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Income Tax - Case Laws
Showing 141 to 160 of 9304 Records
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2022 (12) TMI 1308
Disallowance of employees’ contribution to Provident Fund as well as ESIC - delayed deposit the employees’ contribution to provident fund within the due date - HELD THAT:- As it is an admitted fact that the payment of employees’ contribution to the provident fund was made before the due date of filing of return of income u/s 139(1) of the Act but beyond the due date as provided in the respective Statutes.
Respectfully following the judgment of Hon'ble Supreme Court Checkmate Services P. Ltd. [2022 (10) TMI 617 - SUPREME COURT] we hold that the assessee-employer was duty bound to deposit the employees’ contribution to provident fund within the due date as mentioned in the respective Statutes. Since this was not done the assessee is not entitled for deduction u/s 36(1)(va) read with section 43B of the Act and the said amount has to be construed as deemed income of the assessee and added to his total income. We do not find therefore, any infirmity with the findings of the Revenue authorities and the appeal of the assessee is dismissed.
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2022 (12) TMI 1307
Income deemed to accrue or arise in India - definition of ‘interest’ as provided under article 12 of the India –U.K. DTAA - justification on the part of the lower authorities in treating the receipts of the assessee as ‘income from other sources’ - whether income was rightly declared as Rental Income under the head House Property and the Statutory Deduction of 30% was rightly claimed? - HELD THAT:- We see no reason to deviate from the view already taken by the Coordinate Benches and following the same, the amount received by the assessee is in the nature of interest taxable @ 15% under Article 12 of India-UK DTAA. In the result, ground of the assessee’s appeal is allowed in favour of the assessee and against the Revenue.
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2022 (12) TMI 1306
Addition u/s. 69A - accommodation entries received by the assessee in respect of his own unexplained money - HELD THAT:- As no appearance was put up by the assessee in response to the notice u/s. 142(1) of the Act. Before the CIT(A) also instead of contending that the AO did not conduct independent enquiry and no details of money trail was referred, no evidence whatsoever were filed by the assessee except an affidavit and a bank statement. There were many opportunities given by the AO as well as CIT(A) but no evidences in support of claim of assessee were ever produced before both the authorities below.
The provisions u/s. 69A requires explanation of assessee about the nature and source of acquisition of money and if any explanation offered by the assessee is not satisfactory in the opinion of AO, the money is deemed to be income of the assessee. Admittedly, as discussed above, no explanation was offered by the assessee in the assessment proceedings to the satisfaction of the AO and it is established that the AO framed assessment to the best of his judgment u/s. 144 - Therefore, the provisions u/s. 69A of the Act requires explanation by the assessee and when no such information offered by the assessee, we deem it proper in the interest of justice to remand the matter to the file of AO for its fresh verification. The assessee is liberty to file evidences, if any, in support of his claim. Thus, ground No. 2 raised by the assessee is allowed for statistical purpose.
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2022 (12) TMI 1305
Accrual of income - Addition pertaining to option premium received on sale of 20 flats as the income in the hands of the appellant - Whether option agreement between the appellant and Hypercity is a normal business transaction and not a sham transaction? - terms and conditions of the option agreement entered as commercially prudent - Case of the Revenue is that, this agreement was a sham transaction, which was only meant to divert profits from the assessee to HRPL - HELD THAT:- We agree with the Ld. AR that this option agreement was a commercially expedient transaction as it enabled the assessee to obtain interim funding in the form of interest-free deposits with embedded option, for its project without interest/cost and it also indirectly secured the commitment from HRPL to buy twenty (20) flats in their proposed development, whose construction had not even commenced by then, and whose sales/bookings until then was sluggish (assessee had only obtained two other bookings until FY 2010-11).
The fact that HRPL, a reputed company and a subsidiary of M/s Shoppers Stop Ltd, chose to participate in this proposed development, enhanced the bankability of the project. It was also pointed out to us that, the option price agreed in 2010 was commensurate with the prevailing market value for stamp duty purposes and therefore it was not a case that the option to acquire twenty (20) flats was given to related party, HRPL at understated values. On the issue of loans of Rs.135.23 crores advanced by the assessee to its sister concerns, it is noted that they were given in the course of business and were interest bearing, and on which the assessee had derived interest income to tune of Rs.25.67 crores. On the other hand, the interest-free deposits with embedded option received from HRPL were not only interest-free but also did not entail any cash outflow. On conspectus of these facts, we agree with the finding of the Ld. CIT(A) in holding the option agreement between the assessee and HRPL to be commercially expedient and thus acceptable.
