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Income Tax - Case Laws
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2022 (1) TMI 1425
Maintainability of appeal against Revision order u/s 263 - DR objected to the assessee’s filing the appeal directly to the Tribunal against the AO’s action giving effect to the 263 order passed by the Ld. Pr. CIT - according to Ld. CIT DR, the appeal of the assessee is invalid and the Tribunal does not have the jurisdiction to hear the appeal of the assessee even though revised Form No 36 has been filed by the assessee - HELD THAT:- We note that the assessee was the same who appeared on behalf of the appellant in the case of M/s. Good point Stockist Pvt. Ltd. (2021 (8) TMI 1411 - ITAT KOLKATA] and the facts of the present case are similar/identical in nature as that of M/s. Good point Stockist Pvt. Ltd. (supra) where the Tribunal was pleased to allow the assessee to withdraw the appeal and had given liberty to file fresh appeal against the action of the Ld. PCIT-4, Kolkata. The Tribunal was also pleased to condone the time consumed in prosecuting the appeal i.e. from the date of filing of the present appeal till receiving the copy of the Tribunal order and the period not to be taken into consideration for the purpose of calculating the limitation period. With the aforesaid same observation we allow the assessee to withdraw the appeal. Appeal of the assessee is allowed.
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2022 (1) TMI 1424
Addition under the head "capital gains" from sale of equity shares held by the assessee - FMV determination - value of leasehold interest in land - residual ownership rights were transferred in favour of person (who was the state subject i.e. resident of Jammu & Kashmir) - whether the value of leasehold interest in the land is to be included to determine the fair market value of each share on 1.4.1981? HELD THAT:- Assessee‟s were shareholders of M/s Jyoti (P) Ltd., who undisputedly owned the hotel building which stood on the land owned by Shri Vikramaditya Singh one of the shareholder, who had become the owner of the land by virtue of the partition of the family properties and the land falling to his share had in fact been leased out by him to the company, M/s Jyoti (P)Ltd.
We find force in the arguments of assessee that since in the state of Jammu and Kashmir no person other than the resident of the state can own the land, the title to the land stood in the name of Shri Vikramditya Singh and even the Hotel Building would have no independent value, if the land on which the building stood is not considered.
We find from deed of lease dt. 21.3.1973 that at the time when M/s Jyoti P. Ltd., had purchased the building by another deed of relinquishment on 21.3.1973, the Hotel Building was already existing on the land so leased and as such virtually it was a case where M/s Jyoti P. Ltd., had an absolute interest despite the fact it was only where the title of the land remained in the name of Shri Vikramaditya Singh. We find even the residual ownership rights were transferred in favour of Sh. Narendra Batra (who was the state subject i.e. resident of Jammu & Kashmir), who was a nominee of Bharat Hotels Ltd. on 16.1.1998 for a nominal value of Rs. 10 lacs when Perpetual Lease Deed was granted in favour of M/s Jyoti (P) Ltd.
We, therefore, find merit in the arguments of assessee that virtually Shri Vikramditya Singh had divested his rights title and interest in respect of the aforesaid land as early as from 21.3.1973 and for all practical purposes the land was considered to be the property of the company. Since under the state laws of Jammu and Kashmir any immovable property could not be owned by a person who is not a resident, only title of the property remained in the name of Shri Vikramaditya Singh. It is true that, lessee had only disclosed the value of the building in its Balance Sheet, despite the fact that it had also acquired and held lease hold rights. We find as on 1.4.1981 un-expired period of lease was 32 years as the lease granted was to expire only on 20.3.2013.
In order to determine the fair market value of each share as on 01.04.1981, it is necessary to adopt the aggregate of fair market value of the assets which would obviously include the value of leasehold interest in the land. In CWT vs. PN Sikand reported in [1977 (4) TMI 1 - SUPREME COURT] had held that an asset also consists of leasehold interest in a land and should be included in the valuation of such leasehold interest in the land. Similar view has also been taken in the decisions relied on by Ld. Sr. Counsel for the assessee in the case law compilation.
