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Income Tax - Case Laws
Showing 81 to 100 of 768 Records
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2022 (6) TMI 1353
Disallowance of write-off - write-off represents amounts due to the assessee by various state transport corporations - assessee submitted that these amount represent price difference / discounts deducted by the Government undertakings which were written off as bad debts since they were not recoverable though they were in the nature of discounts - AO held that the assessee could not produce any details such as copies of invoices to prove the claim relating to the claim of discounts and any correspondence to show that the Government undertaking claimed discounts on the invoices raised by the assessee - HELD THAT:- The undisputed position that emerges is that the assessee has received short-payment against invoices from various transport undertakings. The same is evident from the ledger extract furnished by the assessee. Undisputedly, these undertakings are the customer of the assessee and the shortfall of amount so received by the assessee has been claimed as bad-debts / discounts.
In our considered opinion, to claim the same, it was not necessary for the assessee to map each of the amounts against particular invoices. It was sufficient to show that there was shortfall in receipt of amount against the invoices. This fact has already been established by the assessee. Therefore, the expenditure is clearly allowable as business loss. Assessee appeal allowed.
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2022 (6) TMI 1352
Additional depreciation - Whether Tribunal is justified in deleting the disallowance of claim of additional depreciation during the year by merely relying upon the judgment passed in M/s Brakes India Limited [2017 (4) TMI 511 - MADRAS HIGH COURT] not applicable to the facts of the present case and ignoring the Tax Audit Report in Form 3CD issued by the Tax Auditor certifying the allowable depreciation as per law?
Whether the instant case falls under the exception clause in circular no. 3 of 2018 issued by the CBDT, where Board has directed to file an appeal on merits in cases where audit objection has been accepted by the department?
HELD THAT:- Issue notice on the respondent in the post admission matter, for which requisites under registered cover with A/D and speed post be filed within two weeks. Office to track the speed post-delivery. Additionally, appellant shall also effect service of notice on the official e-mail address of the Respondent containing attachment of the entire Memo of Appeal and its Annexures within the same time and file supplementary affidavit to that effect within one week thereafter.
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2022 (6) TMI 1351
Tax Collection at Source (TCS) - licence for the said business was in the name of Mrs. Pramila P. Rai[ assessee brothers wife] - TCS was made on behalf of the license holder, who is a different person than the assessee - claim was rejected by the AO as well as the CIT(A) for the reaon that as per the procedure for claiming credit for TCS laid down in Rule 37-I of the I. T. Rules read with section 206C(4) credit can be given only for Mrs.Pramila Rai and not the Assessee - claim of the assessee that there was a family settlement and understanding by which the business of M/s. Prashanth Wines was to be carried beneficially by the assessee, though the licence for the said business was in the name of Mrs. Pramila P. Rai - HELD THAT:- The issue requires to be set aside to the AO for examination afresh in the light of the outcome before the Central Excise authorities for transfer of excise licence from Mrs. Pramila P. Rai to the assessee. AO can take necessary safeguards to ensure that the interest of the Revenue is not affected or prejudiced in any manner. We therefore, set aside the issue of grant of credit of TCS to the AO for examination afresh on the lines indicated above. Appeal of the assessee is treated as allowed for statistical purposes.
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2022 (6) TMI 1350
TP Adjustment - Comparable selection - HELD THAT:- Companies whose turnover in the current year is more than Rs.200 crores needs to be excluded for the purpose of comparable companies.
R.S.Software Ltd., should be excluded from the list of comparables.
Rectification of margin of Harbinger Systems Pvt. Ltd. - The weighted average margin of the company was rightly computed by the TPO 14.74%, however in the final list of comparables of the TPO order, the TPO adopted the margin at 15.06%, which is an apparent mistake. We therefore direct the TPO to consider this afresh while recomputing the ALP in the SWD services segment in the light of the directions given in this order.
Disallowance of provision for Bad Debts - HELD THAT:- We notice that the party wise details of the bad debts written off as furnished before the DRP- Further the sum was created as a provision in the financial year relevant to assessment year 2014-15 was offered to tax in the said year which fact is substantiated by the relevant extracts of the financial statements and the statement of computation of income for the assessment year 2014-15 that can be seen - Based on these facts we are of the considered view that that the disallowance which was already disallowed in the computation of income of the assessee should be deleted since otherwise the same would result in double disallowance.
