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Income Tax - Case Laws
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2022 (12) TMI 1563
Taxability of income in India or not - receipts on account of Infrastructure Data Centre (‘IDC”) charges, referral fees, and member login fees - Royalty receipt under the India - Singapore Double Taxation Avoidance Agreement ('DTAA')
Taxability of IDC charges as royalty under the India Singapore DTAA - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd [2021 (10) TMI 14 - ITAT MUMBAI] for the assessment year 2016–17 to hold that IDC charges received by the assessee is not in the nature of royalty, thus, decided similar issue in favour of assessee.
Taxability of other service charges (referral fees) as royalty under the India Singapore DTAA - We find that the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd [2021 (10) TMI 14 - ITAT MUMBAI] for the assessment year 2016–17 to hold that referral fee received by the assessee is not in the nature of royalty decided similar issue in favour of the assessee by following the judicial precedents rendered in assessee’s own case.
Taxability of member login fees as royalty under the India Singapore DTAA - We find that the coordinate bench of the Tribunal in assessee’s own case in Edenred Pte Ltd [2021 (10) TMI 14 - ITAT MUMBAI] for the assessment year 2016–17 decided similar issue in favour of the assessee by following the judicial precedent rendered in assessee’s own case.
Appeal by the assessee is allowed.
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2022 (12) TMI 1561
Disallowance of expenses in earning exempt income u/s. 14A r/w Rule 8D - HELD THAT:- As per the spirit of the decision of Hon’ble Kerala High Court Catholic Syrian Bank [2010 (10) TMI 1068 - KERALA HIGH COURT], the AO can resort to Rule 8D of the Rules, only, if he in terms of Sec. 14A(2) of the Act, he arrives at a satisfaction that having regard to the accounts of the assessee, that the claim of the assessee in respect of expenditure in relation to income which does not form part of the total income under the Act is incorrect.
Therefore the AO cannot blindly apply Rule 8D of the Rules without first complying with the requirements of Sec. 14A(2) of the Act. This exercise has to be necessarily carried out by the AO and therefore we are of the view that the issue requires fresh examination by the AO as directed by the Tribunal in it’s order after affording the Assessee opportunity of being heard and after considering the submissions made before us with regard to the amount to be disallowed u/s. 14A of the Act and in particular the mandate laid down in the provisions of Sec. 14A(2) of the Act. The AO will also consider the specific submissions made by the Assessee before us as to why disallowance u/s. 14A of the Act cannot be made in the case of the Assessee. We therefore allow both the appeals by the Revenue and the Assessee for statistical purpose.
Disallowance of deduction on account of provision for leave encashment - HELD THAT:- Hon’ble Supreme Court in the case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT] overruled the decision of Calcutta High Court in the case of Exide Industries [2007 (6) TMI 175 - CALCUTTA HIGH COURT] and upheld the constitutional validity for deduction of leave encashment on payment basis under section 43B(f) of the Act. Deduction on account of provision for leave encashment cannot be allowed unless it is actually paid. Assessee will not be entitled to claim deduction on leave encashment on the basis of the provision.
Deduction on account of amortization of premium on securities not claimed or allowed in earlier years now allowable on sale of securities of the Act in the computation of total income instead of the correct amount - It was not a case where no claim was made in the return of income but a case where only the quantum of deduction claimed was sought to be enhanced. An additional ground was raised before CIT(A) to adjudicate the claim of the Assessee but the same was not adjudicated or considered by the CIT(A). We therefore restore the issue to CIT(A) to consider the additional claim made by the Assessee.
Non examining of claim made without filing a revised return of income - Revised the original claim and claimed enhanced deduction on account of amortization of premium on securities not claimed or allowed in earlier years now allowable on sale of securities - HELD THAT:- The law by now is well settled that the appellate authority under the Act can entertain a legal claim even though the said claim has not been made by way of a revised return of income. In Jute Corporation of India Ltd. [1990 (9) TMI 6 - SUPREME COURT] it was held that the first appellate authority has wide powers u/s. 251(1)(a) of the Act and can entertain an additional claim.