Thus we hold that while adopting the fair market value as on 01.04.1981, the value of leasehold interest in the land be also held to be included in the value of asset of M/s Jyoti Private Limited, so as to determine the fair market value of shares held by the sharesholders. The lease hold interest in the land is an asset of company and is capable of valuation. That the assessee had made no capital gain and the method of valuation adopted under the Wealth Tax Act is not applicable, while arriving at the fair market value of shares as on 01.04.1981 for the purpose of section 55(2)(b)(ii) of the Act. The various decision relied on by Ld. Special Counsel for the Revenue are distinguishable and not applicable to the present case. Accordingly, the order of the Ld. CIT(A) on this issue is upheld and the grounds raised by the Revenue on this issue of Capital Gain are dismissed.
Characterization of income - correct head of income - agricultural income or income from other sources - assessee could not substantiate its agricultural income and the assessee was not showing any agricultural income in the past years - CIT(A) deleted addition - HELD THAT:- The assessee before the Assessing Officer as well as the Ld. CIT(A) had filed the details of agriculture produce and the details of sale etc. It is also submitted before the Ld. CIT(A) that the apple and Cherry trees which were planted before three four years earlier had started giving fruits during the year and therefore the assessee has shown agricultural income from this year. Merely because the assessee had not shown agricultural income in the past, in our opinion, cannot be a ground for rejecting the claim of agricultural income during the impugned year especially when the assessee had filed the details of agricultural land and the receipts of the buyers who had purchased the apple and cherry. We, therefore, uphold the order of the ld. CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed.
Validity of reassessment proceedings - income declared by the assessee in the invalid return has escaped assessment in terms of section 147 - HELD THAT:- Since, such income has already been offered to tax and due taxes have already been paid, therefore, pre-requisite before the issuance of notice of escapement of income on 10.01.2001 being not satisfied, assumption of jurisdiction u/s 148 of the Act and consequent assessment order passed in our opinion is unsustainable in law especially when there was time available with the AO to complete the assessment u/s 143(3)/144 upto 31.03.2001. Further, the Assessing Officer in the order passed u/s 143/147 of the Act has brought to tax a sum by way of capital gain which was not the ground of reopening of the assessment. Therefore, we agree with the contention of the ld. Sr. Counsel for the assessee that such addition made in the assessment order is unsustainable in law in view of the decision of Ranbaxy Laboratories Ltd. [2011 (6) TMI 4 - DELHI HIGH COURT] and Jet Airways (I) Ltd. [2010 (4) TMI 431 - HIGH COURT OF BOMBAY]
Reopening of the assessment in the case of Dr. Karan Singh and other two assessees - We find the proceedings u/s 148 of the Act was initiated after a period of four years from the end of the relevant assessment year. The entire basis on which the proceedings had been initiated u/s 147 of the Act in the case of the three assessees was on the basis of the findings recorded by the A.O. in the order of assessment dated 26.03.2002 in the case of Mr. M.K. Ajat Shatru Singh, such findings had ceased to remain valid findings when the learned CIT(A) had held that no gain had accrued to the assessees. Therefore, such reopening of assessment after the order of the Ld. CIT(A) holding that no gain had accrued to the assessees in our opinion makes the reassessment proceedings unsustainable in law since the foundation on which the structure was proposed did not exist.
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2022 (1) TMI 1417
Addition u/s 43CA - difference between the agreement value and market value as per registered agreement - assessee stated that payment & allotment letters for the impugned items were received much earlier - CIT(A) has held that he was of the opinion that invariably the stamp value date on registration has to be adopted and hence, he was upholding the order of the AO
HELD THAT:- CIT(A) conclusion is quiet contrary to what the AO has held. AO has clearly accepted the assessee’s contentions that he is in agreement that ready recokner value on the date of allotment is being considered. Hence, the reason for CIT(A) in upholding the addition is not as per the facts on record.
In any case, we note that this is assessees plea that section 43CA was introduced w.e.f. 01.04.2013 and the agreement under consideration were entered into prior to 31.03.2013.This is assessees plea that difference is only 5% between the ready recokner rate and sale consideration.