Understandably, until the construction work began, there was little need of funds by the assessee. It was only when the certificate for commencement of construction was received on 27.05.2013, that the actual requirement for working capital arose, and until then the assessee had admittedly been able to secure interest free option deposits from HRPL to the tune of Rs.48.66 crores (upto FY 2013-14) against twenty (20) flats. Having regard to these facts, even this doubt raised by the Ld. DR regarding the staggered manner of payment of option deposits, is found to be untenable.
Apart from the above reasons, we are also unable to countenance the action of the Ld. DR in questioning the necessity and purpose for entering into option agreement, on the premise that, it is the assessee’s prerogative to decide the manner in which it wants to run its business and the Department cannot replace the wisdom of the assessee.
Revenue cannot decide or dictate as to how an assessee should conduct its business or maximize its profits. It is by now well settled in law that, the Revenue cannot step into the shoes of the businessman for determining reasonableness and business expediency. Hence, the Ld. DR could not have questioned the necessity, purpose and manner of raising of funds by the assessee, in the form of option deposits from HRPL, as it was outside the domain and jurisdiction of the Revenue.
Courts have time and again observed that, whether the transaction is expedient for the purpose of business has to be looked at by the Income-tax Authorities from the view-point of the assessee as a prudent businessman and not from the armchair of the AO. The Courts have observed that it is the assessee who knows its business. It is its success or failure in the business, which is material to it. It is not for the income-tax authorities to suggest, or advice, or to presume or surmise as to the expedience of the transaction. For the aforesaid reasons, we hold that the Ld. DR could not have questioned the commercial necessity for the assessee to have entered into the option agreements with HRPL.
Assessee has also demonstrated before us that, it was also not the case, that by entering into this option agreement, the assessee had shifted profits to HRPL thereby reducing its tax liability. It is not in dispute that, both the assessee and HRPL are assessed in the status of ‘company’ at the same applicable tax rates. It is also not the case of the Revenue that HRPL did not credit the revenues derived from sale/assignment of options as income in its books of accounts. Assessee had brought forward losses to the tune of Rs.156 crores from earlier years. Hence, even taking into account the addition of Rs.98 crores made by the AO, there were sufficient losses available with the assessee to set-off such addition and also carry forward remaining losses to future years, and hence it did not result in creation of any tax liability upon the assessee. Although, we agree with the Ld. CIT(A) that, this fact alone cannot be a decisive factor to decide the acceptability of the option agreement, but having regard to the overall facts and circumstances of the case as already discussed in the foregoing, this fact pointed out by the Ld. AR does have persuasive value.
Addition made by the AO is held to be unjustified both on facts and in law. Accordingly, the Ground No. 1 of the appeal of the assessee is allowed and the Ground No. 1 of the appeal of Revenue is dismissed.
Disallowance u/s 14A - assessee had made suo-moto disallowance - CIT(A) allowed the appeal of the assessee by holding that the disallowance u/s 14A was to be restricted to the extent of exempt income, by following the decision of State Bank of Patiala [2018 (11) TMI 1565 - SC ORDER] - HELD THAT:- Having heard rival submissions and perusing the material on records including the impugned order, we do not find any infirmity in the order of Ld.CIT(A) deleting the further disallowance made by the AO u/s 14A of the Act. Accordingly, Ground no. 2 of the appeal of the Revenue is dismissed.
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2022 (12) TMI 1304
Unexplained source of deposits - whether amount routed through bank account and registries existed in the name of M/s Vardhman Industrial Estate and its concern, proves the genuineness of transactions? - CIT (Appeals) deleted these additions based on the evidences furnished by the assessee in the form of confirmation from M/s. Vardhman Industrial Estate and its sister concern that they have paid the assessee these moneys - HELD THAT:- These moneys are routed through banking channels and they are verifiable. The finding of the ld. CIT (Appeals) that the documents show that lands were registered in the name of M/s. Vardhman Industrial Estate where the assessee acted only as an agent in facilitating the purchase of land from farmers on behalf of M/s. Vardhman Industrial Estate. As observed that the ld. CIT (Appeals) deleted these additions based on these evidences where major portion of the lands were registered in the name of M/s. Vardhman Industrial Estate and a small portion to its sister concern.