In the case of Chicago Pneumatic India Ltd. [2007 (3) TMI 409 - ITAT MUMBAI] in the context of allowability of new claims during the assessment proceedings without having recourse to a revised return, has, placing reliance on principle embedded in Article 265 of Indian constitution (No tax can be collected except by the authority of law), CBDT Circular No. 14 dated 11 April 1955 and explaining the ratio of the Goetz (india) Ltd. [2006 (3) TMI 75 - SUPREME COURT] ruling, categorically held that assessee has the right to make new claims during assessment proceedings without recourse to a revised return. The CIT(A), in our view, therefore ought to have entertained the claim of the Assessee in this regard.
Deduction on account of bad debts written off in accordance with the provisions of Sec. 36(1)(vii) - HELD THAT:- Before CIT(A), the claim was made for deduction. The CIT(A) however held that the claim was not made in the original return filed and no revised return was filed and hence the claim cannot be entertained. We are of the view that in the light of the discussion on identical issue in the earlier paragraphs, the claim of the Assessee should be examined and rejecting the claim without even examining the same on merits was not proper and that the CIT(A) ought to have entertained the claim. Since the issue requires examination by the AO, we deem it fit and proper to remand this issue for consideration on merits.
Deduction u/s. 36(1)(viii) - what is the sum to be reduced from the gross income as deduction under clause 36(1)(viii)? - HELD THAT:- CIT(A) rightly appreciated the position that while computing profits of eligible business only proportionate expenses relatable to the eligible business should be reduced from gross receipts from eligible business to arrive at the profits of the eligible business.
Expenses which are not pertaining to eligible business cannot enter into computation of net income from eligible business and this position has rightly been appreciated by the CIT(A) and hence his order on this issue is upheld and the ground of appeal of the revenue is dismissed.
Proceedings u/s. 154 for quantification of deduction u/s. 36(1) -HELD THAT:- We are of the view that the CIT(A) in his order dated 23.1.2014 has upheld the quantification of deduction u/s. 36(1)(viii) of the Act at Rs. 18 Crores as claimed by the Assessee. Therefore, the AO cannot rectify the said quantum in an order u/s. 154 of the Act and that in the event of dispute with regard to the quantum of amount that should have been allowed u/s. 36(1)(viii) of the Act, the AO ought to have filed appeal against the order of CIT(A) dated 23.1.2014 and without doing so ought not to have resorted to proceedings u/s. 154.
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2022 (12) TMI 1558
Accrual of income in India - receipts on account of provision of information technology and other administrative services to its affiliate in India are in the nature of Fees for Technical Services [FTS] under the India Singapore DTAA - AO concluded by holding that the services in the nature of managerial services provided by the assessee to its Indian AE and such technical knowledge, experience, skill, know-how etc. were made available by the assessee to the Indian affiliate and, therefore, they are in the nature of FTS being taxable @ 10% under the provisions of the DTAA.
HELD THAT:- In order to qualify as FTS, the services rendered ought to satisfy the ‘make available’ test. Therefore, in our considered opinion, in order to bring the alleged managerial services within the ambit of FTS under the India-Singapore DTAA, the services would have to satisfy the ‘make available’ test and such services should enable the person acquiring the services to apply the technology contained therein.
Mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the AO/CIT (A) is the incidental benefit to the assessee which has been considered to be of enduring advantage.
In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider.
We are of the considered view that the service recipient of the assessee is unable to make use of the said technology only by itself in its business or for its own benefit without recourse to the assessee year after year.
The receipts of the assessee on account of provision of information technology and other administrative services to its affiliate in India are not in the nature of Fees for Technical Services under the India Singapore Double Taxation Avoidance Agreement and we, accordingly, direct the AO to delete the same. Appeal of assessee allowed.
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2022 (12) TMI 1557
Validity of scrutiny assessment - sustainability of the order passed by the A.O u/s. 143(3) without issuing a notice u/s. 143(2) - validity of the jurisdiction assumed by the A.O, i.e., ITO, Ward-1(1), Raipur for issuing notice u/s. 143(2) and validity of the assessment framed u/s 143(3), dated 18.03.2015 by the ITO, Ward-2(1), Raipur
HELD THAT:- No infirmity can be attributed to the notice u/s. 143(2) of the Act, dated 08.08.2013 that was issued by the ITO, Ward-1(1), Raipur.
