of Ld PCIT to find fault with the AO’s action as erroneous for lack of enquiry cannot be countenenced. Therefore, we cannot agree with the Ld. PCIT that AO’s scrutiny assessment u/s 143(3) is erroneous for non-enquiry. Therefore, the Ld. PCIT erred in assuming jurisdiction u/s 263 - Appeal of the assessee is allowed.
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2021 (12) TMI 1455
Validity of assessment u/s 144B - short period that had been given on service of the final notice and the Draft Assessment Order - whether the request for adjournment made has been responded as required under the law and whether the assessment framed can therefore be permitted to be sustained? - HELD THAT:- Once the statute provides that there is an opportunity to be availed to the assessee when there is a variation prejudicial to its interest is proposed, his request for adjournment as well as for the hearing also needs to be responded to. It is a completely unacceptable and unpalatable proposition that once a request come from the assessee, the respondent chooses not to respond to the same and go ahead with the framing of the assessment, that too when the time period was not expiring.
Even if the time period expires, it is for the respondent to workout a schedule in the manner as expected particularly when there is no human agency and when the assessee also has no one to turn to but to send a request through the e-portal.
Therefore, in the instant case when there was already a second surge of infection due to COVID-19 virus, the entire country was grappled with that second waive. If there is a categorical request that was made on account of such infection of the partner of the petitioner company and time was sought on 10.04.2021 when the time period for finalizing the assessment was getting over on 30.04.2021 as was known to the respondent from February, 2021, as extension had already come by virtue of the Circular, the framing of the assessment in clear defiance and in violation of this provision shall need to be interfered with.
Resultantly, we allow the present petition and quash and set aside the Assessment Order rendered u/s 143 (3) r.w.s. 143(3A) and 143(3B) which has been framed by the authority. The penalty proceedings and the demand notice are also quashed and set aside. AO shall be availing an opportunity to the petitioner including the opportunity of personal hearing, if requested for and decide the matter in accordance with law.
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2021 (12) TMI 1449
Income accrued in India - Indo Oman DTAA - dividend income was taxable but exempted under Omani Law - HELD THAT:- A perusal of the paper book reveals that the issues raised in the present appeal are no longer res integra, as the Coordinate Bench [2017 (4) TMI 1035 - DELHI HIGH COURT] has dismissed the revenue’s appeal on similar grounds.
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2021 (12) TMI 1447
TDS u/s 195 - Income taxable in India - Royalty - amounts paid by the assessee to the foreign company for the use of copyright of 'computer software' - HELD THAT:- Substantial questions of law raised herein have been decided in favour of the assessee, in the decision of Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT] held amounts paid by resident Indian endusers/distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income Tax Act were not liable to deduct any TDS u/s 195 of the Income Tax Act. Decided against revenue.
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2021 (12) TMI 1446
Levy of Interest u/s 234D - HELD THAT:- As decided in judgment dated 19.03.2019 [2019 (5) TMI 112 - MADRAS HIGH COURT] though computation of interest will depend upon the appeal effect order to be passed, the quantum of net payment is to be determined accordingly, after allowing weighted deduction under Section 35 (2AB) of the Act, as indicated above. The provisions of Section 234D have been held applicable for Assessment Year 2003-2004 in question in terms of the decision this Court in the case of Fisher Sanmar Ltd. [2014 (4) TMI 236 - MADRAS HIGH COURT] Accordingly, Questions are answered in favour of the Revenue and against the Assessee.
Disallowance of bad debts as conditions laid down in Section 36(1)(vii) r.w.s. 36(2) not satisfied - debts have been taken over from the sister concerns - Tribunal allowed the claim - HELD THAT:- Substantial question of law involved in this appeal has already been considered and decided in favour of the assessee by judgment [2019 (1) TMI 2017 - MADRAS HIGH COURT] as held tribunal has taken note of the position that the Memorandum and Articles of Association permitted the assessee to carry on the business of money lending and the transactions in question have been held to be in the realm of business activity. Decided in favour of assessee.