Addition being cash deposits into bank account - CIT (Appeals) was of the view that it would be unreasonable to add the entire amount as these proceeds emanate from the business of the assessee which is on-going. The ld. CIT (Appeals) also observed that assessee had opening balance of Rs.24,05,867/-. Therefore, the ld. CIT (Appeals) considered the peak credit of this account as undisclosed income of the assessee and worked out the peak credit at Rs.21,59,522/-.
CIT (Appeals) on appreciation of evidences furnished by the assessee deleted the additions of Rs.76,50,000/- and Rs.10,50,000/- and restricted the peak credit in respect of cash deposits into bank account at Rs.21,59,522/- which, in our opinion, is justified. Therefore, we see no good reason to interfere with the findings of the ld. CIT (Appeals). Thus, we sustain the order of the ld. CIT (Appeals) and reject the grounds raised by the Revenue.
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2022 (12) TMI 1303
Revision u/s 263 - notice to a non-existent entity - deduction u/s.80IC was wrongly allowed as it appears that the assessee firm was not carrying out manufacturing activities at the factory premises - HELD THAT:- Since, the notices issued by the revenue authorities were after the date of closure of the business they have been rightly returned answered. Since, the closure of the business as no operations could be carried and no employees were available at the premises of the factory, the notices have been returned. Hence, it cannot be concluded that during the financial year period from 01.04.2011 to 31.12.2012 was not in existence. The derivation of the ld. PCIT cannot be held to be correct.
Had the manufacturing activities were carried out as on date the notices could have been served.From the record, it is clear that the manufacturing activities were not being carried out from 31.12.2012 and the cancellation of registration on 04.03.2013 was also on record. Hence, the notices could not be served and it is a fact that the manufacturing activity was not carried out as on the date of issue of notice. It certainly does not give raise to a conclusion that there was no manufacturing activity during the year 01.04.2011 to 31.12.2012.
It is not worthy to conclude that the permanent closure of the business was done w.e.f. 31.03.2014. It is a fact on record that the permanent closure of the business was done w.e.f. 31.03.2014 and polynomial interpolation cannot be resorted to conclude that the assessee was not into manufacturing during the period 01.04.2011 to 31.12.2012.
The authorization given by the assessee was not affixed by requisite court fee. Hence invalid.
The validity or invalidity of the letter of authority cannot be a matter of proceedings u/s. 263 especially when the assessee reaffirmed the details filed by the AR.The assessee sold products to only two concerns at Bangalore namely, M/s. Creative International Pvt. Ltd. and M/s. Texport Overseas Pvt. Ltd.
The bills have been duly examined. The transport bills have been duly filed before the AO which consists of South India Freight Carriers and Uttarakhand Logistics. The transport charges have been paid by the recipient. The central Sales Tax declarations/'C' Form have been duly filed. Hence, there is no reason to suspect the sales without bringing any material to prove that the bills are phoney or the entities which received the goods are bogus. Hence, the conclusion of the ld. PCIT cannot be supported.
The sale invoices to those two concerns do not give any information as to how the goods have been sent to Bangalore from Roorkee. The sale invoices clearly shows that the goods have been sent by freight carrier companies named above and the recipient "to pay" the freight charges.
The raw materials were also purchased from Bangalore which do not give any credence to the factum of purchase. Factually incorrect. No goods have been purchased from Bangalore. The Poly Yarn was purchased from Delhi and Erode
The expenses incurred on account of electricity & wages do not suggest any manufacturing activity carried out at the premises.
The amounts have been duly examined by the AO as per the observation at page no. 2 of the Assessment Order. The electricity bills and invoices details have been duly examined and accepted by the AO with reference to books of accounts and bills. In the absence of any remark, no adverse conclusion could be drawn with regard to the provisions of Section 263 - Appeal of the assessee is allowed.
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2022 (12) TMI 1287
Reopening of assessment u/s 147 - Reasons to believe - accommodation entry receipts - HELD THAT:- On perusal of the reasons recorded, the assessment is sought to be reopened for verification of the facts which are already on record as to whether the amount received by the assessee and reflected in the regular books of accounts pertains to any accommodation entry or not. It is not in dispute that the assessee returned that amount within a short span of two months. Therefore, it appears that under the guise of reopening the assessment, AO wants to have a roving inquiry. Under the circumstances, it cannot be said that AO had any tangible material to form an opinion that the income chargeable to tax has escaped the assessment.