In case the jurisdiction over the assessee’s case was vested with the ITO, Ward-1(2), Raipur, then, as per the mandate of Section 124(3) of the Act, the assessee having filed his return of income u/s. 139(1) of the Act on 17.09.2012 was obligated to have called in question within a period of one month the validity of the jurisdiction that was assumed by the aforesaid A.O, which, we find that he had failed to do. Considering the fact that the ITO, Ward 1(1), Raipur who had validly issued notice u/s. 143(2), dated 08.08.2013 to the assessee, we are of the view that pursuant to the restructuring and reallocation of the territorial jurisdictions of the AO’s vide the CBDT Notification No. 1/2014-15, dated 15.11.2014, the automatic transfer of the territorial jurisdiction over the case of the assessee from the ITO, Ward-1(1), Raipur to ITO, Ward-2(1), Raipur could also not be faulted.
We, say so, for the reason that now when the ITO, Ward-1(1), Raipur pursuant to the residential address that was provided by the assessee in his PAN database was validly vested with the territorial jurisdiction over his case, therefore, the subsequent transfer of the territorial jurisdiction over the said residential area to ITO, Ward-2(1) could by no means be called in question by the assessee. We, thus, are of the considered view that as the territorial jurisdiction over the case of the assessee stood transferred to ITO, Ward-2(1), Raipur, therefore, the latter in exercise of his jurisdiction had validly framed the assessment vide his order passed u/s. 143(3), dated 18.03.2015.
We, thus, on the basis of our aforesaid deliberations are unable to concur with the claim of the assessee that the A.O, i.e., ITO, Ward-1(1), Raipur had wrongly assumed jurisdiction and issued notice u/s. 143(2), dated 08.08.2013. Also, we find no substance in the claim of the Ld. AR that the ITO, Ward-2(1), Raipur had exceeded his jurisdiction and framed the assessment in the case of the assessee vide his order passed u/s. 143(3), dated 18.03.2015. Accordingly, finding no substance in the additional ground of appeal raised by the assessee before us, we dismiss the same in terms of our aforesaid observations.
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2022 (12) TMI 1555
Utility for filing the return of income electronically in ITR-6 refusing to allow petitioner to upload the return of income for making certain claims which petitioner proposes to make as per the provisions of the Income Tax Act - HELD THAT:- If petitioner does not have positive income under the head “profits and gains” from business but the Gross Total Income is in the positive, then petitioner should be permitted to file its return.
Also draws the attention of this court to two ad-interim orders in the case of Tata Sons Private Limited [2022 (3) TMI 1627 - BOMBAY HIGH COURT] and [2022 (11) TMI 1542 - BOMBAY HIGH COURT] where in view of the inability of the software to permit the petitioner therein to make a particular claim, this court had granted ad-interim relief to petitioner to file paper return of income subject to final outcome of the petition. Similar appears to be the case here.
Issue notice to the respondents. Waives service of notice on behalf of the respondents. The respondents may file reply within a period of six weeks from today with an advance copy to the other side.
List on 27th January, 2023. Pending the hearing and the final disposal of this petition, the petitioner is permitted to file paper return of the income for the assessment year 2022-23 subject to final outcome of the petition.
Since there is a constitutional challenge to the vires of Rule 12 of the Income Tax Rules, issue notice to the Attorney General for India in so far as prayer clause (a) is concerned.
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2022 (12) TMI 1553
Validity of the assessment framed u/s 147 - no valid approval obtained from the JCIT under the provisions of section 151 - HELD THAT:- AO before issuing notice u/s 148 of the Act for initiation of reopening of the assessment is required to take approval from the higher authority being JCIT/CIT u/s 151 of the Act
Approval from the JCIT was obtained dated 28 September 2017 whereas the reasons were recorded on 30 September 2017. Thus, it becomes evident that the approval has been granted by the ld. JCIT without verifying the reasons recorded by the AO for initiating the proceedings under section 147 of the Act which is contrary to the provisions of law. Hence, we hold that the notice u/s148 of the Act was issued without having valid approval and jurisdiction. Therefore the assessment framed u/s 147 r.w.s. 143(3) of the Act in the present facts is not sustainable. Decided in favour of assessee.
