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Income Tax - Case Laws
Showing 361 to 380 of 7776 Records
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2021 (12) TMI 766
Appeal in case of acquittal - prosecution u/s 277A - application seeking condonation of delay in filing an application for grant of special leave to appeal from an order of acquittal under Section 378 (5) of the Code of Criminal Procedure (Cr.P.C.) - alleging falsification of books of accounts and documents while evading tax - complaint under Section 256 of the Cr.P.C. and the respondent stood acquitted - maintainability of the present application for condonation of delay - HELD THAT:- There is no controversy before this Court about the fact that an application for special leave to appeal on behalf of the applicant - Department as the complainant in the present case is governed by special law found in Section 378(4) and (5) of the Cr.P.C. In the case where the complainant is a public servant, as in the present case, the period of limitation is six months and in every other case it is 60 days under Section 378(5) of the Cr.P.C.
In this context when the law laid down by the Bench of three Hon’ble Judges in the case of Hukum Dev Narain Yadav v/s. Lalit Narain Mishra [1973 (12) TMI 92 - SUPREME COURT] and followed in Gopal Sardar v/s. Karuna Sardar [2004 (3) TMI 743 - SUPREME COURT], as also in other subsequent judgments, is perused and appreciated, this Court finds that the test to be applied for examining as to whether a special law “expressly excludes” applicability of Sections 4 to 24 of the Limitation Act, is not that such specific provisions must necessarily be excluded by referring to them, but the test to be applied would be the one specified by the Bench of three Hon’ble Judges of the Supreme Court in the case of Hukum Dev Narain Yadav v/s. Lalit Narain Mishra(supra) i.e. by analyzing the scheme of the special law, the nature of remedy provided therein as the legislature intended it to be a complete Code by itself, which alone should govern the several matters provided by it.
A very significant and important question regarding power and jurisdiction of this Court arises in the present matter. Considering the views expressed in the abovementioned judgments of the Hon’ble Supreme Court governing the field, we see no option but to resort to Rule 8 of Chapter I of the Bombay High Court Appellate Side Rules, 1960, to make a reference to two or more judges of this Court, on questions framed herein below.
The papers of this case be placed before the Hon’ble the Chief Justice for the matter to be heard more advantageously by a bench of two or more judges, on the following questions:
1) Whether Sections 4 to 24 of the Limitation Act, 1963, stand expressly excluded under Section 378(4) and (5) of the Cr.P.C. as special law for appeals against acquittal to be filed by the complainant, by operation of Section 29(2) of the Limitation Act, 1963?
2) Whether the Judgment of a Bench of two Hon’ble Judges of the Supreme Court rendered in the case of Mangu Ram and others v/s. Municipal Corporation of Delhi[1975 (10) TMI 102 - SUPREME COURT] is per incuriam, in view of the earlier judgment of a Bench of three Hon’ble Judges in the case of Hukum Dev Narain Yadav v/s. Lalit Narain Mishra(supra)?
3) Whether judgment of the Hon’ble Supreme Court in the case of Gopal Sardar v/s. Karuna Sardar [2004 (3) TMI 743 - SUPREME COURT]holds that judgment of two Hon’ble Judges of the Supreme Court in the case of Mangu Ram and others v/s. Municipal Corporation of Delhi (supra) is not good law in view of the aforesaid earlier judgment of the Bench of three Hon’ble Judges of Supreme Court in the case of Hukum Dev Narain Yadav v/s. Lalit Narain Mishra [1973 (12) TMI 92 - SUPREME COURT]?
4) Whether judgment of the learned Single Judge in the case of M/s. Sharmaji Textiles v/s. M/s. Sandeep Traders and others[2009 (1) TMI 931 - BOMBAY HIGH COURT] correctly holds that the judgment of the Hon'ble Supreme Court in the case of Gopal Sardar v/s. Karuna Sardar [2004 (3) TMI 743 - SUPREME COURT] has not disturbed the earlier judgment of the Bench of two Hon’ble Judges of the Supreme Court in the case of Mangu Ram and others v/s. Municipal Corporation of Delhi (supra)?
5) Whether the test laid down in Hukum Dev Narain Yadav v/s. Lalit Narain Mishra(supra) by the Hon’ble Supreme Court must be applied to the applications for special leave to appeal filed under Section 378 (4) and (5) of the Cr.P.C. in the context of Section 29(2) of the Limitation Act, 1963?