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2021 (12) TMI 1440
TP Adjustment - interest payment made by the assessee to its overseas associate enterprises @ 11% while adopting domestic prime lending rate only - HELD THAT:- As held that the currency involved herein is not “Euro” only, alleged “safe harbor” rules also do not pertain to these four assessment years. We thus affirm the TPO’s identical action in all these four assessment years adopting “LIBOR + 200” interest rate coming to 2.9% as against that claimed @ 11% at assessee’s behest.
Addition u/s 14A r.w.Rule 8D - HELD THAT:- Addition restricted to the extent of exempt income only in the CIT (A)’s order in the light of Joint Investment (P) Ltd [2015 (3) TMI 155 - DELHI HIGH COURT]
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2021 (12) TMI 1437
Loss in trading of cotton cloth - Classification of sale account of raw cotton - AO was of the view that the assessee had failed to explain the claim of wrongly classified sale of cotton cloth - assessee could not substantiate the wrong posting in the sale account so as to justify the loss in the sale of cotton cloth (as was computed by the AO) - HELD THAT:- It cannot be said that no documents or evidences were furnished by the assessee. We have also gone through the Certificate dated 27.3.2021 issued by M/s S. Karan Shama & Co. , C.As, Ludhiana placed at page 8 of the paper book in which certain quantitative details pertaining to the cotton cloth and raw cotton have been certified. Apparently this Certificate was neither before the Assessing officer and nor before the Ld. CIT(A) and the assessee has filed it in the paper book for the first time before us. We also note that there is no application on behalf of the assessee to admit this Certificate as additional evidence.
Thus in the absence of such application for admitting of additional evidence, the same cannot be admitted for consideration by us.
Thus although the assessee could not explain the claim of wrong posting at the time of assessment proceedings or first appellate proceedings but had duly furnished the relevant documents coupled with the settled principle that tax should be levied only on the correct amount of income, and also in the interest of substantial justice, we restore this appeal to the file of the Ld. CIT(A) with a direct ion to adjudicate the issue afresh - Appeal of the assessee stands allowed for statistical purposes.
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2021 (12) TMI 1435
Addition on account of consumption debtors - HELD THAT:- This Tribunal in the [2019 (4) TMI 204 - ITAT DELHI] for Assessment Years 2008–09 and 2009–10 has considered a similar quarrel on identical set of facts and has decided the issue in favour of the assessee.
Disallowance u/s 14A - HELD THAT:- The undisputed fact is that the assessee has earned exempt dividend income of Rs.18, 521/– only. But when the assessee filed return of income, the decision of the Hon'ble Delhi High Court [2015 (3) TMI 155 - DELHI HIGH COURT] was not available with the assessee. The Hon'ble High Court has restricted the disallowance to the extent of exempt income.
Similar view was taken in the case of Caraf Builders and Construction [2018 (12) TMI 410 - DELHI HIGH COURT]. Since now we have the binding decision of the Hon'ble Jurisdictional High Court of Delhi we direct the Assessing Officer to restrict the disallowance to the extent of exempt income - Ground of the assessee is allowed.
Disallowance towards leave and encashment u/s 43B - assessee claimed that claim of leave encashment on accrual basis - HELD THAT:- We have carefully perused the orders of this Tribunal in [2021 (12) TMI 441 - ITAT DELHI] as relying on Apex Court in case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT] held that the claim with regard to leave encashment has to be allowed on cash basis i.e. actual payment basis and not on accrual basis. we direct the Assessing Officer to verify and allow the deduction u/s 43B on actual payment basis as held in the decision of the Hon’ble Apex Court. Ground allowed for statistical purposes.
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2021 (12) TMI 1434
Assessment u/s 153A - addition qua unabated assessment - incriminating material found during the course of search and seizure or not? - where no assessment proceeding for the year under consideration is pending, in that eventuality, in the absence of any incriminating material found during the course of search and seizure proceedings, whether the addition can be made qua unabated assessment for the said year? - HELD THAT:- Since, the facts of the instant case are exactly identical to the facts of the Smt. Sanjana Mittal Vs. DCIT [2019 (3) TMI 1757 - ITAT AMRITSAR] hence we hold that in the absence of incriminating material, in the case of the appellant assessee, no addition can be made qua unabated assessment for the year under consideration. Appeal of the assessee is allowed.