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2022 (12) TMI 1552
Addition made u/s. 56(2)(viib) - assessee company issued 6250 equity shares of Rs. 100/- each at a premium of Rs. 9500/- per share - NAV Method or the DCF Method to determine the fair market value of shares - revenue had rejected the said DCF method and had re-determined the share value at Rs. 2603/- per share using NAV - HELD THAT:- DCF method is certainly one of the prescribed methods provided in Rule 11UA of the Rules and assessee is given an option either to use the DCF method or NAV method. In the instant case, the assessee has chosen to adopt DCF method. The aforesaid facts which are mentioned in various tables reproduced supra goes clearly to prove that the independent valuer had relied on various projections and free cash flow provided by the management for the purpose of share valuation, the said projections had indeed become true and assessee could achieve more than the projections in the subsequent years. Hence, so called non-existing discrepancies pointed out by the AO which have been duly met by the assessee are hereby dismissed as factually incorrect.
Whether the ld. AO could change the method of share valuation was subject matter of consideration in the case of Vodafone M-Pesa Ltd. [2018 (3) TMI 530 - BOMBAY HIGH COURT] as held AO is undoubtedly entitled to scrutinise the valuation report and determine a fresh valuation either by himself or by calling for a final determination from an independent valuer to confront the petitioner. However, the basis has to be the DCF Method and it is not open to him to change the method of valuation which has been opted for by the Assessee.
Also in Credtalpha Alternative Investment Advisors (P) Ltd. [2022 (1) TMI 937 - ITAT MUMBAI] addressed the issue that DCF method adopted by the assessee cannot be rejected merely on the basis of comparing projections with actuals.
Thus, we direct the ld. AO to delete the addition made u/s. 56(2)(viib).
Seeking set off of unabsorbed depreciation with the addition made by the AO - This has to be factually verified by the ld. AO. But in view of our decision given for ground Nos. 1-3 hereinabove, this unabsorbed depreciation figure if found to be correct, has to be carried forward to subsequent years as per law.
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2022 (12) TMI 1549
Disallowance of interest expenditure u/s 36(1)(iii) - AO took a view that interest bearing funds have been diverted for making interest free advance - disallowance of interest pertaining to the said advances computed @12% of the interest free advances - sole contention raised by the ld. counsel for the assessee was that it had sufficient interest free funds at its disposal in the form of capital for making investment in interest free advances
HELD THAT:- Hon’ble Apex Court in the case of CIT Vs. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT] that presumption in such cases was that interest free advances had been made out of interest free funds, warranting no disallowance of interest under section 36(1)(vii) of the Act.
DR was unable to controvert the factual contentions made by the ld. counsel for the assessee before us, nor was he able to distinguish the decision relied upon by the Ld. Counsel for the assessee before us of the Hon’ble Apex Court.
Since the assessee has demonstrated the availability of sufficient own funds for the purpose of making interest free funds, the issue, we find, is squarely covered by the decision of Reliance Industries Ltd [2019 (1) TMI 757 - SUPREME COURT] following which, we hold that no disallowance under section 36(1)(vii) is warranted in the facts and circumstances of the case. Accordingly, the disallowance of interest u/s 36(1)(iii) is hereby directed to be deleted. Appeal of the assessee is allowed.
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2022 (12) TMI 1547
Disallowance of deduction of director’s remuneration u/s 40A(2)(a) - it was the claim of the assessee company before the CIT(Appeals), that the A.O had grossly erred in observing that it was not benefited at all by increasing the director’s remuneration during the year under consideration - HELD THAT:- As the AO had failed to adopt either of the prescribed basis/yardstick for verifying the reasonableness of the director’s remuneration that was paid by the assessee company during the year under consideration, therefore, there was no justification on his part to have confined the assessee’s claim for deduction of the same to Rs. 2.40 lac (supra) u/s. 40A(2)(a) of the Act.
Apart from that, we are unable to concur with the view of the CIT(Appeals), who despite taking cognizance of the contentions of the assessee that on the basis of services rendered by the directors on full time basis, it was able to scale down its expenses, liquidate its debtors, raise its commission income etc., had upheld the view taken by the A.O on the solitary basis that there was no substantial increase in the turnover and there was a comparative decline in the net profit of the company during the year under consideration.