6) Whether upon applying the test laid down by the Hon’ble Supreme Court in the case of Hukum Dev Narain Yadav v/s. Lalit Narain Mishra(supra) i.e. considering the scheme of the special law under Section 378(4) and (5) of the Cr.P.C. pertaining to applications for special leave to appeal by complainants, nature of the remedy provided therein, intending it to be a complete Code in itself, it can be said that Sections 4 to 24 of the Limitation Act, 1963, are excluded in their applicability to such applications for special leave to appeal?
7) In the light of the above, whether the application for condonation of delay filed by the applicant - Department is maintainable?
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2021 (12) TMI 765
Deduction u/s 10B - re-computation of deduction under section 10B on account of re-computation of depreciation - Allocation of depreciation on Komori unit between the Manesar unit and Delhi unit in the ratio of the total sales pertaining to each of the units during the year - A.O. was of the view that this claim of the assessee was a deliberate attempt to shift the claim of depreciation to a non-eligible unit so as to lower the profits in the non-eligible unit and showing higher profit in the eligible unit which was thereby eligible for deduction under section 10B of the I.T. Act, 1961 on a higher amount - HELD THAT:- CIT-A correctly held that the allocation was justified and dismissed the appeal of the appellant on this issue. The facts in the appellant’s case are identical to the facts in AY 2009-10. Following the decision of the CIT(A) in the appellant’s own case for AY 2009-10 the allocation of depreciation made by the AO between Delhi unit and Manesar unit is confirmed.
Denial of deduction u/s 10B considering increased profit due to computation of income u/s 40(a)(ia) - It is an admitted fact on record that the computation of deduction u/s 10B for the year under consideration has been done by the AO based on the figures of profit shown by the appellant. This computation of deduction u/s 10B is as per the provisions of the law and requires no interference. The issue of not allowing the deduction u/s 10B on the increased income in view of disallowance u/s 40(a)(ia) pertains to AY 2009-10 and no corrective action, if any, requires to be taken on this account for the AY 2010-11 - no infirmity in the order of the Ld. CIT(A) - Decided against Assessee.
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2021 (12) TMI 764
Revision u/s 263 by CIT - determination of true nature and character of income arising to the assessee on sale of rights in land parcel along with other proposed co-purchasers as confirming parties - case was selected for scrutiny through CASS under ‘limited scrutiny’ category - allegations made in the revisional order passed against the assessee can be capsulated as (1) wrong characterisation of income under the head ‘capital gains’ as claimed on the ground that such income arose to the assessee by way of compensation on release of rights in land parcel bearing Survey No.847 PCIT viewed that such gains are susceptible to tax under the ‘income from other sources’ (2) incorrect claim of exemption and cost of improvement in respect of sale of other two plots
HELD THAT:- It is trite that the revenue cannot step into the shoes of the contracting parties to determine the expediency of payment. Where the seller and purchasers have consciously decided to pay compensation for relinquishment of right arising from an erstwhile banakhat and suitable clause to this effect was put up in the registered sale deed, the revenue cannot displace the legal effect of such express terms duly registered. In the factual matrix, the gains arising by virtue of such arrangement is either chargeable under the head “”capital gains”” or not chargeable at all. There is no scope for bringing such income to tax under the head ‘income from other sources’.
Scope of powers under revisionary jurisdiction are not unfettered. Whereas the A.O. had rightly endorsed the corroborated claim of the assessee in this regard, the PCIT, in our view, has attempted to substitute his wisdom by views of the A.O. without any definite basis. If the view of the PCIT towards the banakhat allegedly hollow or unenforceable is accepted, no income can be recognised at all. The view taken by the A.O. is clearly plausible in law and could not have been displaced in a revisionary proceedings by a very untenable or a debatable view.
Having come to a conclusion that the income should be taxed under the had ‘income from other sources’ it was not open to the PCIT to direct the A.O. to make enquiries and verifications without keeping the issue open for him to be determined afresh. It is evident that the issue was foreclosed in the revisional order itself and the A.O. was simply directed to follow the dotted lines in the garb of lack of proper enquiries or verifications. The PCIT has also failed to spell out as to what further enquiry or verifications are required to be made independently where all the evidences are already perused. Manifestly, the revisional order does not pass the test of prerequisites of jurisdiction embedded in section 263 of the Act. In our view, the PCIT has failed to demonstrate any perceived error in the assessment order. Noticeably, the assessee claims a converse situation where the prejudice, if any, has caused to assessee for offering such gains as chargeable to tax, where judicial view is also available for its non chargeability at the threshold.