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2022 (6) TMI 1349
Revision u/s 263 - Deduction u/s 80P(2)(a)(i) - assessee had earned an amount as interest income on deposits with Banks - HELD THAT:- As per section 80P(2)(a)(i) reproduced above, the sums referred in sub-section (1) would be in case of a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities.
As per section 80P(4), the provisions of section 80P would not apply in relation to any co-operative bank other than Primary Agricultural Credit Society or Primary Co-operative Agricultural and Rural Development Bank. As per the explanation, the terms “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned in Part V of the Banking Regulation Act, 1949. We note that by virtue of section 80P(4), the co-operative banks other than those mentioned therein were meant to be excluded for the purpose of deduction u/s 80P. In this context, in the case of M/s. Jafri Momin Vikash Co-operative Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] has held that exclusion clause of section 80P(4) will not apply to cases where the assessee is a primary agricultural co-operative credit society.
PCIT while arriving at a conclusion to set aside the impugned assessment order for fresh consideration by the AO has relied on the decision of Totagars Co-operative Societies Ltd. [2010 (2) TMI 3 - SUPREME COURT] to which ld. counsel placed on record that the said decision is not applicable to the facts of the assessee duly supported by the financial details submitted before us which are reproduced above.
The order of the AO may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT holds and records reason why it is erroneous. CIT must after recording reasons, hold that order is erroneous. The jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further observed by the Hon’ble High Court that the material, which the CIT can rely up on includes not only the records as it stands at the time when the order in question was passed by the AO but also records as it stands at the time of the examination by the CIT. Nothing prohibits CIT from collecting and relying new/additional material which evidence to show and state that the order of the AO is erroneous.
We find that Ld. PCIT in the present case has not carried out any enquiry of his own and has merely set aside the assessment to the file of the AO to pass a fresh assessment order on the issue of claim of deduction u/s 80P(2)(a)(i) - Therefore, it is contrary to the guidelines as mandated in the case of ITO v. DG Housing Projects Ltd. [2012 (3) TMI 227 - DELHI HIGH COURT] - Therefore, the consideration arrived at by the PCIT invoking provisions of section 263 of the Act on the issue recorded by him is not justified and cannot be sustained under the facts and circumstances of the present case. Appeal of the assessee is allowed.
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2022 (6) TMI 1348
Reopening of assessment u/s 147 - Notice by ITO being without jurisdiction - HELD THAT:- Admittedly, no notice was issued by the concerned ITO-Ward-50(4) to the assessee before proceeding to frame the assessment. Any notice issued by ITO, Ward-37(4) being without jurisdiction has no legal sanctity. The issue is squarely covered by the decision of the Co-ordinate Bench of the Tribunal in the case of Mukesh Kumar vs ITO [2015 (6) TMI 1142 - ITAT, DELHI]
Thus the assessment framed by the ITO, Ward-50(4) being bad in law for want of issue of notice u/s 148 of the Act is hereby quashed and consequential addition stands deleted. - Decided in favour of assessee.
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2022 (6) TMI 1347
Reopening of assessment u/s 147 - bogus purchases - HELD THAT:- As decided in assessee own case [2017 (9) TMI 181 - ITAT DELHI] as relying on Unique Metal Industries [2015 (10) TMI 2753 - ITAT NEW DELHI] case we observe that the AO had recorded similarly worded reasons and name of the parties form whom the assessee alleged to have made bogus purchases were also same except the amount mentioned therein in the reasons recorded in the tabular form, as in the case of the present assessee. We, therefore, respectfully following the above hold that the initiation of reassessment proceedings as well as issuance of notice u/s. 148 of the Act was not valid and the same was void ab initio.
Addition of bogus purchases @ 20% - Estimating profit @ 20%) by taking into consideration the or visions of section 40A(3) will not lead to determination of correct real income. Section 40A(3) is meant for a different purpose when the assessee has made purchases in cash. This provision cannot be applied in such cases. Once the purchases are held to be bogus then the trading results declared by the assessee cannot be accepted and right course in such case is to reject books of accounts and profit has to be estimated by applying a comparative profit rate in the same trade. Though there can be a little guess work in estimating profit rate but such profit rate cannot be punitive.