Be that as it may, as the A.O had without adopting ant prescribed basis/yardstick held the director’s remuneration as excessive and unreasonable, therefore, unable to uphold his view. Accordingly, set-aside the order of the CIT(Appeals) and vacate the disallowance that had been sustained by him. Thus, the Ground of appeal No.2 raised by the assessee is allowed.
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2022 (12) TMI 1546
Revision u/s 263 - income relatable to the excess-stock, excess-cash and unexplained money-advanced attracted section 115BBE - application or non-application of section 115BBE - HELD THAT:- We are in agreement with Ld. DR that the Ld. AO has simply stated that the assessee has incorporated the excess-cash, excess-stock and money-advanced in the ITR. Needless to mention that the function of assessing authority is not only of adjudicator but also of investigator. In the present case, it is quite apparent from assessment-order that the Ld. AO has not made requisite enquiry to ascertain the nature and tax implications of the impugned incomes, he has simply shut the point by saying that the assessee has incorporated incomes in ITR. Therefore, the decisions relied upon by AR do not support the assessee’s stand.
As relying on Maruthi Babu Rao Jadav [2021 (1) TMI 481 - KERALA HIGH COURT] we are inclined to hold that the higher rate of tax prescribed in section 115BBE is applicable to the whole previous year 2016-17 relevant to assessment-year 2017-18 and there is no merit in the contention raised by assessee.
We are of the view that the PCIT has rightly termed the assessment-order as erroneous-cum-prejudicial to the interest of revenue and therefore the revision order passed by Ld. PCIT is a valid order in terms of section 263. Appeal of assessee is dismissed.
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2022 (12) TMI 1545
Reopening of assessment u/s 147 - Disallowances of deduction claimed by the assessee u/s 35(1)(ii) for grant of donation to SHG&PH i.e. School of Human Genetics and Population Health - whether the appellants are entitled to weighted deduction @ 175% of the donations given by them to allege Research Institute namely SHG&PH u/s 35(1)(ii) - HELD THAT:- The reasons for reopening are available as perused these reasons. AO has observed that he has received the information from the DIT (Investigation), Kolkata and he formed a belief that income has escaped assessment with regard to the bogus claim of donation under section 35(1)(ii) - Assessee has filed objections to these reasons and AO has disposed of them.
The stand of the assessee is that in the reasons, AO has not observed that these are bogus donations. There is no application of mind at his own, rather he treated the letter of the DIT(Investigation), Kolkata as gospel truth.
On due consideration of the above, we are of the view that AO did not commit any error in reopening the assessment. The information supplied by the Principal DIT(Investigation), Kolkata was sufficient to harbour belief that income in the shape of alleged claim of donation to Herbicure is a bogus one, because the Department was able to lay its hand on a large number of material, which was available with the Revenue and it was intimated to all the AO. AO has made reference to the statements of the Founder and Director Shri Dasgupta as well as other persons, who have deposed during the survey and post-survey inquiries. Thus we are of the view that sufficient material was available with the ld. AO for forming an opinion that income has escaped assessment. We do not find any merit in this ground of appeal. It is rejected in both the years.
Determination of taxable income by the ld. Deputy Commissioner - On distribution of work amongst the ITOs, vis-a-vis Addl. Commissioner/Deputy Commissioner even no order for transfer of jurisdiction u/s 127 is required to be passed. This is an exercise after the process of selection of the case for scrutiny. Once computer identifies a particular case for selection of scrutiny, then on the basis of PAN data, notice is to be issued upon the assessee providing an opportunity to the assessee that its case has been selected for scrutiny assessment and kindly submit what the assessee wants to submit in support of the return. As observed earlier, the process of selection for scrutiny does not contemplate any discretion in the Assessing Officer. He is bound to follow the CBDT guidelines issued for the purpose of selection of the cases for scrutiny. Thus in this case also, AO has issued the notice on the basis of PAN Data, which infuses jurisdiction in ITO, Ward-10 and thereafter following the Instruction No. 1 of 2011, the case was taken up for determination of taxable income by the ld. Deputy Commissioner. There is no violation in the procedure. Hence, additional ground of appeal is rejected.