We are thus inclined to agree with various pleas raised on behalf of the assessee for setting aside the revisional order and restore the assessment order in so far as taxability of receipts attributable to impugned land parcel bearing survey no. 847 is concerned. The revisional order is accordingly set aside on the point of taxability of capital gains on sale of land parcel bearing survey no.847 in question.
In the light of concession given on behalf of the assessee, the grievance of the Assessee in respect of other land parcels (other than survey no. 847) are, however, answered in negative and against the assessee.
Appeal of the assessee is partly allowed.
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2021 (12) TMI 763
Penalty u/s 271G - assessee failed to keep and maintain any information as per the provisions of section 92D - As per AO assessee firm has entered into specified domestic transactions and hence the assessee was liable to keep and maintain such information and document as per the provisions of subsection (3) of section 92D - Appellant submits that there is general and substantial compliance of the provisions of Rule 10D inasmuch as all the requisite documents, details and submissions have been filed before the learned AO in the course of the assessment proceedings and no fault has been found with respect to the same and AO ought to have first issued a notice specifying the document or information to be furnished by the Appellant and only if the Appellant did not comply with such notice could the question of levying penalty under section 271G arise - HELD THAT:- The submission of the assessee is cogent. The order of authorities below is conspicuous inasmuch as there is no mention as to what document required/ordered for and which were not maintained. The order passed by the authorities below is mechanical without proper application of mind. Hence, on the touchstone of above discussion and precedents we set aside the order of authorities below and direct that the penalty be deleted - Decided in favour of assessee.
Penalty u/s 271AA - defective notice - Allegation of non strike of irrelevant words - assessee failed to keep and maintain any information as per the provisions of section 92D - HELD THAT:- We find that the notice in this also is an omnibus show-cause notice as it does not strike off/delete the inappropriate/irrelevant/not applicable portion. Such a generic notice betrays a non-application of mind. Hence, the penalty levied pursuant to such a notice is not legally sustainable in law. Hence relying on MR. MOHD. FARHAN A. SHAIKH case [2021 (3) TMI 608 - BOMBAY HIGH COURT] we hold that the Assessing Officer was bereft of valid jurisdiction as the notice issued to assessee is unsustainable in law. - Decided in favour of assessee.
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2021 (12) TMI 762
Additional depreciation u/s. 32(1)(iia) on block of assets like Computers and Software - AO disallowed the claim on the premise that the computers were installed in the office premises, thus would disentitle claim for additional depreciation within the meaning of the Proviso 2B to section 32(1)(iia) - HELD THAT:- It was a case of windmill for generation of power wherein additional depreciation was claimed by assessee. AO therein disallowed the claim on the ground that assessee was engaged only in manufacture of textile goods and setting up of windmill had no connection with the manufacture of textile goods.
Assessee is already claiming 60% depreciation on the computers which are used for the purpose of business and in rendering of software development services to its associated enterprises. We note that the Ld.AO granted depreciation as per the provisions u/s. 43(3) read that Rule 5 as well as appendix-1 has been granted.
Assets eligible for additional depreciation must be plant or machinery. Also that such plant or machinery should not be installed in any office premises or residential accommodation. We note that the development activity carried on by the assessee cannot be considered to be a manufacturing activity.
Accordingly, relying on the decision of IBM World Trade Corporation [1977 (11) TMI 4 - BOMBAY HIGH COURT], we do not find any infirmity in the disallowance of additional depreciation to assessee. However, the alternative plea to allow the deprecation in the subsequent assessment year on the enhanced WDV of block of assets at the prevailing rates cannot be denied. - Decided in favour of assessee.
Addition of CSR activities - as submitted that donations were made to eligible institutions and deduction u/s. 80G was claimed that pertained to such donations - HELD THAT:- Assessee has suo moto disallowed the expenditure towards the CSR responsibilities u/s. 37(1) of the Act and claimed deduction u/s. 80G to the extent of donations paid to eligible charitable institutions. Thus as relying on FIRST AMERICAN (INDIA) PVT. LTD. case [2020 (5) TMI 187 - ITAT BANGALORE] we direct the Ld.AO verify the payments made by assessee towards CSR that also forms part of deduction u/s. 80G. Ld.AO shall then grant the deduction claimed u/s. 80G of the Act in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes.