Hence, this is assessees plea that the same has to be ignored on the touchstone of Krishna Enterprises vs ACIT[2016 (12) TMI 52 - ITAT MUMBAI] - Thus issue decided in favour of the assessee.
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2022 (1) TMI 1416
Reopening of assessment u/s 147 - Bogus LTCG - Penny stock transactions - reason to believe - information received from the intelligence being of Kolkata is only information relied upon - independent application of mind v/s borrowed satisfaction - Tribunal allowed the appeal of the assessee by holding that the Assessing Officer’s reasons recorded fall in the zone of “reasons to suspect” and not “reasons to believe”
HELD THAT:- Undoubtedly, there exists a material on record that after the original assessment was concluded, the information had been received from the Investigating Wing, Kolkata, which carried on the survey and search operations, where it was established that the large number of penny stock companies share prices were artificially manipulated on the stock exchanges in order to book bogus claims of LTCG/Loss.
The statement had also been recorded of Shri Sanjay Vora u/s 131 of the Act, which does not contain the name of the assessee and it also does not relate to the broker of assessee, since the sale is not through M/s.Anand Rathi Shares and Stock Brokers Ltd., but through Arcadia Share and Brokers Pvt.Ltd. Thus, on obtaining this information, there shall need to be a reason for formation of belief that there is a rational connection having live link between the material coming to the income tax officer and his formation of belief that the income chargeable to tax has escaped the assessment of the particular year.
Even when the Court is not required to go into the sufficiency or adequacy of the material, it is a must for the AO to establish the rational connection of direct nexus or live link between the material coming to the notice of the officer and formation of his belief. There does not appear to be any material connecting the present assessee, where information in relation to the third party has been used by the AO. There is nothing to indicate as to how in absence of any explicit connection of the assessee with the information received from the another agency, the reassessment proceedings have been initiated. The statement recorded of Shri Sanjay Vora also does not name the assessee nor has there been any link of the broker through whom the assessee has sold the shares.
Of course, the company whose share has been purchased by the assessee is alleged to be one of the penny stock companies. Therefore, the reasons recorded were drawn from survey and search operation in relation to the other assessees and therefore, the requirements of the statute does not appear to be satisfied. Even if, there is a needle of suspicion towards the assessee, the Assessing Officer shall need to act upon his own belief that the twin conditions required under the statute are satisfied before he initiates the proceedings of reassessment.
this Court cannot be oblivious of the requirement of satisfying these conditions before the reassessment proceedings are initiated, there appears to be a borrowed satisfaction. It has chosen to merely considered the information/material received from other source without forming any independent opinion on the basis of the material on record that income has escaped the assessment. His suspicion of the assessee dealing with the shares and claiming of LTCG would not provide the sufficient grounds for reopening.
The exercise which is based on suspicion is not permissible for reopening and any notice for reassessment in such circumstances would need to be termed as a fishing inquiry only.
The Apex Court interpreted the word “reason to believe” in case of Central Prominces Mangnese Ore Company ltd. (1991 (8) TMI 4 - SUPREME COURT] it held that, the word “reason” in the phrase “reason to believe” in Section 147, would mean cause or justification to know that income had escaped the assessment he can be said to have reason to believe. This expression does not mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion.
AO to form the opinion there shall need to be some link with the material and as discussed above, the same is missing, the challenge needs to fail. Though no rigid format is a must to express application of mind or for formation of belief that income chargeable to tax has escaped assessment and yet, when reliance on the information is mechanical without reassessment for the verification, independent opinion needs to be held to be absent. Decided against revenue.
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2022 (1) TMI 1414
Denial of credit of TDS - HELD THAT:- A perusal of the impugned orders of the ld. CIT(A) reveals that the ld. CIT(A) after considering the submissions of the assessee has directed the AO to verify the claim of the assessee and allow the necessary credit of the taxes paid/deducted at source as per law. Since the CIT(A) has already granted relief to the assessee by directing the AO to verify the claim of the assessee, therefore do not find any reason to interfere in the order of the ld. CIT(A). The appeals of the assessee are, therefore dismissed.