Thus respectfully following the decision of the Tribunal in the case of Unique Metal Industries (supra), whereby the addition of 20% of the purchases sustained by the Ld. CIT(A) has been deleted in the identical facts and circumstances of the case, are not inclined to sustain the similar addition in the instant case. Appeal of the assessee is allowed.
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2022 (6) TMI 1346
Deduction u/s 36(1)(viia) - deduction of provision for bad and doubtful debts against the advances of rural branches - provision made for bad and doubtful debts in accordance with the provision of the Gujarat Cooperative Societies Act,1961 read with the consequential provision in the bye-laws of the assessee - assessee is a District Co-Op Bank and as such engaged in the business of banking activities, having various branch including rural branch - HELD THAT:- As it is a settled position in the law that explanation to Section 36(1)(viia) includes ‘rural branch’ of ‘cooperative banks’ as per the decision KANNUR DISTRICT CO-OPERATIVE BANK LTD. [2014 (8) TMI 635 - KERALA HIGH COURT] - We find merit in the submission of ld. AR of the assessee. We find that Section 36(1)(viia) was amended vide Finance Act, 2007 and after amendment the benefit of deduction under Section 36(1)(viia) which was available to a scheduled and non-scheduled bank is sought to be extended to a co-operative banks other than primary agricultural credit society or a primary cooperative agriculture and rural development bank w.e.f. 01/04/2007. Further rest while deduction available to such eligible cooperative banks under Section 80P stood withdrawn by Finance Act, 2006 w.e.f. 01/04/2007.
Thus, there was an amendment by way of Finance Act, 2007 to Section 36(1)(viia) w.e.f 01/04/2007 wherein cooperative bank other than primary agricultural credit society or a primary cooperative agriculture and rural development bank, were brought under the provision of Section 36(1)(viia) for claiming deduction in respect of provisions made for bad and doubtful debts. Thus, in view of aforesaid factual discussion and the legal view taken by the Kerela High Court in Kannur District Cooperative Bank (supra), we find that the order of ld. CIT(A) is based on proper appreciation of amended provision of Section 36(1)(viia) which we affirm.
So far as objection of CIT-DR and his reliance on the decision of Indore Bench in Jhabua Dhar Khatriya Gramin bank [2018 (9) TMI 533 - ITAT INDORE] we find that the ratio of finding of Tribunal is not applicable on the facts of the present case. In the said case the Tribunal relied on the earlier case law in Narmada Malwa Gramin Bank 2012 (3) TMI 619 - ITAT INDORE wherein the issue was restored to the file of assessing officer to re-computing the claim of deduction to the extent of amount written off in the books of accounts. Thus, the finding in the said decision is not at all applicable on the facts of his case. In the result, the ground No. 2 of appeal raised by the Revenue is dismissed.
Deduction on account of diminution of value of Government securities - shifting of investment from HTM category to AFS category - change in categorisation from HTM category to current category, is not reflected separately by the assessee in its Balance Sheet as on 31.03.2009 - whether change in valuation as a result of reclassification/shifting is allowable? and/or whether only change in market price during the current year is allowable or entire difference between book value and market price as on 31/03/2009 is allowable? - CIT-A deleted the addition - HELD THAT:- CIT(A) held that there is no bar to change the classification in the middle of the year, the classification can be changed only on approval of ‘Board of Directors’ approved such classification, as has been done in the middle of the year, then claim of loss on account of diminution of value in Govt. securities has no connection availability of deduction.
Even if change would have been done in the beginning of the year it could change on 31.03.2009 and the amount of claim would still remain same. On the objection of Assessing Officer that for allowance of claim of deduction is that has assessee regularly followed the method of diminution of value investment under AFS category.
CIT(A) held that in case loss as available to assessee would be only Rs.51.17 lakhs for the year under fluctuation and not Rs.5.86 crores and if such theory of AO is accepted then assessee would lose all the loss relating to earlier depreciation and which cannot be said to be just or fair, if the assessee has claimed the loss on account of diminution of securities for the first time and genuineness and correctness of such losses are not doubtful then such case is the claim of loss is allowable.