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2021 (12) TMI 761
Penalty u/s 271(1)(c) - defective notice - non striking of irrelevant portion of notice - as argued penalty u/s 274 as defective and does not spell out the grounds on which the penalty was sought to be imposed - HELD THAT:- On perusal of the show cause notice issued u/s 274 of the Act it is clear that the same is defective as it does not spell out the ground on which the penalty is sought to be imposed, whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. It can be seen from the copy of the notice proposing penalty u/s 271(1)(c) of the Act, the irrelevant portion has not been strike off. See MANJUNATHA COTTON AND GINNING FACTORY, MANJUNATH GINNING AND PRESSING, VEERABHADRAPPA SANGAPPA AND CO., V.S. LAD AND SONS, G.M. EXPORT [2013 (7) TMI 620 - KARNATAKA HIGH COURT]
Thus show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. -Decided in favour of assessee.
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2021 (12) TMI 760
Disallowing the business advances written off - Trading loss u/s 28 - claim of assessee to be considered u/s. 28 or section 37 - HELD THAT:- Admittedly the money advanced by assessee to Golden Gate was for the purposes of business - AO rightly rejected the claim of assessee u/s 36(2) as assessee had never taken into account the said advance in computing the income of assessee in any of the previous year which is the necessary condition laid down in section 36(2)(i) - AO did not verify the claim as a trading loss u/s. 28 - CIT(A) admitted to the fact that assessee took steps to recover the money from Golden Gate. However, upheld the addition by holding that for year under consideration assessee did not file any case related to bouncing of remaining cheques.
In the present facts of the case, there is no dispute that the advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a business loss while computing the profit and gains of business. As relying in SUMANGAL OVERSEAS LTD. [2011 (11) TMI 45 - DELHI HIGH COURT] we hold that the amount that could not be recovered is to be treated as trading loss. Accordingly, the grounds raised by assessee stands allowed.
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2021 (12) TMI 759
Addition u/s 68 - bogus creditors - HELD THAT:- There is a valid confirmation letter and the outstanding is on account of purchases from that company and the AO cannot doubt the genuineness of the transaction and capacity of the lender. Being so, the CIT(Appeals) has taken a correct view of facts of the case and accordingly this ground of the revenue is dismissed.
With regard to the addition on account of purchase payable, the CIT(Appeals) observed that the assessee has filed complete list with names of parties and the amount outstanding from the various parties and most of the creditors are below ₹ 5 lakhs. According to the CIT(A), these credits are genuine and outstanding on account of purchases - these purchases ought to have been verified individually so as to satisfy the identity, creditworthiness and genuineness of the transactions which the CIT(Appeals) failed to do so. In view of this, we remit this issue to the file of the AO for fresh consideration - Revenue’s appeal is partly allowed for statistical purposes.
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2021 (12) TMI 758
Revision u/s 263 by CIT - reopening of assessment u/s 147 - revenue accrued but deferred by the Assessee and not offered to tax and consequently there was loss to the revenue - HELD THAT:- There was no prejudice or loss to the revenue whatsoever when the show cause notice u/s.263 of the Act, dated 22.1.2016 was issued by the CIT and when the CIT passed the impugned order dated 11.3.2016. The alleged loss of revenue to the tune of ₹ 216,89,00,773/- has already been brought to tax by the revenue in the order dated 30.3.2015 in the reassessment proceedings.
Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy [1984 (3) TMI 28 - KARNATAKA HIGH COURT] has held that Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue.Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facieerroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suo moto power of revision under section 263.
We are of the view that the impugned order u/s.263 of the Act is liable to be quashed and is hereby quashed. - Decided in favour of assessee.
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2021 (12) TMI 757
Levy of fees u/s. 234E for delay in filing quarterly statements of deduction of taxes u/s. 200(3) - assessee has filed quarterly statement of tax deducted at source in form no. 26Q for all the above three years - HELD THAT:- As brought to the notice of both the sides that jurisdictional High Court of Gujarat in the case of Rajesh Kourani vs. Union of India [2017 (7) TMI 458 - GUJARAT HIGH COURT] held that section 234E of the act is a charging provision creating a charge for levy of fess for certain default in filing statements and also held that the fees prescribed u/s. 234E could be levied even without a regulatory provision being found in section 200A for computation of fees. We have noticed that rule 31A of IT rule laid down the time limit for filing quarterly statement for deduction of tax u/s. 200(3) of the act.