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2022 (1) TMI 1411
Rejection of rectification application filed by the assessee u/s 154 - submission filed by the assessee on the online portal - AR submitted that both the Revenue Authorities have not given any opportunity to the assessee for proper hearing and principles of natural justice were violated - HELD THAT:- We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that at any stage of the assessment proceedings as well as appellate proceedings, i.e. before the CIT(A), no opportunity was granted to the assessee for personal hearing to comment on the merit of the case.
Therefore, it will be appropriate to remand back the entire issue to the file of the AO for proper adjudication of the issues on merit and thereafter pass appropriate order as per due process of law. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Appeal of the assessee is partly allowed for statistical purposes.
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2022 (1) TMI 1410
Addition u/s. 68 - unexplained partners investment in the assessee-firm - source for the amount introduced in the firm as capital and loan was not properly explained - since the interest credited to the partners account was in violation of the provisions of section 40(b) AO disallowed the claim of expenditure towards such interest and added the same in the hands of the assessee - HELD THAT:- With respect to unexplained cash brought into the firm as partner’s capital and loan from partners, neither the Ld. AR nor the assessee has established that the amount was accounted in the books of the respective partners of the firm. The amount is credited in the books of the assessee firm during the relevant assessment year without any corresponding entries in the books of the respective partners of the firm and there is no evidence to establish that the source of those funds are genuine and accounted. It is also obvious that the entire amount is appropriated and utilized by the assessee firm and not by the partners of the assessee firm.
From the above provisions of section 68 and the facts of the relevant case before us it is crystal clear that the assessee firm is directly hit by the provisions of section 68 of the Act.
Needless to mention that if the partners of the assessee-firm had introduced the cash in their respective books and thereafter transferred the same to the books of the assessee firm then probably the onus may be on the partners of the assessee firm to establish the source of the cash brought into their respective books and therefore addition may not be made in the hands of the assessee firm depending on the facts and circumstance of the case.
In the case of the assessee it is apparent that the cash was never introduced in the books of the partners of the assessee firm, but it was merely introduced in the books of the assessee firm. Therefore, the onus is on the assessee firm to establish the genuineness of the cash introduced in its books.
Since the assessee firm has failed to establish the genuineness of the cash introduced in its books obviously the addition has to be made in the hands of the assessee firm as held by the Ld. AO. Therefore, we hereby set aside the order of the Ld. CIT (A) and confirm the order of the ld. AO on this issue.
Further, neither the Ld. AR nor the assessee could establish that the amount debited in the P & L Account of the assessee firm as interest payable / paid to the partners of the assessee firm are not in violation of the provisions of section 40(b) of the Act.
CIT (A) has deleted the addition without making a clear finding on the issue. No merit in the order of the Ld. CIT (A) on this issue also. Accordingly, we hereby set-aside the order of theCIT (A) on this issue and the order of the Ld. AO is hereby confirmed. Decided in favour of revenue.
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2022 (1) TMI 1399
Accrual of income - Waiver of term loan - nature of receipt - addition made by the AO by holding that the principal amount of loan/borrowings taken by the assessee from banks and which were waived off by the banks, was income of the assessee - HELD THAT:- So far as the term loans were concerned, these were taken by the assessee for the purpose of capital assets from time to time. With regard to this loan, the amount did not come into the possession of the assessee on account of any trading transaction; the receipts were capital in nature being loan repayable over a period of time along with interest. Therefore, on waiver of this term loan, no benefit or perquisites arose to the assessee in the revenue field. On the other hand, it is a capital receipt.
Thus, the waiver of the term loan cannot be treated as income of the assessee. However, waiver of overdraft, letter of credit, pre-shipment advance, export bills, benefit had arisen to the assessee. These loans were received in the course of carrying on business of the assessee even if it was treated as loan at the time of receipt of said loan and waiver of said amount will result in revenue receipt and to be liable for tax. Since it was the money had been borrowed for day-to- day affairs and not for purchase any capital assets, the said loan were not term loan taken for the acquisition or purchase of capital assets.