In case of Inductotherm (India) (P.) Ltd. v. M. Gopalan, Deputy CIT [2012 (9) TMI 16 - GUJARAT HIGH COURT] the Division Bench of this Court observed that for a mere verification of the claim, the power of reopening of assessment could not be exercised and the AO cannot seek to undertake a fishing or a roving inquiry and seek to verify the facts which are already on record, as if it were a scrutiny assessment.
Thus from reasons recorded to reopen the assessment, we are of the opinion that under the guise of reopening the assessment, the AO wants to have a roving inquiry. In absence of any tangible material to form an opinion that the income chargeable to tax has escaped assessment and in absence of any satisfaction recorded by the Assessing Officer by merely relying upon the information received from the Office of DCIT Central Circle 2(2), Mumbai, the impugned action of reopening the assessment while exercising power under section 148 of the Act cannot be sustained. - Decided in favour of assessee.
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2022 (12) TMI 1286
Reopening of assessment u/s 147 - new tangible material available on record - reasons to believe - reopening based upon the audit objection - necessity of independent application of mind - HELD THAT:- In the present case, the entire material was available with the Assessing Officer during the original assessment and therefore, there was no failure on part of the assessee to disclose truly and fully all material facts necessary for assessment and based upon such material supplied by the petitioner, the Assessing Officer passed the original assessment order.
It appears that the notice for reopening is based upon the audit objection and there is nothing on record to suggest that such reopening is made on account of new tangible material available on record. It is therefore, apparent that there is change of opinion by the AO to reopen the assessment for the Assessment Year 2011- 2012, more particularly, when the issue raised in the reopening assessment is already considered during the original assessment proceedings.
AO cannot have any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT]
AO issued notice under section 148 of the Act only to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the original assessment under section 143(3) of the Act. It appears that the Assessing Officer now wants to re-verify the facts which is not permissible to be an acceptable ground for exercising powers to reopen the assessment.
The impugned notice issued u/s 148 by the respondent exercising the powers to reopen the assessment for the Assessment Year 2011-2012 is illegal and liable to be set aside. Appeal of assessee allowed.
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2022 (12) TMI 1285
Disallowing lease equalization charge claimed as a deduction from gross lease rentals received by the assessee in respect of finance lease of assets - difference between cost of asset leased minus the depreciation claim and the lease deposit received - Tribunal held that the amount taken to the lease equalisation fund was not an allowable business expenditure as it was an appropriation of profit - HELD THAT:- This issue is no longer res integra as the same has been answered by the Supreme Court in Commissioner of Income Tax-VI v. Virtual Soft Systems Limited [2018 (4) TMI 1472 - SUPREME COURT] as examined the guidelines issued by the Institute of Chartered Accountants of India (briefly referred to hereinafter as ‘ICAI’) and also referred to Section 211 of the Companies Act, 1956 to emphasize that Accounting Standards prescribed by ICAI shall prevail until Accounting Standards are prescribed by the Central Government.
Method of accounting followed as derived from ICAI Guidance Note is a valid method of capturing real income based on the substance of finance lease transaction. The rule of substance over form is a fundamental principle of accounting.
No force in the contentions of the Revenue that the accounting standards prescribed by the Guidance Note cannot be used to bifurcate the lease rental to reach the real income for the purpose of tax under the IT Act.
Bifurcation of lease rental as per the accounting standards prescribed by the ICAI allowed. Moreover, there is no express bar in the IT Act regarding the application of such accounting standards - Decided in favour of assessee.
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2022 (12) TMI 1284
Validity of Order of Assessment passed u/s 143(3) r/w. Section 144B - as argued Show Cause Notice issued in terms of Section 144B sub-section (6), clause (vii) of the Act, did not provide to the petitioner a reasonable opportunity of filing a response to the said show cause notice - HELD THAT:- In our opinion, the time that was made available to the petitioner to file its response to the show cause notice was quite inadequate and illusory and therefore, the principles of natural justice can be said to have been violated in the case of the petitioner.
Be that as it may, we allow the petition and accordingly pass the following order :-
(i) Order of Assessment dated 18th September 2022, passed under Section 143(3), r/w. Section 144B, of the Income Tax Act, 1961, relevant to the Assessment Year 2020-21, is set aside and the matter is remanded back to the Assessing Officer, who shall consider the objections to the Show Cause Notice dated 13th September 2022, which shall be filed within two weeks from today, for which the system be enabled accordingly.