Section 234E prescribes the charging of fees for every day default in filing of statement u/s.200(3) of the act or any proviso to subsection (3) of section 206 of the act. Section 200A pertained to processing of statement of tax deducted at source and prior to 01-06-2015 this provision did not include any reference of the fees payable u/s. 234E of the act. W.e.f. 1st June, 2015, this provision specifically provides for computing fees payable u/s. 234E of the act. As in the case RAJESH KOURANI [2017 (7) TMI 458 - GUJARAT HIGH COURT] has held that when section 234E has already created a charge for levying fees, it would thereafter not have been necessary to have yet another provision creating the same charge. Even in absence of section 200A with introduction of section 234E, it was always open for the revenue to demand and collect the fees for late filing of the statement. As also held that section 234E is a charging provision and it was always open for the revenue to charge fees in terms of section 234E of the act even prior to 1st June, 2015.
After considering the above facts and judicial findings, we are not inclined with the contention of the ld. counsel that CPC was not authorized to levy fee u/s. 234E of the act.
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2021 (12) TMI 756
Delayed Employee’s contribution towards ESI and EPF - assessee’s failure to pay the employee’s contribution of PF/ESI within the prescribed due dates as per Section 36(1)(va) - HELD THAT:- In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case.
Addition by way of adjustment while processing the return of income u/s 143(1) so made by the CPC towards the deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) of the Act is hereby directed to be deleted. - Decided in favour of assessee.
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2021 (12) TMI 755
Penalty u/s 271(1)(c) - Defective notice u/s 274 - Non recording mandatory "satisfaction" as per law - HELD THAT:- Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT], CIT vs. SSA’s Emerala Meadows 2016 (8) TMI 1145 - SC ORDER] and Pr. CIT vs. Sahara India Life Insurance Company Ltd. [2019 (8) TMI 409 - DELHI HIGH COURT], we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable.
Even the AO has failed to apply his mind at the time of recording satisfaction at the time of framing assessment to initiate the penalty proceedings u/s 271(1)(c) of the Act as to under which limb of section 271(1)(c) i.e. for concealing particulars of income or furnishing inaccurate particulars of such income, penalty proceedings have been initiated rather written vague and ambiguous satisfaction recorded that, “penalty proceedings u/s 271(1)(c) are initiated”. So, initiating penalty proceedings on the basis of vague and ambiguous satisfaction rather “no satisfaction” are bad in law and as such not sustainable.
We are of the considered view that AO has failed to make out a case for furnishing of inaccurate particulars of income or concealment of particulars of income by the assessee so as to attract the provisions contained u/s 271(1)(c) of the Act. More so, when undisputedly, income has been estimated by the AO, there is no scope for concealment by the assessee so as to attract the provisions contained u/s 271(1)(c) - Decided in favour of assessee.
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2021 (12) TMI 754
Accrual of income - interest received on bank Deposits - grant received from Government of Karnataka - AO noticed that the assessee has earned interest income on deposits, but did not declare the same as its income - case of the assessee that it is receiving grants from State Government of Karnataka and it was a condition that, if any part of the grant is kept in deposits, the interest earned thereon would also be treated as grant - HELD THAT:- CIT(A) referred to the decision rendered in the case of CIT & Anr. Vs. Karnataka Urban Infrastructure & Finance Corporation [2006 (2) TMI 114 - KARNATAKA HIGH COURT] wherein held that interest accrued on bank deposits could not be treated as income of the assessee as interest was earned out of money given by Government of India for purpose of implementation of Mega City Scheme and interest earned was also utilised for implementation of Mega City Scheme. Also referred to the decision rendered in the case of Karnataka Municipal Data Society vs, ITO [2016 (11) TMI 119 - KARNATAKA HIGH COURT] wherein the Hon’ble High Court held that Government money was released to assessee society for utilizing it in Government schemes and interest was accrued on grant money. In such case neither grant amount nor interest thereon could be held as income of assessee as Assessee-society held fund only as a custodian and full command for utilisation remained with Government.
Thus interest earned on deposits made out of Government grants was held to be not income of the assessee. Since the Ld CIT(A) has deleted this addition in all the years following the binding decision rendered by jurisdictional High Court, we do not find any reason to interfere with his decision rendered on this issue in all the years under consideration. - Decided in favour of assessee.
Disallowance of Repairs and Maintenance expenses - claim of the assessee under the head repairs and maintenance in all the three years referred above, was disallowed by the AO holding it as capital in nature - A.R contended that these expenses are in the nature of replacement of air conditioners, construction of car and two wheelers garages in leased premises, repair & renovation of premises etc. Accordingly, the Ld A.R contended that these expenses are in the nature of revenue expenses only - HELD THAT:- In our considered view, this issue requires fresh examination at the end of the AO applying the principles explained by Hon’ble Supreme Court in the case of Saravana Spinning Mills Ltd [2007 (8) TMI 16 - SUPREME COURT] in all the three years under consideration. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore this issue to the file of AO in all the three years.