On the other hand, it is used as a circulating capital not as a fixed capital and the money was used in ordinary course of business in carrying the day-to-day affairs of the assessee. Being so, writing off the over draft cash credit, letter of credit, pre-shipment advance and export bills, etc. which was received for carrying out the day-to-day operation of the assessee and waiver of the same to be treated as income of the assessee u/s 28(iv) of the Act.
Similarly, interest waiver, if any and if it is allowed as a deduction in any earlier assessment years, then only the waiver of such interest could be treated as revenue receipt liable to tax u/s 41(1) of the Act. With this observation, we remit this issue in dispute to the file of AO for reconsideration. Appeal filed by the assessee is partly allowed for statistical purposes.
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2022 (1) TMI 1398
Revision u/s 263 - As pr CIT assessee has incurred advertisement and publicity expenses and AO allowed the expenses without appreciating the legal position - Pr.CIT initiated the revision proceedings with the view that the advertisement and publicity expenses incurred by the assessee in the television are not admissible due to the fact that these are illegal and contravenes the Cable Television Networks (Regulation) Act, 1995 - HELD THAT:- Assessee is advertising in the same mode of advertisement in earlier years as well as continued to advertise in subsequent years, we also observe that no authority who approves the advertising in the television has initiated any proceedings under the Cable Television Networks (Regulation) Act, 1995 as per which assessee has contravened any of the Act of the Cable Television Networks (Regulation) Act or levied any fines/penalties. In absence of any proceedings against the assessee, it clearly indicates that the advertisement made by the assessee in the televisions are within the provisions of the above said Cable Television Networks (Regulation) Act, 1995. Therefore, in the absence of any such proceedings the Income-tax authorities have no jurisdiction to presume that assessee has contravened any provision of the Cable Television Networks (Regulation) Act merely because assessee has several products to market some of them may be prohibited to advertise and others are not.
One cannot presume that the assessee is only promoting the products for which advertisements are prohibited as long as the advertisements are allowed to broadcast in the televisions which is approved by the proper authority, the assessee cannot be penalized by invoking the provisions of Cable Television Networks (Regulation) Act, 1995.
Thus in the absence of any adverse remark or penalties levied by the broadcasting authorities the Assessing Officer need not go into verification of regular expenditure which assessee was regularly claiming over the years. We observe that Assessing Officer has also collected several information before allowing the expenses claimed by the assessee. Therefore Ld. Pr.CIT cannot invoke the provisions of section 263 of the Act to reassess the completed assessment merely on the basis of presumption or with the view that assessee may have contravened the Cable Television Networks (Regulation) Act, 1995. Decided in favour of assessee.
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2022 (1) TMI 1392
Reopening of assessment u/s 147 - notice issued after more than four years of the expiry of the relevant assessment year - onus is on respondent to show that there was failure on the part of petitioner to fully and truly disclose all material facts that was required for assessment - HELD THAT:- When the primary facts necessary for assessment are fully and truly disclosed, AO is not entitled on change of opinion to commence proceedings for reassessment. Even if the AO, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the AO who has decided to reopen assessment, is not competent to reopen assessment proceedings.
Where on consideration of material on record, one view is conclusively taken by the AO, it would not be open to reopen the assessment based on the very same material with a view to take another view.
We also find from the records filed with the petition that a specific query had been raised by the AO and he had sought from petitioner pending details of reconciliation of ITS Information and petitioner had also replied to the same.
It is settled law that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not even necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. [Aroni Commercials Ltd. [2014 (2) TMI 659 - BOMBAY HIGH COURT]]. Notice set aside - Decided in favour of assessee.
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2022 (1) TMI 1390
Rectification application - comparable selection for TP Adjustment - HELD THAT:- Exclusion of Allsec technologies the revenue ground is misplaced as TPO has himself excluded it from final comparable.
The other submission that the order should be modified to confirm exclusion of Axis Integrated Systems is not sustainable. The reading of the above order shows that the ITAT has not specifically dealt with the revenue ground relating to Axis Integrated Systems Ltd, raised by revenue in ground no 36. Hence, the Ld. Counsel of the assessee submission that exclusion of Axis Integrated Systems Ltd. is also adjudicated by the Tribunal is not correct. Since, this ground raised by the revenue has not been adjudicated, we recall ground No. 36 of revenue appeal for fresh adjudication. This miscellaneous application is partly allowed.