CIT(A) held that there is no requirement of separate disclosure of HTM category and ASF category and as per the RBI’s Master Circular, the investment should continue to be classified in Govt. Securities, shares & Bond of PSU and others. The categorization in the case of assessee has been done separately as per RBI’s requirement and held that assessee is eligible for claim of deduction under diminution in the value investment shifted from HTM category to ASF category. See STATE BANK OF MYSORE VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(3), BANGALORE [2009 (5) TMI 610 - ITAT BANGALORE] wherein claim of the assessee towards provision of depreciation on account of transfer of securities from AFS Category to HTM Category is allowed - Decided against revenue.
Disallowance of claim of deduction u/s 36(1)(viia) by taking a view that the definition of rural branch in explanation (ia) does not cover cooperative banks - HELD THAT:- We find that merit in the submissions of the ld AR for the assessee and find that as per section 67A of Gujarat Cooperative Society Act, every society, working in the State of Gujarat, which earned profit from its transactions, shall maintain a bad debts reserve funds. As per sub-section (2) of section 67A, every year, the society shall carry at least 15% of the net profit to the debts reserve funds. All such funds shall be certified by the certified auditors and the expenses incurred in recovering the same shall first be written off as per section 67A(3). It is settled position under law that co-operative banks are primarily a co-operative society. We also noted that the financial statement of the assessee is not only subject to the statutory audit but also subject to the approval of the Registrar of Co-operative society. Thus, considering the aforesaid factual and in view of the statutory provision in the State Co-operative Act, the assessee is also allowed deduction which in line with the provisions of section 67A of Gujarat Co-operative Society Act.
So far as objection of assessing officer is that in the profit and loss accounts of the year no such provision is made by the assessee, is concerned, we find that in Kedar Nath Jute Manufacturing Company 1971 (8) TMI 10 - SUPREME COURT held that nomenclature or treatment in the books of accounts in not decisive or conclusive for a particular deduction otherwise allowable under the law. In the result, the ground of appeal raised by the assessee is allowed.
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2022 (6) TMI 1345
Rectification of mistake - Levy of interest u/s 201(1A) - on a rectification application filed by the Assessee, demand raised under Section 201(1A) of the Act was reduced to Nil. however, CIT(A) confirmed the levy of interest under Section 201(1A) of the Act for the period commencing from the date on which the tax was first deductible to the date of filing of relevant return of income by the recipient–deductee - HELD THAT:- Having perused the material on record, and the order [2019 (7) TMI 73 - ITAT MUMBAI] passed by the Tribunal, we find merit in the contention of the Assessee that Ground No. 1, 1.1, and 1.2 of the appeal have not been adjudicated which constitutes a mistake apparent on record. Accordingly, the appeal is restored for the limited purpose of adjudication of Ground No. 1, 1.1 and 1.2 of the appeal.
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2022 (6) TMI 1344
Rectification of mistake u/s 154 - CIT justification in invoking jurisdiction u/s.263 and modifying the assessment order passed u/s.143(3) under 'Limited Scrutiny' category in conformity with CBDT instructions on the facts and in the circumstances of the case and valuation of closing stock when the same was not the subject matter of "Limited scrutiny" in the assessment completed u/s.143(3) on the facts and in the circumstances of the case.
HELD THAT:- A perusal of the appeal, more specifically the grounds of appeal before the Tribunal, shows that at the side of grounds No.2 & 3, it is mentioned as “Not. P”, however, it is not signed by either the assessee or the authorised representative. The Vakalatnama in case of the AR was verified. The said Vakalatnama does not give any power to the authorised representative to withdraw the appeal.
This being so, as the director of the assessee company has specifically filed an affidavit that he has not authorised to withdrawal of the grounds as also the fact that he was present to the court and the grounds were not withdrawn as also on the ground that the Vakalatnama of the authorised representative, who represented the assessee in the appeal originally does not have authority to withdraw the grounds, we are of the view that there is a mistake apparent from the order of the Tribunal insofar as grounds No.2 & 3 have been which have been recorded as not pressed. Consequently, the order of the Tribunal passed [2021 (5) TMI 398 - ITAT CUTTACK] for the assessment year 2014-2015 in the case of the assessee stands recalled only for the purpose of the adjudication of the grounds No.2 & 3 of the grounds of appeal.