Disallowance of bad debts claimed - AO noticed that the assessee has written off a sum being excess expenditure incurred in respect of “Additional Housing Scheme 1 (AHS 1), since the Government of Karnataka did not reimburse above expenses - HELD THAT:- We have earlier upheld the claim of the assessee that the interest income earned on deposits made out of Government grants is not taxable in the hands of the assessee, since the said interest income is also treated as “government grant” only, as per the directions of Government of Karnataka. Further, the above said view has also got support of Hon’ble High Court of Karnataka.
As noticed that the interest earned on deposits has been directed to be treated as part of grant amount. Hence, on a combined reading of various directions given by the Government of Karnataka, it is discernible that the Government, instead of reimbursing the additional amount, has directed the assessee to offset the same against interest earned on deposits, which was also considered to be Government grant. In effect, the Government of Karnataka has actually reimbursed the additional amount out of interest income (grant amount). Hence, we are of the view that the tax authorities are justified in holding that the assessee cannot claim the additional expenses separately. Accordingly, we confirm the order passed by Ld CIT(A) on this issue.
Addition of expenditure incurred on skill development of children of Police Personnel - AO considered this expenditure as an expenditure on “Corporate Social Responsibility” - AO also held that this expenditure is not related to the business activities of the assessee, viz., construction of buildings for police and allied departments and project monitoring - CIT(A) also confirmed the same - HELD THAT:- The assessee could claim this expenditure u/s 37(1) of the Act, as per which the expenditure should be laid out or expended wholly and exclusively for the purpose of business. We notice that the tax authorities have given a specific finding that this expenditure is not related to the business activities of the assessee, viz., construction of buildings for police and allied departments and project monitoring. The contentions of Ld A.R are that the children trained under skill development scheme could be employed by the Civil Contractors, which will in turn facilitate the business activities of the assessee - connection with the business activities of the assessee sought to be established by Ld A.R is far fetched one. Accordingly, we are of the view that the assessee has failed to show that this expenditure has been incurred wholly and exclusively for the purpose of business. Accordingly, we confirm the order passed by Ld CIT(A) on this issue.
Disallowance of claim of bad debts - AO noticed that the assessee has claimed “Provision towards bad debts” as deduction need to be disallowed - HELD THAT:- The orders of tax authorities that they have disallowed only “Provision towards bad debts”. Admittedly, the provision for bad debts is not allowable as deduction under the provisions of Income tax. Accordingly, we confirm the disallowance made by the tax authorities.
Disallowance of Leave encashment expenses - HELD THAT:- We do not find any such disallowance in the assessment order. The Ld A.R also did not advance any arguments on this issue. Accordingly we reject this ground.
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2021 (12) TMI 753
Scope of Section 44BB - Service tax inclusion in the gross revenue for computing profits under presumptive provisions of section 44BB - HELD THAT:- Excludability of service tax in the gross receipts is squarely covered by the judgment of the Hon'ble Delhi High Court in the case of Mitchell Drilling International Pty Limited [2015 (10) TMI 259 - DELHI HIGH COURT] wherein held that service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB.
Further Hon’ble High Court of Uttarakhand in the case of DIT International Taxation Vs M/s Schlumberger Asia Services Ltd.[2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section(2) of Section 44BB of the Act. The Hon’ble Court is clearly spelt that even otherwise, it is not every amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee under Section 44BB . It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee.
Thus we hold that the service tax receipts donot form part of receipts for computation of income in the section 44BB of the Income Tax Act. - Decided against revenue.
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2021 (12) TMI 752
Deduction u/s 80P(2)(a)(i) - assessee has shown interest income which was received from the non-members - impugned income of interest was earned by the assessee from the co-operative banks as well as from the nationalized bank thus as per AO assessee is not eligible for deduction under section 80P(2)(a)(i) - HELD THAT:- The income from the activity of financing from the members is only eligible for deduction under section 80P(2)(a)(i) of the Act. If there is any income arising to the co-operative society from the non-members that will not be subject to deduction under section 80P(2)(a)(i) of the Act. In holding so we draw support and guidance from the judgment of the Hon’ble Gujarat High Court in the case of State Bank of India[2016 (7) TMI 516 - GUJARAT HIGH COURT]
It is only the interest derived from the credit provided to its members which is deductible under section 80P(2)(a)(i) of the Act and the interest derived by depositing surplus funds with the State Bank of India is not being attributable to the business as envisaged under the provisions of the Act. Thus the same cannot be deducted under section 80P(2)(a)(i) of the Act.