(ii) Petitioner be also given an opportunity of being heard in terms of Section 144(6)(vii) of the Income Tax Act, and thereafter proceed to pass appropriate orders in accordance with the law.
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2022 (12) TMI 1283
Validity of Reopening of assessment u/s 147 - whether personal hearing a condition precedent before an order is made under Section 148 A (d)? - HELD THAT: - As in the light of the Circulars which has prescribed the procedure to be followed if a request for personal hearing is made and which expressly provides for grant of personal hearing vide Clause viii of the Department circular in F.No.299/10/2022-Dir(Inv.III)/611, dated 01.08.2022 - the above Circular is binding and it may not be open to the Revenue to contend to the contrary.
In view of the fact that the Circular which is binding has provided for personal hearing, we do not propose to examine Section 148 A to find if personal hearing is mandatory or otherwise.
Writ Petition is allowed and it is held that personal hearing is necessary in terms of the Circular.
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2022 (12) TMI 1282
Reopening of assessment u/s 147 - Reason to believe - short disallowance u/s 14A - HELD THAT:- There shall be no gainsaying that the issue about the allowable expenditure u/s 14A was gone into by the AO at the time of scrutiny assessment on the basis of material and the information supplied and available with it. Notice u/s 148 was issued in respect of assessment year 2014-2015, after four years from the end of the year consideration. The pre-requisite was to show that there was failure on part of the petitioner assessee in fully and truly disclosing the facts as per the first proviso to section 147 of the Act.
In the facts of the case, there was full and true disclosure in the year under consideration on the part of the assessee. The submission could not be brushed aside lightly that on the said ground alone, the notice issued by the respondent under section 148 of the Act was liable to be set aside.
As could be seen AO had acted to undertake the assessment, which ended up with the assessment order under section 143(3) of the Act, in which the aspect of allowability of interest under section 14A was considered alolngwith the other aspects on the basis of the material and conscious decision was taken reflected in the assessment order. It is on the basis of the very facts that the assessing officer wanted to reopen the concluded assessment proceedings. It amounted to change of opinion.
It is well settled that mere change of opinion could not be a ground for the AO to reopen the concluded assessment. In Commissioner of Income Tax vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] the supreme court observed that concept of change of opinion was an inbuilt test and it did not stand obliterated after substitution of section 147 in the Act by the Direct Tax Laws (Amendment) Act, 1987 and 1989.
AO issued notice u/s148 only to make a roving inquiry into the facts which were already considered and which had gone into his consideration and decision. It appeared that the assessing officer wanted to re-verify the facts, which is not an acceptable ground for exercising powers to reopen the assessment. - Decided in favour of assessee.
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2022 (12) TMI 1281
Reopening of assessment u/s 147 - transactions in question were in the nature of partners’ capital withdrawal - HELD THAT:- In response to the summons under section 131(1A) the petitioner explained that there was a development agreement entered into between M/s. Sarthak Enterprise and M/s. Savy Unispace Pvt. Ltd. M/s. Sarthak Enterprise received certain amountg as advances from M/s. Savy Unispace Pvt. Ltd. which was partially withdrawn by the petitioner who was partner in the firm M/s. Sarthak Enterprise. The petitioner produced copy of the account from M/s. Sarthak Enterprise alongwith copies of acknowledgment of the returns filed by the firm, copies of accounts of M/s. Savy Unispace Pvt. Ltd was also produced and the bank account of M/s. Savy Unispace Pvt. Ltd was also shown duly reflecting the source of M/s. Sarthak Enterprise for made to the petitioner.
The above facts show that the amount was received by the petitioner as partners’ capital. The amount received had a valid source. The petitioner utilised the amount for repayment of loan obtained from Munjal B. Shah. Therefore, the account reflected that there was an element of income in the transaction. The question of escapment of income chargeable to tax did not arise. The assessing officer misdirected himself in invoking powers to reopen the assessment
Undisputedly powers to reopen the assessment were exercised beyond four years from the end of the relevant assessment year. Therefore the First Proviso to section 147 of the Act would require the assessing officer to establish that the assessee had failed to fully and truly disclose all material facts.
As in the communication whereby the reasons recorded were supplied, no satisfaction was recorded by the assessing officer that the income chargeable to tax has escaped assessment. Not only the said requirement was not satisfied, but as seen above, there was no actual escapment of income as well. The formation of opinion by the assessing officer for the purpose of exercise of powers to reopen the assessment could be said to have been vitiated to be rendered bad in law. For all the aforesaid reasons, the petitioner is entitled to succeed.