Apparent mistake rectifiable u/s. 254(2) - non adjudication of additional ground - HELD THAT:- As we note that the mistake apparent from the record has crept in the order of this Tribunal inasmuch as the aforesaid additional ground was not adjudicated by the Tribunal. Hence, there is a mistake apparent from the record. However in an MA, the ground on merits cannot be adjudicated
Hence, the order can only be recalled for the limited purpose of adjudicating this additional ground which had remained unadjudicated. Ld. DR has no objection with regard to this miscellaneous application inasmuch as, the recall will be only to adjudicate the issue which had by mistake remained unadjudciated. Accordingly, we recall the aforesaid order for limited purpose of adjudication of the aforesaid additional ground, which has remained to be adjudicated.
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2022 (1) TMI 1388
TDS u/s 195 - Royalty - amounts paid by the concerned persons resident in India to non-resident, foreign software suppliers - Whether constitutes as taxable income deemed to accrue in India u/s 9(1)(vi) or not? - income deemed to accrue or arise in India - As decided by SC [2021 (3) TMI 138 - SUPREME COURT] given the definition of royalties contained in Article 12 of the DTAAs it is clear that there is no obligation on the persons mentioned in section 195 of the Income Tax Act to deduct tax at source, as the distribution agreements/EULAs in the facts of these cases do not create any interest or right in such distributors/end-users, which would amount to the use of or right to use any copyright - HELD THAT:- List these matters for hearing before the Court after the resumption of physical hearing.
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2022 (1) TMI 1387
Business Expenditrue - Deduction u/s 37(1) - assessee advanced money for the purpose of purchase of material to construct the hotel building - HELD THAT:- As it is clear that the amount paid to various vendors for supply of construction material for construction of hotel building was not in the normal course of business of assessee. Since the amount was given for the purpose of creation of capital asset, the same cannot be treated as a revenue loss, but a capital loss. Accordingly, the debt arisen in the normal course of business is revenue in nature, but in the present case, the debt arose in the field of capital investment and writing off the same was in the nature of capital loss and cannot be allowed as a deduction. This ground of the assessee is dismissed.
Accrual of income - incentive deposit received for rebranding of the hotel - AO observed that the 'incentive' has been received during the year under consideration for rebranding of the hotel and corresponding expenditure has been debited in the instant year itself, the amount received is an revenue receipt - HELD THAT:- The argument of the assessee is that income not at all accrued to the assessee, as such, incentive cannot be taxed in the hands of the assessee in the year under consideration. In our opinion, the assessee is following mercantile system of accounting.
The assessee treated the expenditure as an asset and claimed depreciation on it and charged it to P&L account. However, corresponding incentive received by the assessee towards brand building has been shown as liability which is against the provisions of Section 5 of the Act. Accordingly, AO rightly brought it to tax. The assessee cannot postpone it on the reason that it is liability and there is likelihood of repaying the amount in a phased manner after 5th of every year in case agreement is prematurely terminated. If the assessee refunds back to the payer, then it could be claimed as deduction in the year in which was paid back by the assessee. Decided against assessee.
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2022 (1) TMI 1386
TP adjustment - Intra Group Services paid to AE for failing transfer support services - HELD THAT:- As undisputed fact that all the issues involved are covered by the decision of the Tribunal in assessee's own case[2020 (2) TMI 156 - ITAT DELHI].
In fact the ld. DRP has categorically directed the AO to verify from the record if no appeal has been preferred by the Department before the Hon'ble High Court against the order of the Tribunal for assessment year 2015-16, then no addition should be made and it was only subject to the fact that if any appeal has been filed before the Hon'ble High Court then only addition should be sustained. Now it has been brought on record that no appeal has been preferred by the Department before the Hon'ble High Court and, therefore, the order of the direction of the DRP to delete the addition as the decision of the Tribunal is upheld - Appeal of assessee allowed.