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2021 (12) TMI 1433
Assessment u/s 153A - Valid approval accorded u/s. 153D or not? - HELD THAT:- The Co-ordinate Bench in the case of Sh. Madan Lal. [2021 (8) TMI 1336 - ITAT AMRITSAR] as held that approval which is granted in a mechanical, stereotype manner, without assigning any reasons and without considering the draft assessment order is not sustainable in the eyes of law.
Thus where approval u/s.153D has been given in a mechanical manner and without application of mind in such cases assessment proceedings are to be vitiated. Appeals of the Assessee are allowed.
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2021 (12) TMI 1432
Revision u/s 263 - AO had passed an “Order Giving Effect” (OGE) allowing full relief to the assessee - As per CIT allowing relief to the assessee in the OGE without conducting fresh examination as directed by AO and without passing fresh assessment order has rendered the OGE erroneous and prejudicial to the interests of revenue - HELD THAT:- We notice that the Tribunal, vide its order [2016 (10) TMI 1374 - ITAT BANGALORE] has restored following three issues to the file of AO for examining them afresh on Disallowance u/s 14A of the Act, Whether Royalty income is eligible for computing deduction u/s 10A/10AA of the Act and Whether foreign currency expenses should be reduced from export turnover for computing deduction u/s 10A/10AA.
As observed by the Ld PCIT, the AO has failed to pass a fresh assessment order u/s 143(3) r.w.s. 254 of the Act. Instead, the AO has passed an OGE and granted relief to the assessee in respect of all the three issues mentioned above without examining them at all. Thus, granting to relief to the assessee without examining the issues as directed by ITAT and also failure to pass a fresh assessment order u/s 143(3) r.w.s 254 of the Act would definitely render the OGE erroneous and prejudicial to the interests of revenue. Hence we do not find any infirmity in the impugned revision order passed by Ld PCIT.
We make it clear that while giving effect to the revision order passed u/s 263 of the Act by PCIT, the AO is duty bound to follow the binding decision rendered by the Hon’ble jurisdictional Karnataka High Court for AY 2010-11 - Appeal filed by the assessee is dismissed.
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2021 (12) TMI 1428
TP Adjustment - Corporate Guarantee Fee - assessee had charged guarantee fee of 0.25% - HELD THAT:- We find that identical issue arose in assessee’s own case in A.Y. 2010-11 [2018 (2) TMI 2030 - ITAT DELHI] and the Co-ordinate Bench of Tribunal decided the issue in favour of the assessee.
Transaction of corporate guarantee fee charged at 0.25% by the assessee from its AEs to be at Arm’s Length rate and accordingly deleted the addition made by TPO. Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-ordinate Bench of Tribunal in assessee’s own case for A.Y. 2010-11 & 2012-13 has been stayed/ set aside/ overruled by higher judicial forum. On relying on the decision of the Co-ordinate Bench of Tribunal for A.Y. 2010-11 in assessee’s own case, we hold that the AO was not justified in making adjustment.
Adjustment on account of interest on foreign currency loan u/s 92CA(3) - assessee had advanced loan to its AEs and had charged interest @LIBOR + 224 bps on the advance provided to the AEs - HELD THAT:- We find that identical issue arose in assessee’s own case in A.Y. 2010-11 [2018 (2) TMI 2030 - ITAT DELHI] and the Co-ordinate Bench of Tribunal in assessee’s own case decided the issue LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AE. Well the assessee has charged 250 basis points over an above such benchmark viz. LIBOR. No addition is justified and the entire addition.
Adjustment on account of reimbursement received by the assessee from its AEs - HELD THAT:- It is an assessee’s submissions that the expenses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee’s submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return.
The aforesaid contentions of the AR have not found to be false. We find that in the case of Vedanta Ltd. [2020 (9) TMI 1010 - ITAT DELHI] has held that no mark up is warranted on pass through costs which are inter alia incurred by the assessee and are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. Before us no material has been placed by Revenue to demonstrate that value addition has been done by the assessee and is not in the nature of reimbursement of primary third party expenses which were initially incurred by the assessee. As in the case of Vedanta Ltd. [2020 (9) TMI 1010 - ITAT DELHI] we are of the view that no addition is called for in the present case. Thus the grounds of assessee is allowed.