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2022 (6) TMI 1343
Reopening of assessment u/s 147 - proceedings were put to challenge on the ground of violation of principles of natural justice -appeal filed by the writ petitioner challening the order passed by single Judge while directing the affidavit-in-opposition to be filed by the respondent department declined to grant an interim order in favour of the appellant/ assessee - HELD THAT:- It is prima facie seen that the assessee has not been furnished the full information based on which the reopening proceedings were proposed. Furthermore, there is a reference to a search action which is conducted and statement being recorded from a Director of the company on 03.01.2019 etc. If that is so, the appellant should have full information so as to enable them to give effective reply. This having not done, this court is of the view that the principles of natural justice have been violated and the appellant should be afforded with an opportunity to put forth their contention.
In the light of the above, the order dated 30.03.2022 under Clause (d) of Section 148A of the Act shall be reckoned for reasons for reopening and the appellant assessee is directed to file an objection not later than two weeks from the date of receipt of server copy of this order and also enclose all documents in support of the claim and thereafter the assessing officer shall consider the reply and documents and afford an opportunity of personal hearing to the appellant/writ petitioner and pass fresh orders under Section 148A(d) of the Act in accordance with law.
In the light of the above, the notice issued under Section 148 of the Act dated 06.04.2022 shall not be enforced and further proceedings be initiated after compliance of the above directions.
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2022 (6) TMI 1340
Addition u/s.56(2)(viib) - excess consideration received on allotment of equity shares over and above fair market value as on date of allotment is income of the assessee - price charged for allotment of equity shares, including premium - HELD THAT:- We ourselves do not subscribe to the reasons given by the AO for simple reason that the assessee has determined value of shares as per discounted cash flow method, as per which fair market value of shares as on date of issue was at Rs.109.21 per share. Assessee has determined such valuation on the basis of discounted cash flow of subsequent years by taking into account project under implementation and its relevance, including intangibles possessed in the line of business carried out by the assessee.
Assessee has also justified fair market value determined as on date of allotment of shares by filing necessary details to establish fair market value of the shares as per net asset value method as at end of the assessment year 2014-15, as per which value per equity share is at Rs.146.3 per share which is higher than issue price at Rs.109.21 per share, which means, fair market value determined by the assessee at the time of allotment of shares is not hypothetical, but intrinsic value of the share based on its future earning capacity.
Therefore, we are of the considered view that even on merits, the assessee has justified price charged for allotment of equity shares, including premium.
In this case, the assessee has filed fair market value of the shares worked out as at end of the impugned assessment year on net asset value method, as per which, share price has been worked out at Rs.147.36 per share which is much higher than issue price of Rs.109.21 per share.
Assessee had also allotted 5 lakhs equity shares to non-resident shareholder M/s.Sojitz Corporation, Japan, at issue price at Rs.450.10 per share, which includes premium of Rs.440.10 per share. If you compare, premium charged on resident shareholders, when compared to non-resident shareholder, premium charged to resident shareholders is much below to premium charged on non-resident shareholders.
It is very clear that the assessee has justified premium charged on issue of shares with necessary evidences, including fair market value of the shares as on date of issue. We are of the considered view that the AO has completely erred in making additions towards securities premium u/s 56(2)(viib) - CIT(A), after considering relevant facts has rightly deleted additions made by the AO. Hence, we are inclined to uphold findings of the CIT(A) and dismiss appeal filed by the Revenue.
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2022 (6) TMI 1339
Ex-parte order passed by the Tribunal due to non-appearance - HELD THAT:- It is an admitted fact that due to continuous non-appearance of the assessee, the Tribunal dismissed the appeals on the ground that the assessee is not interested in prosecuting the appeals filed by it. Further, these appeals are not decided on merit. We deem it fit and proper to recall the orders passed by the Tribunal. As the appeals are posted for hearing on 4.7.2022 which was announced in the Open Court, no separate notice of hearing be sent to the parties.