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2022 (1) TMI 1385
Unexplained investment u/s 69 - ‘on money’ paid for purchase of the said land through its partner and the payment of ‘on money’ in cash is not recorded in the books of account - HELD THAT:- We find that DR failed to controvert the facts that firstly the additions were made simply on the basis of statement of power of attorney holders, secondly the addition was made without providing any opportunity of cross examination to the assessee with the 3rd party on whose statement addition has been made, thirdly, the additions are made merely on the basis of oral evidences and there is no evidence on record which could prove that the seller has received ‘on money’ and offered the same before the revenue authorities and lastly the addition seems to be made on assumption and presumption as except the registered sale deed no other incriminating material was found during search proceedings which could indicate that the alleged ‘on money’ has been paid by the assessee.
As in the finding of ld. CIT(A) are inclined to hold that no addition u/s 69 was called for in the hands of assessee. No infirmity in the finding of ld. CIT(A) and the same is confirmed. Decided against revenue.
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2022 (1) TMI 1380
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 [2021 (12) TMI 1446 - 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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2022 (1) TMI 1379
Revision u/s 263 - cancellation of registration for the year when the cancellation order was not available to the AO while passing the order u/s 147/143(3) - HELD THAT:- Tribunal had allowed the assessee’s case following the decision in the case of Commissioner of Income Tax(exemption) Vs. Mukesh Bhansali Charities Trust [2019 (3) TMI 2027 - CALCUTTA HIGH COURT] allowed the assessee’s appeal wherein the Tribunal upheld circular No. 1 of 2011, dated 6th April, 2011 issued by the CBDT and held that Section 12AA(3) is applicable only from the assessment year 2011-12.
We find that the substantial questions of law raised in this appeal are covered against the revenue.
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2022 (1) TMI 1378
Addition u/s 68 - Identity, genuineness and creditworthiness in respect of money received in its books of accounts not proved - main plank on which the assessing officer made the addition was because the directors of the share subscribers did not turn up before him - CIT-A deleted the addition - HELD THAT:- There is no finding of involvement of any entry provider or hawala operator. M/s Anushka Soft-Tel Pvt. Limited is not found to be-part of any group of Companies floated by any entry provider.
A detailed interrogation was conducted by the assessing officer and the director of M/s Anushka Soft-Tel Pvt. Limited has answered all the questions, which show that the director is having full knowledge of operations of M/s Anushka Soft-Tel Pvt. Limited as well as the assessee-company.
The director is not a name lender as generally happens in the case of dummy companies and Shell Company. The statement of the director has not been rebutted or discredited by the assessing officer.
The assessing officer has not made reference to FT & TR nor has he made any investigation / inquiry, in this case. The documents filed reflect that SWEI Inc, is a Company having substantial operating revenues and it has enough shareholders equity to make investment in assessee-company.
Documents also show that the investment has been made through a proper channel of foreign remittances and by following due procedure under FCGPR. The same is also reflected in the balance sheet of M/s SWEI Inc. The assessing officer has not given any contrary finding on any of the documents / details filed. The assessing officer has made addition only in respect of two companies. The assessee has filed basic relevant documents at assessment stage and wherever the Assessing Officer has issued notices, they are complied with and investigations/ examination of director has not thrown up any contrary fact.
All the share applicants are (i) income tax assessee’s, (ii) they are filing their return of income, (iii) the share application form and allotment letter is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the assessing officer found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above.
We are not inclined to accept the contention of the AO in any manner and hence the addition so made by assessing officer has been rightly deleted by ld CIT(A) by passing a reasoned and speaking order. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. Decided in favour of assessee.
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2022 (1) TMI 1376
Exemption u/s 11 - scope and amplitude of the definition “charitable purpose” - correct interpretation of the proviso to Section 2(15) “charitable purpose” - as per revenue assessee is involved in widespread commercial activities in nature of business and the activity of the assessee covered under the provisions of Section 2(15) of the Act and thus, exemption u/s.11 & 12 of the Act is not allowable to the assessee - HELD THAT:- The substantial questions of law raised are no longer res integra in view of the decision of this Court in the case of Ahmedabad Urban Development Authority Vs. ACIT (Exemption) [2017 (5) TMI 1468 - GUJARAT HIGH COURT] - Decided against revenue.