Disallowance on brought forward Business Losses - HELD THAT:- The issue in the present ground is with respect to disallowance of brought forward business losses A.Y. 2013-14. Before us, AR has submitted that the appeal for A.Y. 2013-14 is listed before the Tribunal and the decision of the Tribunal is thus awaited. Considering the aforesaid facts, we direct the AO to allow the claim of the losses when the same is finally determined and in accordance with law. Thus the Ground of the assessee is allowed.
Disallowance of depreciation on Goodwill - HELD THAT:- We find that issue of depreciation on goodwill also arose in assessee’s own case in A.Y. 2012-13 [2020 (2) TMI 1485 - ITAT DELHI] and the Co-ordinate Bench of Tribunal by relying on the decision of Hon’ble Apex Court in the case of Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] held that assessee is eligible to claim depreciation on goodwill. However in that order since the claim of depreciation was made as an additional claim before the Tribunal, the matter was remitted to the AO for examination. In the year under consideration, we are of the view that since the claim was already made in the return of income and was denied by AO and DRP, we are of the view that ratio of the decision rendered by Hon’ble Apex Court in the case of Smifs Securities is squarely applicable to the facts of the case. We are therefore direct the AO to grant the depreciation of such goodwill. Thus the ground of assessee is allowed.
Incorrect computation of Book Profit under MAT - disallowance of depreciation on goodwill amounting to Rs.25,53,577/- to work out the adjusted Book Profit - HELD THAT:- We have herein while deciding the Ground have held the depreciation on goodwill as an allowable expenditure. Therefore in such a situation, we are of the view that once the depreciation is held to be an allowable expenditure, same cannot be added to the book profit more so as u/s 115JB the depreciation which is required to be added back to compute book profits is the depreciation as per the books of account and not as per the Income Tax Act. We are of the view that AO was not justified in making addition of depreciation on goodwill to compute the book profits. We accordingly direct the AO to delete the addition made to book profit u/s 115JB - Thus the ground of assessee is allowed.
Claim of deduction u/s 80-IA in respect to Wind Power Plant (WPP) and Captive Power Plant (CPP) - HELD THAT:- We are also find in the case of Mitesh Impex [2014 (4) TMI 484 - GUJARAT HIGH COURT] has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the Assessing Officer. It has further held that any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record.
We are of the view that the claim of the assessee of the deduction u/s 80IA merits consideration and adjudication by the AO. We therefore set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such documents, explanations and submissions as deemed fit in respect of its claim. Thus the ground of assessee is allowed for statistical purposes.
Additional depreciation u/s 32(1)(iia) - HELD THAT:- It is the case of the assessee that it did not claim the additional depreciation in the return of income but was claimed before the AO but however AO did not discuss the issue and when the matter was carried before the DRP, DRP also did not allow the claim of additional depreciation. We find that identical issue arose in assessee’s own case in A.Y. 2010-11, the claim was allowed in A.Y. 2012-13 - following the reasoning of the Co-ordinate Bench for A.Y. 2010-11 and for similar reasons set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee.
TDS and self assessment tax which was not claimed in the return of income - HELD THAT:- Before us, assessee is seeking the credit for TDS amounting to Rs.2,70,000/- deducted on sale of immovable property and the claim of self assessment amounting to Rs.47,61,334/- which was inadvertently claimed as TDS. Assessee has furnished the copy of the self assessment tax challan in the paper book and the copy of Form 26QB evidencing the deduction of TDS - We find merit in the prayer of Ld AR. We therefore considering the submissions of the Learned AR restore the matter to AO to examine the same as per record and if the claim of the assessee is found to be in order, to allow the claim. Thus the ground of assessee is allowed for statistical purposes.
Deduction of education cess - HELD THAT:- Since the issue being identical to the issue in the case of ExLServices.com (India) Pvt. Ltd [2021 (9) TMI 361 - ITAT DELHI] we therefore for similar reasons hold the expenses on education cess to be allowable and accordingly direct the AO to allow its deduction. Thus the ground of assessee is allowed.