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2022 (6) TMI 1338
Disallowance u/s 40(a)(ia) - tds u/s 194I - non-deduction of tax at source on go-down rent expenses - non-submission of details regarding payment of the above mentioned amount to different professionals - Scope of amendment brought in by the Finance Act (No. 2) 2014 effective from 01/04/2015 made in the provisions of Section 40(a)(ia) for 100% disallowance of expenditure, the disallowance u/s 40(a)(ia) of the Act was limited to the extent of 30% of such expenditure - hardships caused to the assessee due to 100% disallowance of the expenditure claimed by the assessee in case of non-deduction of TDS - CIT-A Confirmed by holding that the assessee failed to bring any cogent evidence suggesting that the rent was paid to three co-owners instead of one as alleged by the AO - HELD THAT:- As regards the 1st contention of the assessee that the rent was paid to three different parties amounting to ₹1,20,000 per person and therefore there is no violation of the provisions of section 194-I read with section 40(a)(ia) of the Act, appears to be devoid of any merit. It is for the reason that, the assessee has not discharged the onus by furnishing the necessary details about the payees to whom the rent was paid. The assessee has not furnished any agreement for the rent or any other document suggesting that the rent was paid by the assessee to three different parties. Thus in the absence of any other document supporting the contention of the assessee, we do not find any reason to interfere in the finding of the authorities below.
Alternate contention of the assessee that the disallowance should be restricted to the tune of 30% of the rent paid under the provisions of section 40(a)(ia) read with section 194-I of the Act, we find force in the argument. The amendment was brought by the Finance Act (No. 2) 2014 effective from 1-4-2015 whereas the year before us relates to the assessment year 2012-13. The Finance Act, 2014 brought an amendment to the first proviso to the section 40(a)(ia) of the Act.
In the case of Neena Kaul [2019 (5) TMI 1697 - ITAT MUMBAI] assessee contended that said provisions have been amended in order to ease the hardships caused to the assessee due to 100% disallowance of the expenditure claimed by the assessee in case of non-deduction of TDS. Assesse also submitted that it has been mentioned in the para 14.3 that withholding of taxes is a mode of collection of tax and does not result into final discharge of tax liability.
As in the case of Amruta Quarry works [2016 (7) TMI 1246 - ITAT AHMEDABAD] it was contended by the assessee that Since the amendment has been brought to remove the hardship caused to the assessee, the amendment assumes the character of being clarificatory in nature and is retrospectively applicable. Reliance is placed on Five Members Constitution Bench of Supreme Court in the case of CIT v. Vatika Township (P.) Ltd [2014 (9) TMI 576 - SUPREME COURT] wherein it has been observed that in case the amendment is brought to remove the hardship caused to the assessee, the same assumes the character of being clarificatory in nature. Hon'ble Tribunal upheld this contention and allowed appeal in favour of the assessee restricting disallowance to 30%. In view of the above, we hold that the disallowance on account of non- deduction of TDS should be limited to the extent of 30% of the rent expenses incurred by the assessee. Thus the ground of appeal of the assessee is partly allowed.
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2022 (6) TMI 1334
TP Adjustment - Comparabaility - HELD THAT:- Companies functionally dissimilar with that of assessee functional profile need to be deselected from final list - RPT filter has to be applied adopting the threshold limit of 15%.
Disallowing the import of equipment under the surmise that there were no supporting documents to prove its genuinity - AO treated the value of this asset as a benefit or perquisite by the assessee in the course of its business brought to tax the aforesaid sum under section 28(iv) - DRP rejected the claim of the assessee on the ground that no evidence was placed on record to show that the assessee returned back the equipment - HELD THAT:- We are of the view that this approach of the DRP is incorrect because the question of return of the equipment will arise only when there is evidence to show that the assessee received the benefit in the form of benefit or perquisite from the RDT. Revenue cannot place negative onus on assessee and seek to make impugned addition. The impugned addition is therefore directed to be deleted.
Addition for non production of import invoices - HELD THAT:- From a perusal of the given table of import information for the balance assessable value along with the purpose for which these have been imported and the purpose of import as given in the last column of the above table, it is clear that the equipments in question were received from respective suppliers for testing and functionality of IT services provided by the Assessee to them. The issue therefore is identical to ground No.15 and for the reasons stated while deciding those grounds, we are of the view that the addition made cannot be sustained and the same is directed to be deleted.
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2022 (6) TMI 1333
Addition being cash deposit made into his bank account during the demonetisation period - HELD THAT:- A.R. took us through the copies of bank account placed in the paper book. A perusal of the same would show that the assessee has withdrawn a sum from his bank account maintained with ICICI Bank on 05.06.2015. We notice that the assessee has withdrawn cash in small amounts in subsequent period also. Since the assessee is an aged person and retired from army, it is quite possible that the assessee had kept the money in cash with him in order to meet medical emergencies.