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2022 (12) TMI 1544
Additions made on account of Interest Accrued on NPA - addition was made on ground that assessee was following mercantile system of accounting and, hence, whole amount of accrued interest had to be brought to tax - Assessee submitted that the assessee is a co-operative bank and was following the “Prudential Norms Directions” issued by the Reserve Bank of India and the accounting standards notified by the Central Government - HELD THAT:- Assessee had been consistently following cash method of accounting recognizing income in respect of asset qualified as bad and doubtful debt (NPA) as per RBI guideline in view of provision of sections 145 and 43D.
ITAT held, following the case of Asstt. CIT v. Osmanabad Janta Sahari Bank Ltd. [2015 (3) TMI 886 - ITAT PUNE] that assessee could offer to tax amount of interest received from bad and doubtful debts (NPA) on actual receipt basis as per RBI guideline, even though assessee was following mercantile system of accounting.
In the case of Karnavati Co-op. Bank Ltd. [2011 (11) TMI 367 - ITAT AHMEDABAD] the assessee, a co-operative bank, was following mercantile system of accounting. It had neither credited in profit and loss account nor offered for taxation amount of interest that had accrued on non-performing assets [NPA] - ITAT held that in view of clear provisions of section 43D, the Assessing Officer was wrong in adding accrued interest on NPA to income of assessee
Thus, we hold that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions made in the hands of the assessee on account of accrued interest on NPA.
Disallowance of deduction u/s. 36(l)(viia) on provision for bad and doubtful debts - AO disallowed the claim of deduction of the assessee on the ground that section 36(1)(viia) of the Act applies only in cases where assessee has given rural advances - CIT(A) deleted addition - HELD THAT:- In the case of Kodungallur Town Co-op Bank Ltd. [2016 (7) TMI 1413 - ITAT COCHIN] a Cooperative Bank is entitled to claim deduction of bad debts provided in first part of clause (viia)(a) of section 36(1) being 7.5 per cent of total income and same cannot be denied linking it to rural advances.
In the case of ING Vysya Bank Ltd [2014 (9) TMI 44 - ITAT BANGALORE] the ITAT held that in order to allow assessee's claim under section 36(1)(viia), what has to be seen by Assessing Officer is as to whether provision for bad and doubtful debts (PBDD) is created irrespective of whether it is in respect of rural or non-rural advances by debiting profit and loss account and, to extent PBDD is so created, assessee is entitled to deduction subject to upper limit of deduction laid down in said section.
Thus, it is clear that the benefit of section 36(1)(viia) of the Act is available irrespective of whether the provision is created in respect of rural advances are not, subject to the prescribed limit specified in the said section.
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2022 (12) TMI 1543
TP Adjustment of AMP expenses - HELD THAT:- We find an identical issue raised were considered by the Tribunal in assessee’s own case for assessment year 2012- 2013 [2023 (3) TMI 656 - ITAT BANGALORE] as followed the dictum laid down in the case of Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] and Sony Ericsson Mobile Communications India (P.) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] and directed the A.O. to delete the AMP TP adjustment and the mark up thereon. Decided in favour of assessee.
Deduction to the extent of leave encashment u/s 43B - HELD THAT:- The Bangalore Bench of the Tribunal in the case of M/s. Hewlett Packard (India) Software Operation Pvt. Ltd. [2021 (3) TMI 1379 - ITAT BANGALORE] had categorically held that deduction to the extent of leave encashment, which has been actually paid should be allowed as deduction u/s 43B of the I.T.Act. The Tribunal in assessee’s own case for assessment year 2012-2013 [2023 (3) TMI 656 - ITAT BANGALORE] has also taken a similar view. Thus, we restore the issue raised to the files of the A.O. with the direction to allow deduction u/s 43B(f) of the I.T.Act with regard to leave encashment on actual payment basis.
Not allowed appropriate credit for TDS as claimed - The issue raised is restored to the files of the A.O. to examine the matter and grant TDS credit in accordance with law.
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2022 (12) TMI 1542
TP adjustment - excess AMP expenditure pertaining to trading segment - HELD THAT:- We find an identical issue raised considered by the Tribunal in assessee’s own case for assessment year 2012- 2013 [2023 (3) TMI 656 - ITAT BANGALORE] followed the dictum laid down in the case of Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT], Sony Ericsson Mobile Communications India (P.) Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] and directed the A.O. to delete the AMP TP adjustment and the mark up thereon.
Thus we delete the TP adjustment made on AMP expenses - Decided in favour of assessee.