There remains no ambiguity that income received by the assessee on the money deposited with the bank is not eligible for deduction under section 80P(2)(a)(i) of the Act - profits and gains attributable to non-members arising as a result of advancement of loans was held to be not an allowable deduction under Section 80P(2)(a)(i) of the Act. In view of the above, we do not find any merits in the argument advanced by the learned counsel for the assessee.
Determine the income which is not eligible for deduction under section 80P(2)(a)(i) - The income on the deposits from the bank has been treated as income from other sources but the gross income cannot be excluded from the deduction available to the assessee under the provisions of section 80P(2)(a)(i) - It is the net interest income on the deposits from the bank which needs to be excluded from the amount of deduction claimed under section 80P(2)(a)(i) and the same should be brought to tax under the head income from other sources under the provisions of section 56 - To determine, the net income on the deposits from the bank, amount of expenses incurred in generating such interest income should be allowed as deduction from the gross income of interest in pursuance to the provisions of section 57.
The expenses such as electricity, rental, audits, printing and stationery which cannot be said to have been incurred wholly and exclusively for the purpose of earning the interest income. Thus, we are not in agreement with the contention of the learned AR for the assessee. But it is also equally important to note that there is no mechanism provided under the provisions of section 57 of the Act for making the disallowance on ad hoc manner as done by the ld. CIT-A.
We direct the AO to work out the interest income on the deposits from the bank after deducting the corresponding expenses incurred by the assessee in generating the interest income - such expenses have to be brought on record by the assessee based on cogent materials. Furthermore, if the assessee has made deposits in the banks out of the money borrowed from the members, then the corresponding interest cost borne by the assessee should be allowed as deduction - we hold that there is no infirmity in the order of the learned CIT (A), requiring any interference. Hence, we uphold the same. Hence, the ground of appeal of the assessee is partly allowed for the statistical purposes.
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2021 (12) TMI 751
Unexplained expenditures and unaccounted cash payment - Onus to proof - HELD THAT:- It is the onus of the assessee to justify based on the cogent material that the impugned cash expenditure was incurred out cash balance of the regular cash book of the assessee. If that be so, there cannot be any addition to the total income of the assessee merely on the reasoning that the assessee failed to record the expenditure in the books of accounts on the date of incurrence of the expenses which were actually recorded in the books of accounts on a later date. It is a matter of verification.
It has to be seen whether there was the cash available in the books of accounts of the assessee as on the date on which the impugned expenditures were incurred i.e. November 2007. If there was sufficient cash in the books of the firm of the assessee, there is no possibility of treating the impugned expenditure as unexplained expense as provided u/s 69C until and unless the revenue brings on record based on cogent materials that there was no cash available in the books of the assessee on the relevant dates or the source of such expenditure was from the third source which was unexplained.
We note that once the revenue has treated the entire amount of expenditure as unexplained expense under section 69C of the Act, there cannot be any addition separately being part and parcel of the total addition otherwise it would lead to the double addition which is not warranted under the provisions of law until and unless the provisions of law requires so - we set aside the issue to the file of the AO for fresh adjudication as per the provisions of law and after necessary verification of the cash book. Ground of appeal of the assessee is partly allowed for the statistical purposes.
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2021 (12) TMI 750
Disallowance u/s 14A r.w.r.8D - HELD THAT:- We find that the assessee own funds are far more that the investments in tax free securities. We note that assessee own funds were ₹ 512.65 Cr whereas the investments in tax free securities were 17.27 Cr. The ld CIT(A) has passed the order after following the decisions of jurisdictional High Court in the case of Reliance Utilities Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT]and HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT].Therefore, we do not find any infirmity in the order of ld CIT(A) and accordingly the ground is dismissed by upholding the order of ld CIT(A) on this issue.
Deduction of u/s 80-IA in respect of profits and gains derived from undertaking engaged in generation of power in the form of steam - HELD THAT:- We are inclined to restore the same to the file of the AO to decide the same after affording a reasonable opportunity to the assessee.