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2022 (12) TMI 1280
Revision u/s 263 - assessee had claimed exemption u/s.54F of the Act against the long term capital gain arising on sale of shares and the said claim had been accepted by the Assessing Officer - HELD THAT:- We notice that the assessee has specifically state that the sale deed is not registered and the AO was very much aware of it. From the queries and replies mentioned above, we are of the view that the AO has conducted proper enquiries and taken a decision.
Whether the decision taken by the AO can be considered as a plausible view? - As in case SURESHCHANDRA AGARWAL VERSUS INCOME-TAX OFFICER, WARD 20 (3) (3) [2011 (9) TMI 243 - ITAT MUMBAI] Tribunal has expressed the view that the requirement of registration is not there for construing the meaning of “transfer” u/s 2(47)(v) of the Act. Thus the above said decision is contrary to the view expressed by Ld PCIT in the impugned revision order, meaning thereby, the view taken by the AO should be considered as one of the possible views. In the case of Malabar Industrial Company [2000 (2) TMI 10 - SUPREME COURT] has held that, if the AO has taken one of the possible views, then the assessment order cannot be considered to be prejudicial to the interests of revenue merely for the reason that the Ld PCIT has got different view on the very same matter. Hence the impugned revision order is liable to be quashed on this ground alone. Thus we are unable to sustain the impugned revision order passed by Ld PCIT - Decided in favour of assessee.
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2022 (12) TMI 1279
TDS Credit - AO issued notice u/s 139(2) for the reason that credit of TDS has been claimed, but the corresponding receipts/income has been omitted to be offered for taxation - HELD THAT:- If the assessee has offered income to tax in either in the current year or any earlier year and TDS has been deducted on the same in the current year at the time of execution of sale deed, credit for the TDS so deducted should be allowed to the assessee in the current year, subject to the assessee producing the necessary supporting to show that corresponding income has been offered in tax either during the current year or any of the earlier previous years.
The buyer/purchase of property deducted tax only at the time of execution of sale deed, while the corresponding income has been offered to tax by the assessee either during the current year or in any of the prior years by the assessee following the percentage completion method.
Accordingly, in the above facts, the matter is being restored to the file of AO to carry out the necessary verification in respect of income offered to tax and the corresponding TDS for which credit is being claimed and TDS credit may be allowed after carrying out the necessary verification in the year when TDS has been deducted - subject to the assessee producing the correlation that such income has been offered to tax either during the current year or any of the earlier previous years. Appeal of the assessee is allowed for statistical purposes.
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2022 (12) TMI 1278
TDS credit treated as income of the assessee - Nature of income - Jaypee Associates Limited (‘JAL’) liability to withhold taxes in respect of payment made to the Appellant - assessee is the commercial rights holder of Formula One World Championship as exclusively entitled to award event promoters with the right to host, stage and promote Grand Prix on various Circuits worldwide and in that capacity entered into a Race Promotion Contract (RPC) with Jaypee Sports International Ltd. [now merged with Jaiprakash Associates Limited (JAL)] granting right to host the Indian Grand Prix - TDS credit claimed by the assessee is over and above the actual RPC fee paid to the assessee by JAL -TDS u/s 195 - existence of fixed place PE and liability of JAL to deduct tax at source on the RPC fee paid to the assessee - while computing the tax demand AO did not grant credit for TDS by JAL, though, the TDS amounts were reflected in Form 26AS of the assessee - In the final assessment orders the Assessing Officer held that the consideration received by the assessee with the Indian Grand Prix represented its profit with 56% of the said profit being attributable to the PE in India
HELD THAT:- Credit/actual payment of RPC fee to the assessee, JAL had not deducted any amount of tax at source in terms of section 195 of the Act. This is, probably by entertaining a view that RPC fee is not taxable in India. However, on an application filed by the assessee before the AAR, a Ruling was delivered holding that RPC fee is in the nature of royalty in terms of Article 13 of India – UK Tax Treaty. Thus, AAR held that JAL was obliged to deduct tax at source on the RPC fee paid to the assessee. Being aggrieved with the AAR Ruling, both the assessee and JAL filed Writ Application before the Hon’ble Delhi High Court. In their judgment, the Hon’ble Delhi High Court overruled the decision of AAR by holding that RPC fee is not in the nature of royalty. However, the Hon’ble High Court held that the assessee had a fixed placed PE in India; hence, the RPC fee is taxable in India. Thus, the Hon’ble High Court held that the JAL was bound to make appropriate deduction under section 195 of the Act from the RPC fee paid to the assessee. Admittedly, by the time, the decision of the Hon’ble Delhi High Court came, which ultimately got confirmed by Hon’ble Supreme Court, JAL has paid the RPC fee to the assessee without withholding tax under section 195 of the Act. Thus, it is a fact on record that the RPC fee received by the assessee was the full amount without suffering any withholding of tax at source.