The assessee is a pensioner and there is no other material to show that the cash withdrawn earlier had been spent away. Accordingly explanation of the assessee that he has made the deposit out of the cash withdrawal made earlier is quite plausible. Accordingly sources for making deposits stand explained in this case. Appeal filed by the assessee is allowed
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2022 (6) TMI 1330
Interest levied for delay in the remittance of the taxes - Application seeking waiver of interest u/s 220 (2A) - voluntary disclosure of amounts by the respective petitioners in the course of the search - HELD THAT:- Petitioners would stress upon the extreme hardships faced by the assessees in remitting taxes, though with delay. Moreover, he attributes the difficulties to the substantial delay on the part of the respondents in issuing refunds to the companies in which the petitioners’ were Directors.
Had such refunds been paid in time, he submits that the same would have been utilized by them to settle their tax demands earlier and intime. This submission would hold no water in the present case, seeing as the demand of tax has been made on the admitted income offered by the petitioner to tax in the returns of income.
Had it been a case where the tax demand had arisen on account of additions/disallowances to the admitted income, the position may have been viewed differently. However, seeing that the tax demand in the present case arises entirely from admitted income and the order of has assessed and attained finality, there is no merit in these writ petitions. The impugned orders are confirmed and these writ petitions, dismissed. Connected writ miscellaneous petitions are closed.
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2022 (6) TMI 1329
Income deemed to accrue or arise in India - Applicable rate of taxation - retrospective insertion to Explanation to Section 90 - Assessee claim for the benefit of the non-discrimination clause of the India-Korea Double Taxation Avoidance Agreement (‘DTAA’) -taxing the Appellant’s income @ 40% (plus surcharge and education cess) or at rate applicable to a resident taxpayer - levy of the income tax on the assessee company at a rate higher than the domestic companies - HELD THAT:- We hold that the applicable rate of taxation, under the Income Tax Act 1961, for the assessee company cannot be read down in the light of the provisions of a double taxation avoidance agreement, as is the specific mandate of Explanation 1 to Section 90 or even on the first principles without the benefit of this Explanation.
As for the mention, in paragraph 7 of the Bank of Tokyo Mitsubishi decision [2019 (8) TMI 895 - CALCUTTA HIGH COURT] of some clarification issued by the CBDT with respect to ABN Amro Bank, even if that be so, it is only elementary that Section 119(1)(a) does not visualize issuance of a circular “so as to require any income-tax authority to make a particular assessment or to dispose of a particular assessment in a particular manner”, and, therefore, such a clarification will not have any bearing on cases other than ABN Amro Bank, or the legally binding force of Section 119. In any event, even going by the observations made by the Hon’ble High Court, this communication was issued prior to 24th November 1997 – much before the retrospective insertion of Explanation 1 to Section 90 took place. With the amendment in law and with this significant change in the legal position, even if there is an old circular, issued in the context of pre-amendment law, it will not hold good any longer. Nothing, therefore, turns on the said communication either, and, in any event, even this communication has not been sighted before us.
We are of the considered view that the plea of the assessee is, therefore, devoid of any sustainable merits. We reject the plea of the assessee, and decline to interfere in the matter.
Deductibility of Interest paid by the Appellant to its Head Office - AO/DRP disallowing interest paid by the Appellant to its head office - HELD THAT:- The short reason for which the impugned disallowance is made is that the payment by an entity to itself, i.e. by its permanent establishment to the head office, and, therefore, it is an inadmissible deduction. What this approach overlooks is that this theory of tax neutrality vis-à-vis intra-company payments and incomes, whatever be its relevance or irrelevance in the cross-border situations, finds its support from judicial precedents in the cases of Sir Kikabhai Premchand [1953 (10) TMI 5 - SUPREME COURT] and Betts Hartley Huett & Co Ltd [1978 (4) TMI 58 - CALCUTTA HIGH COURT] is in the context of the computation of profits under the Income Tax Act. This theory would not, therefore, extend to the computation of profits attributable to a permanent establishment under the scheme of the tax treaties.