Deduction towards provision for leave encashment on accrual basis - HELD THAT:- In view of the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. [1996 (12) TMI 7 - SUPREME COURT] the additional ground raised is admitted and taken on record for adjudication. The Bangalore Bench of the Tribunal in the case of M/s. Hewlett Packard (India) Software Operation Pvt. Ltd. [2021 (3) TMI 1379 - ITAT BANGALORE] had categorically held that deduction to the extent of leave encashment has actually been paid should be allowed as deduction u/s 43B of the I.T. Act. The Tribunal in assessee’s own case for assessment year 2012-2013 [2023 (3) TMI 656 - ITAT BANGALORE] has also taken a similar view.
Thus we restore the issue raised in ground 14 to the files of the A.O. with the direction to allow deduction u/s 43B(f) of the I.T.Act with regard to leave encashment on actual payment basis.
Not allowed appropriate credit for TDS as claimed - The issue raised is restored to the files of the A.O. to examine the matter and grant TDS credit in accordance with law.
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2022 (12) TMI 1539
Income from House property - addition on account of determination of annual letting value in respect of unsold units lying with the assessee, who is a builder - HELD THAT:- The assessment year under consideration is 2017-18. The Finance Act, 2017 introduced sub-section (5) to section 23 providing that where a property held as stock in trade is not let out during the year, its annual value, after a period of one year or as revised to two years, shall be considered for the purposes of inclusion under the head "Income from House property”. This amendment has been brought out w.e.f. 01-04-2018. Thus, this provision manifestly does not apply to the assessment year under consideration.
Tribunal considered this aspect in several cases including the one taken note of by the ld. CIT(A), namely, Cosmospolis Construction [2018 (9) TMI 1621 - ITAT PUNE] and held that no income from house property can result in respect of unsold flats held by a builder as stock in trade at the year-end. While disposing off the above referred case, the Tribunal observed that income from unsold flats could be considered only under the head “Profits and Gains from business or profession” and not “Income from House Property”. CIT(A) considered these observations of the Tribunal qua the inclusion of income, if any, under the head “Business Income” and directed to include deemed annual value as business income in the impugned order. He however, did not appreciate that the Tribunal nowhere held for the inclusion of the deemed rental income under the head “Profits and Gains from business or profession”. It simply directed that income, if any, from unsold flats held as stock in trade can be considered only as “Business Income”.
Tribunal eventually deleted the addition. It is but natural that if a particular income is to be taxed under a specific head, the computational mechanism governing that head only can come into play. There is no provision under the head “Profits and Gains from business or profession” which deems the rental income from unsold flats held as stock as “Business income”.
Addition made by the AO and as sustained in the first appeal, is not called for. The same is directed to be deleted. Assessee appeal is allowed.
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2022 (12) TMI 1537
Addition u/s 68 - exemption claimed u/s 10(38) denied - bogus LTCG - adding 2% of the transaction amount as unexplained expenditure u/s 69C - as argued addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein - whether the AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus?
HELD THAT:- We are unable to persuade ourselves to accept to the contentions of the ld. DR that Kolkata Investigation Wing had conducted a detailed enquiry with regard to the scrip dealt by the assessee herein and hence whomsoever had dealt in this scrip, would only result in bogus claim of long term capital gain exemption or bogus claim of short term capital loss.
Merely because a particular scrip is identified as a penny stock by the income tax department, it does not mean all the transactions carried out in that scrip would be bogus. So many investors enter the capital market just to make it a chance by investing their surplus monies. They also end up with making investment in certain scrips (read penny stocks) based on market information and try to exit at an appropriate time the moment they make their profits.
In this process, they also burn their fingers by incurring huge losses without knowing the fact that the particular scrip invested is operated by certain interested parties with an ulterior motive and once their motives are achieved, the price falls like pack of cards and eventually make the gullible investors incur huge losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee or his broker is not one of the parties who had been proceeded against by SEBI, the transaction carried out by the assessee cannot be termed as bogus.
We hold that the entire addition has been made based on mere surmise, suspicion and conjecture and by making baseless allegations against the assessee herein. Now another issue that arises is as to whether the ld. AO merely on the basis of Kolkata investigation wing report could come to a conclusion that the transactions carried out by the assessee as bogus.