This is the reason, why the assessee did not claim credit for TDS in return of income. Subsequently, as a consequence of the judgment of the Hon’ble Delhi High Court, proceedings under section 201 of the Act was initiated against JAL on account of failure to deduct tax at source under section 195 of the Act and basis demand raised under section 201(1) and 201(1A) of the Act, JAL deposited the amount of tax which should have been withheld under section 195 of the Act while paying RPC fee to the assessee. Of course, it is a fact on record that TDS credit of Rs.35.68 crores appears in favour of assessee in Form 26AS. Subsequently, JAL has also issued TDS certificates in Form 16A in favour of the assessee in respect of TDS deposits. However, it is a fact on record that the TDS credit claimed by the assessee is not a part of the income offered to tax in the returns of income. The TDS credit claimed by the assessee is over and above the actual RPC fee paid to the assessee by JAL.
Thus, essentially the TDS credit now claimed by the assessee is in the nature of an additional income over and above the RPC fee the assessee was entitled to receive under the contract. Thus, it is an additional item of income which has not suffered tax at the hands of the assessee. Therefore, the issue arising for consideration is, what is the nature of such income at the hands of the assessee. In this regard, we accept the submission of learned counsel for the assessee that the TDS credit partakes the character of original income, i.e., the RPC fee and has to be taxed in the same manner in which the Assessing Officer taxed the RPC fee.
We direct the AO to factually verify the actual amount of TDS credit by matching figures in Form 26AS and TDS certificates issued in Form 16A and thereafter treat the TDS credit as income of the assessee partaking the character of RPC fee and tax it in the same manner in which RPC fee was brought to tax in the final assessment order. At this stage, we make it clear that the mandate given to the Assessing Officer in this order is only for taxation of the TDS credit and no other item of income. Needless to mention, before deciding the issue, the Assessing Officer must provide a reasonable opportunity of being heard to the assessee.
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2022 (12) TMI 1277
Addition on account of creditors - assessee had failed to establish the genuineness of the creditors - AO made the addition against 13 creditors only by taking view that either they have no response or the notices under section 133(6) were not complied - CIT-A deleted the addition - HELD THAT:- AO has not segregated the parties who have not complied with or the notice of which parties were returned back with the remarks of Postal Authorities “incomplete addresses, or not found”. AO made addition by taking view that assessee has not furnished complete details. We find that the AO added the addition of sundry creditors under section 68 instead of section 69C - As noted above, before the Ld. CIT(A) assessee filed detailed written submission. The submission of assessee also consider by Ld. CIT(A) that assessee have shown WIP of Rs. 9.31 Crore.
CIT(A) further noted that the assessee claimed that all the details of creditors were furnished before assessing officer and that in subsequent year all most of the payments were made, which is not doubted by the assessing officer. We find that once the payment in subsequent assessment year has been accepted in the scrutiny assessment as genuine, the same cannot he left as treated in-genuine. Moreover, the assessee has made TDS against such payment of labour contractors wherever applicable. In view of the aforesaid discussion, we do not find any reason to devoid the findings of Ld. CIT(A). This ground of Revenue’s appeal is dismissed.
Nature of expenses - Loan Processing Charges - CIT-A deleted the addition - HELD THAT:- CIT(A) accepted the contention that such expenses were revenue in nature and allowable under section 37(1) of the Act. Such expenditure was paid through account payee cheque and expenditure were incurred for the purpose of assessees good business. We find that the contention of assessee throughout the proceedings that loan processing charges were borne by assessee to attract the buyers book flats and Assessing Officer has not investigated the fact either bank or financial institutions or from the buyers whether the loan processing charges borne by assessee. The details fact alleged buyers and bank may have been available with the AO. No investigation is made either from the buyer or from other bank or financial institute by assessing officer. AO made addition / disallowance without making thorough investigation of fact and disbelieve the contention of assessee. CIT(A) granted relief on appreciation of fact that loan processing charges were born by assessee-firm to attract the buyers for booking flats of assessee as in the nature of revenue expenditure allowable under section 37(1) of the Act. Such view of Ld. CIT(A) does not warrant any inference.