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2021 (12) TMI 1427
Characterization of receipts - entrance fees received from its member - capital receipts or revenue receipts - whether facilities that are made available to the members are done in normal course of its business as the assessee is engaged in the business of race course? - HELD THAT:- ITAT held that there is no dispute to the fact that right from practically the date of incorporation i.e., 1925 onwards, the entrance fee from the members was treated as capital in nature and majority of these orders were passed under Section 143(3) of the Income Tax Act, 1961 - ITAT also relied upon the judgment of this court in CIT vs. Diners Business Services Pvt. Ltd [2003 (4) TMI 56 - BOMBAY HIGH COURT] and held that any sum paid by a member to acquire the rights of a club is a capital receipt. The ITAT has relied upon various receipts and loopholes that the view of the Assessing Officer to treat the entrance fee as revenue receipt and not capital receipt was incorrect.
Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raises any substantial question of law.
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2021 (12) TMI 1425
Bogus LTCG - Capital Gains Generated on Sale of Penny Stock - realince on third party information - A.O. has accepted the statements recorded by some other officers of the Department in some unconnected proceeding and believed it as a gospel truth against the Appellant and relying on it proceeded to draw inference against the Appellant - genuineness of claim of Long Term Capital Gain u/s 10(38) of the Act for sale of equity shares of listed companies denied - HELD THAT:- AO failed to perform his twin duties that of the investigator and adjudicator resulting in the additions being vitiated in the process.
The entire disallowances in this case is based on third party information gathered by the Investigation Wing of the Department which have not been independently subjected to further verification by the A.O., who has not provided the copy of such statement to the Appellant, thus denying opportunity of cross-examination to the Appellant, who has prima facie discharged the initial burden, the impugned addition made by the A.O. is not sustainable, thus is directed to be deleted.
In the fact of the present case, save and except relying on the statement of so called entry operators, the Revenue could not bring on record any credible evidence which could show that, the Appellant has routed his unaccounted money in the form of bogus capital gain. The A.O. never examined any one of these persons, whose statement relied upon by him in the Assessment order nor did he grant an opportunity for cross-examination except the bald references to the recorded statement. The Revenue could not bring on record any material which could link the Assessee with any wrong doing. When the learned CIT(A) found that, the A.O. has not followed the due procedure of law as stated in the above paragraph, he rightly deleted the impugned additions.
Assessee should be assessed for the correct income and ignorance if any made by the assessee in filing the return but brought to the notice of the Ld. AO before the conclusion of the assessment proceedings should be entertained and also as per the principle of natural justice if any addition is made on the basis of statement of 3rd party, a proper opportunity of cross examination should be given to the affected party and if the same is not done, action of the Ld. AO making additions cannot be held to be justified.
Exemption u/s 10(38) - As assessee has fulfilled necessary conditions to claim the exemption u/s 10(38) of the Act for the Long Term Capital Gain earned from sale of equity shares of M/s Kailash Auto Finance Ltd. and M/s Lifeline Drugs & Pharma Ltd. Therefore, we hold that the assessee has rightly claimed the exemption u/s 10(38) of the Act before the conclusion of assessment proceedings. We, therefore, find no reason to interfere in the finding of ld. CIT(A) and the same is confirmed.
Assessee appeal allowed.
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2021 (12) TMI 1423
TP Adjustment - exclude M/s. Karvy Consultants Limited from the final list of comparables - HELD THAT:- When the Tribunal had given a specific direction in the first round of litigation to exclude all comparables having annual turnover of less than Rs.5 crores in ITeS segment, in our view, the TPO has exceeded his brief in including M/s. Karvy Consultants Ltd. as comparable in spite of the fact that its turnover from ITeS segment is below the threshold limit of Rs.5 crores.
Pertinently, while deciding assesse’s appeal in assessment year 2002-03, the Tribunal [2012 (3) TMI 208 - ITAT DELHI] had excluded M/s. Karvy Consultants Ltd. as a comparable since its turnover from ITeS segment was less than Rs. 5 crores. Thus, in view of the aforesaid, we do not find any infirmity in the decision of the Commissioner (Appeals) in excluding M/s. Karvy Consultants Ltd. as a comparable. Ground raised is dismissed.
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