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2022 (1) TMI 1374
Deduction u/s 10A - deduction u/s. 10A for Bangalore BPO Unit was restricted to total income (under the head business) after set off of losses from other units (10A and non-10A units) - While the DRP accepted the objection of the assessee, the AO in the final assessment order for the first time excluded the loss/profit of section 10A units eligible for deduction at the source level itself, while no such direction was given by the DRP. According to the ld. AR, the action of the AO in the final assessment order is against the mandate of the provisions of section 144C(10) r.w.s. 144C(13) - HELD THAT:- As submitted that the provisions of section 10A are deduction in nature and in the absence of provisions similar to section 80A(2), the entire deduction to be restricted to total income in all the loss/profit of 10A units to be excluded at source level. For this purpose, he relied on the order of Yokogawa India Ltd [2016 (12) TMI 881 - SUPREME COURT] wherein it was held that though section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. Being so, the issue is remitted to the AO to pass consequential order in compliance of the decision above.
Disallowance of provision for litigation under normal provisions of the Act as well as upward adjustment to net profit while computing book profit u/s. 115JB - DR submitted that there is no basis for this provision towards legal fees or out of pocket expenses and the lump sum provision is made without specific production of details of litigation pending at various courts - HELD THAT:- As before us, the ld. AR could not establish that this provision has been made on a scientific basis relating to particular cases pending before various courts and due to particular counsel. As such, we decline to entertain this ground and the same is rejected.
MAT computation - AR submitted that as per Explanation 2(i) to section 115JB of the Act, any reversal out of provision created in earlier year, if the book profit of such year has been increased by those provisions, be reduced from net profit while computing book profit in the year of reversal, if such amount is credited to Profit & Loss account. - HELD THAT:- If the book profit is increased by provision created in that year and on reversal of that provision in the present assessment year, net profit of this assessment year to be reduced so as to compute the correct book profit. With these observations, we remit the issue to the AO for fresh consideration.
Addition u/s. 201(1) & 201(1A) for not withholding tax on payments towards bandwidth and leased line charges - The issue has been settled by the assessee by availing VSVS, 2020 scheme - HELD THAT:- At the time of passing the DRP order, the certificate under VSVS, 2020 was not made available before the lower authorities. Since the issue raised before us is directly related to the issue in the appeal in.[2020 (12) TMI 1375 - ITAT BANGALORE] if the issue was settled by the assessee by availing VSVS, 2020, the assessee is entitled for consequential relief. Accordingly this issue is set aside to the file of AO to consider the VSVS, 2020 scheme availed by the assessee and decide the issue accordingly.
Computing deduction u/s. 10A - HELD THAT:- We are of the opinion that this issue has been decided in favour of the assessee by the judgment of Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] holding that for the purpose of computing deduction u/s. 10A if the export turnover in the numerator is to be arrived at after excluding the communication expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. This has been confirmed by the Hon’ble Supreme Court in the case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT].
TP Adjustment - comparable selection - HELD THAT:- Remit this issue in respect of selected comparables to the file of DRP for adjudication of this issue after considering the submissions and case laws cited by the assessee.
Only companies functionally similar to the assessee need to be selected.
Corporate guarantee transaction treated as an international transaction and applying arbitrary rate of 3% as guarantee fee - HELD THAT:- We set aside this issue to the record of the A.O./TPO to recompute the ALP by considering the arm's length guarantee fees at 0.5% and further by providing appropriate adjustment for corporate guarantee received by the assessee from its arm's length.
Reimbursement transactions - TPO proposed to apply CUP method and treat the payment towards the Re-imbursement as NIL and made adjustment in the intragroup payment made by the assessee - HELD THAT:- Before the lower authorities, the assessee has not placed the necessary evidence, as such this issue was decided against the assessee. Before us, it was pleaded that the assessee is in a position to place the evidence to support its claim. Accordingly, the issue is remitted to the AO/TPO to consider the same and decide the issue afresh.
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