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2021 (12) TMI 749
Late remittance of employees’ contribution to PF and ESI - As contended that assessee has paid the employees’ contribution prior to the due date of filing of return under section 139(1) - Scope of amendment - HELD THAT:- On identical facts, the Bangalore Bench of the Tribunal in the case of M/s. Shakuntala Agarbathi Company Vs. DCIT [2021 (10) TMI 1196 - ITAT BANGALORE] by following the dictum laid down by the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd [2014 (3) TMI 386 - KARNATAKA HIGH COURT] had held that the assessee would be entitled to deduction of employees’ contribution to PF and ESI provided that the payments were made prior to the due date of filing of the return of income u/s 139(1) of the I.T.Act. It was further held by the ITAT that amendment by Finance Act, 2021, to section 36[1][va] and 43B of the Act is not clarificatory.
As amended provisions of section 43B as well as 36(1)(va) of the I.T.Act are not applicable for the assessment years under consideration. By following the binding decision of the Hon’ble jurisdictional High Court in the case of Essae Teraoka Pvt. Ltd Vs. DCIT (supra), the employees’ contribution paid by the assessee before the due date of filing of return of income u/s 139(1) of the I.T.Act is an allowable deduction. Accordingly, we decide this issue in favour of the assessee.
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2021 (12) TMI 748
Revision u/s 263 by CIT - allowability of CSR expenses as donation u/s.80G - argument of no adequate inquiry or specific inquiry or recording reasons for accepting assessee’s submission - case of the assessee for selected for scrutiny and original assessment was framed by the AO u/s.143(3) - HELD THAT:- Assessee has filed detailed note on allowability of CSR expenses as donation u/s.80G and therefore the issue was considered by the AO during the assessment proceedings. Besides we note that the assessee has filed the Scheme of Arrangement of demerger alongwith all documents including financials of IDMPL, assessment orders of IDMPL determining losses, book entries incorporating the demerger in the books of the assessee. All conditions of section 2(19AA) were complied with and therefore there was a proper demerger and the same has been accepted by AO.
Assessee also filed detailed note on allowability of expenses on CSR u/s.80G vide letter dated 14.12.2018.PCIT has formed an incorrect opinion that the AO has not examined the issue of allowability of CSR expense as donation.
Claim of business loss of ₹ 14,36,669/- being set off both by the assessee and by IDMPL, we note that the assessee had claimed the loss of ₹ 14,36,669/- in the first revised return filed on 1.11.2017 and in the second revised filed on 29.3.2018 the said claim was withdrawn by the assesse suo-motto as is evident from amount of income returned in both the income tax returns. We note that the income returned in the first revised return at ₹ 18,14,22,950/- was increased to ₹ 18,28,59,260/- in the second revised return filed on 29.3.2018 and the difference between two returned income is ₹ 14,36,669/-. Thus, the claim of loss of ₹ 14,36,669/- was withdrawn by the assessee.
Thus we are inclined to hold that the revisionary proceedings were not valid and so is the revisionary order passed u/s 263 of the Act by ld. PCIT.
Issue of interest u/s.244A - The facts before us that the ld PCIT has not given any opportunity to the assesse during the revisionary proceedings and it was also not in the show cause notice issued. So on this basis, the revisions can not be sustained. Beside we note that the interest has been correctly allowed and there is no mistake which his prejudicial to the interest of the revenue. In view of these facts we are to quash the revisionary proceedings as well as order u/s 263 as bad in law. - Decided in favour of assessee.
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2021 (12) TMI 747
Delayed employee’s contribution - Disallowance u/s 36(1)(va) r.w.s 43B - whether the amendment to the provisions to section 43B and 36(1)(va) of the Act by the Finance Act, 2021, has to be construed as retrospective and applicable for the period prior to 01.04.2021 also? - HELD THAT:- As in the case of Essae Teraoka Pvt. Ltd. [2014 (3) TMI 386 - KARNATAKA HIGH COURT] has taken the view that employee’s contribution u/s 36(1)(va) of the Act would also be covered under section 43B of the Act and therefore if the share of the employee’s share of contribution is made on or before due date for furnishing the return of income under section 139(1) of the Act, then the assessee would be entitled to claim deduction. Therefore, the issue is decided in favour of the Assessee.
Scope of amendment - The explanatory memorandum to the Finance Act, 2021 proposing amendment in section 36(1)(va) as well as section 43B is applicable only from 01.04.2021. These provisions impose a liability on an assessee and therefore cannot be construed as applicable with retrospective effect unless the legislature specifically says so - the aforesaid amendment is applicable only prospectively i.e., from 1.4.2021. We are therefore of the view that the impugned additions made under section 36(1)(va) of the Act deserves to be deleted. - Decided in favour of assessee.
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