The five-member bench decision, in the case of Sumitomo Mitsui Banking Corp [2012 (4) TMI 80 - ITAT MUMBAI] recognizes this position and specifically states that “the position under the domestic law, as emanating from the above judicial precedents is that one cannot make profit out of himself”, and in the lights of the corollaries to this position, declined the applicability of this theory in the treaty situation. There is no other reason assigned in this case in support of the disallowance of interest paid by the PE to the head office or the GE. For this short reason alone, therefore, the impugned interest disallowance must be deleted.
The computations of profits attributable to the PE are to be computed on the basis of this hypothetical independence of the PE from its GE, and, to that extent, the profit neutrality theory of intra-company transactions will not come into play - though the assessee had initially raised a grievance against the taxability of interest received from its head office, when the appeal came up for hearing before us, this plea was abandoned even as there was a five-member bench decision, in support of the assessee, on that point. The assessee has claimed a deduction for interest paid by the PE to GE, and included in its taxable income, interest received by the PE from its GE. That is what, in our humble understanding and for the reasons set out above, the computation of profits of the PE, under the scheme of the tax treaties, envisages. In view of these discussions, and bearing in mind the entirety of the case, we hold that the disallowance of interest is not sustainable in law. Assessing Officer is directed to delete the same.
Whether the said interest paid by the PE to GE (i.e. PE-GE interest) can be taxed in the hands of the assessee company as income of the GE, as has been done by the Assessing Officer? - It may perhaps be too much to contend that the taxability of PE-GE interest receipt is required to be considered on the basis of the domestic law provisions, but even this discussion seems entirely academic in the light of our finding, as above, that an internal charge for the PE profit attribution does not amount to taxable income in the hands of the GE anyway. Be that as it may, having decided this aspect of the matter on the treaty principles so far as taxability of PE-GE interest in the hands of the GE is concerned, we need not examine that aspect any further. In our considered view, for the detailed reasons set out in this order, dehors this theory of tax neutrality for intra-GE transactions also, this PE-GE interest is not taxable in the hands of the assessee. Of course, we have reached the same destination by following a different path but then as long as reach the same destination, our traversing through a different path does not really matter at all.
We uphold the plea of the assessee that the interest paid by the PE to the GE cannot be brought to tax in the hands of the assessee company, even though it is to be allowed as a deduction in the computation of profits attributable to the permanent establishment. The Assessing Officer is directed to grant the relief accordingly. The assessee has already offered to tax the interest income received from its head office, and there is no surviving dispute in respect of the same.
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2022 (6) TMI 1327
Addition on account of jewellery found in the search premises of the assessee - HELD THAT:- On consideration of the rival submissions of the parties, we are of the opinion that in the interest of justice and fair play, the matter should be restored back to the file of the AO to verify the veracity of the claims made by the assessee who shall produce evidence which were not available with him during the course of assessment proceedings for the purposes of verification. The Ld. AO shall also consider the claim of the assessee taking into account the CBDT Instruction No. 1916 dated 11.05.1994 and decide the issue afresh after giving reasonable opportunity of hearing to the assessee.
Addition u/s 69A on account of cash found during search - HELD THAT:- Right from the stage of search, the case of the assessee has been that the family withdraws Rs. 40,000/- every month for meeting house-hold expenses and the cash found in search is accumulation of savings. Moreover, documentary evidence of bank statement showing withdrawal of cash of Rs. 1,00,000/- by the assessee and Rs. 1,50,000/- by his wife on 20.04.2012 just few days before search on 09.05.2012 was placed on record. There is no adverse finding that the said withdrawals of cash was utilised for any specific purpose and that nothing was available out of the said withdrawal of cash. We are, therefore, inclined to hold that the source of cash available at the time of search has been satisfactorily explained by the assessee and delete the impugned addition.
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2022 (6) TMI 1325
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As relying on VISION FINSTOCK LTD [2016 (7) TMI 603 - ITAT AHMEDABAD] restrict the disallowance made by the Assessing Officer under Section 14A read with Rule 8D and sustained by the learned CIT(A) to Rs.50,000/- being the exempt income actually earned by the assessee in the year under consideration. In the result, the appeal of the Revenue is dismissed while the appeal of the assessee is partly allowed.
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