In our considered opinion, the ld. AO is expected to conduct independent verification of the matter before reaching to the conclusion that the transactions of the assessee are bogus. More importantly, it is bounden duty of the ld. AO to prove that the evidences furnished by the assessee to support the purchase and sale of shares as bogus.
It is well settled that the suspicion however strong could not partake the character of legal evidence. Hence the greater onus is casted on the revenue to corroborate the impugned addition by controverting the documentary evidences furnished by the assessee and by bringing on record cogent material to sustain the addition. No evidence has been brought on record to establish any link between the assessee herein and the directors of Sunrise Asian Limited or any other person named in the assessment order being involved in any price rigging and also the exit provider. This onus is admittedly not discharged by the revenue in the instant case.
Thus we are not inclined to accept to the stand of the ld. CIT(A) in sustaining the impugned additions on account of denial of exemption for long term capital gains u/s 10(38) of the Act and estimated commission @ 2% against the same. Accordingly, the grounds raised by the assessee are allowed.
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2022 (12) TMI 1534
Profit estimation on ingenuine purchases - purchases from grey market - HELD THAT:- Since, in the instant case sales made out of disputed purchases were not doubted by the Revenue, the only logical conclusion could be that assessee had made purchases in the grey market in order to have savings in indirect taxes and instantly, profit element thereon.
Hence, it would be just and fair to bring to tax only the profit element embedded in the value of such disputed purchases. We find that this Tribunal has been consistently passing orders by estimating the profit percentage for assessee’s engaged in iron and steel industry at 5%. When this was put to learned Authorized Representative, he also fairly agree for estimation of profit at 5%. Accordingly, we estimate the profit element at the rate of 5% of disputed purchases, which in our considered opinion, would meet the ends of justice. Appeals of the assessee are partly allowed.
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2022 (12) TMI 1531
Deduction u/s 80P(2)(d) - interest income received from a cooperative bank by a cooperative housing society - HELD THAT:- From a bare reading of Sec. 80P(2)(d), it can be discerned that interest income derived by an assessee co-operative society from its investments held with any other co-operative society shall be deducted in computing its total income.
What is relevant for claim of deduction under Sec. 80P(2)(d) is that the interest income should have been derived from the investments made by the assessee co-operative society with any other co-operative society. So if the interest income is derived by a co-operative society from its investments made with any other co-operative society, the claim of deduction under Sec. 80P(2)(d) of the Act is a valid claim.
Though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) - Decided in favour of assessee.
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2022 (12) TMI 1530
TP Adjustment - assessment barred by Limitation - Timelines u/s 92CA, 144C and 153 - Reference to DRP - order of remand passed by the Tribunal, the Assessing Officer has not taken up the assessment proceedings within a reasonable time and therefore, the entire proceedings are vitiated by reason of delay
As decided by HC [2022 (6) TMI 848 - MADRAS HIGH COURT] provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed u/s 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders.
Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act - Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time - In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless.
The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed,
HELD THAT:- Delay condoned. Issue notice.
Leave granted.
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2022 (12) TMI 1529
Reopening of assessment u/s 147 - Reasons to believe or Reason to suspect - AO was of the opinion that assessee might have purchased goods from the Grey Market - profit embedded in the turnover taxed at the rate of 12.5% - HELD THAT:- The information on the basis of which the AO formed the opinion of escapement of income to the tune of Rs.3,00,52,199 i.e. bogus sales was not correct and instead, AO after investigation has accepted the purchases as well as sales of goods shown by the assessee in the assessee’s book. In the light of this crucial fact, it is discerned that AO’s reasons recorded for reopening the assessment was based on information from the Investigation Wing, which can at best be termed as ‘Reason to suspect’ and not ‘Reasons to believe.’
When there was adverse information, AO ought to have made preliminary enquiries and collected material which could make him form belief that there is in fact escapement of income, which in the facts discussed the AO failed to do.
Therefore, we hold that the jurisdictional requirement that is ‘Reason to believe, escapement of income’ as occurring in section 147 of the Act has not been met by the AO in the reasons recorded in the instant facts of the case. Therefore, we are inclined to quash the notice issued u/s 148 of the Act itself. Appeal of the assessee is allowed.
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