Appeal of the Revenue is dismissed.
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2022 (12) TMI 1276
Revision u/s 263 by CIT - assessee company has not made any submission to substantiate that it had submitted complete details pertaining to the expenses charged to the P&L account under the head “other advertisement and sales promotion expenses” - HELD THAT:- A perusal of the assessment order clearly shows that the AO during the course of assessment proceedings had called for the details of advertisement and sales promotion expenses.
As held in various decisions that for invoking jurisdiction u/s 263 of the I.T. Act, the twin conditions namely, (a) the order is erroneous and (b) the order is prejudicial to the interest of the Revenue must be satisfied. However, in the instant case, the order may be prejudicial to the interest of the Revenue, but it cannot be said to be erroneous since the AO after conducting necessary inquiries by calling for information and having gone through the details furnished by the assessee has taken a possible view. Merely because the learned PCIT does not agree with the view taken by the Assessing Officer, the order cannot be said to be erroneous or not a possible one. Under these circumstances, since one of the twin conditions i.e. the order is not erroneous is not satisfied, therefore, we hold that the learned PCIT is not justified in invoking jurisdiction u/s 263 - Accordingly, the order of the PCIT passed u/s 263 of the I.T. Act is set aside and the grounds raised by the assessee are allowed.
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2022 (12) TMI 1275
Levy of penalty u/s. 271(1)(c) - transfer pricing adjustment that were initially suggested by TPO but were subsequently enhanced by Ld. CIT(A) - HELD THAT:- We find that the enhancement to transfer pricing adjustments directed by Ld. CIT(A), was challenged by the assessee before the Tribunal. The co-ordinate Bench of Tribunal vide order [2019 (8) TMI 184 - ITAT DELHI] had directed the inclusion/exclusion of certain comparables.
Assessee has also made correspondence with the A.O. wherein assessee has inter alia requested him to carry out the appeal effect consequent to the directions of Tribunal, which is yet to be carried out by the A.O. It is the contention of the assessee that if the directions of the Tribunal for inclusion/exclusion of comparables are carried out by the A.O. then there would remain no basis for making any TPA. The aforesaid factual contention of the Ld.AR has not been controverted by the Revenue. In such a situation, considering the totality of the aforesaid facts we find force in the contentions of the Ld.AR that no adjustment on transfer pricing issue would subsist and therefore there is no question of penalty u/s. 271(1)(c) on such addition. We therefore direct the deletion of penalty u/s. 271(1)(c) - grounds of assessee are allowed.
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2022 (12) TMI 1274
Reopening of assessment u/s 147 - Reason to believe - as argued CIT had granted his approval u/s.151 of the Act in a mechanical manner i.e., without any application of mind - validity of the jurisdiction that was assumed by the A.O for initiating proceedings u/s 147 and framing the consequential assessment - validity of the addition made by the A.O u/s 68 of the Act of the simpliciter cash deposits in the assessee’s bank accounts - sustainability of the addition made by the A.O in the backdrop of the merits of the case - HELD THAT:- We are unable to find favor with the same. On a perusal of the approval/sanction granted by the Pr. CIT, Raipur, find that the latter after duly recording his satisfaction had granted the sanction to the A.O for issuing notice u/s.148 of the Act to the assessee - the challenge thrown by the Ld. AR to the validity of jurisdiction assumed by the A.O on the basis of his multi-facet contentions being grossly misconceived and misplaced cannot be accepted and are accordingly rejected.
Addition of simplicitor cash deposits in his bank accounts as unexplained cash credit u/s.68 - We find substance in the contentions advanced by the Ld. AR. As stated by the Ld. AR, and, rightly so, as the bank account statement/bank passbook cannot be treated as books of accounts of the assessee, hence, no addition in respect of the cash deposits could be validly made u/s.68.
As the bank accounts of the assessee could not have been held to be the “books of account” of the assessee maintained for any business or profession, therefore, no addition u/s.68 of the Act could have been made in respect of the simplictor cash deposits made in the said bank accounts.
Disallowance made u/s.14A - Both the lower authorities had grossly erred in law and the facts of the case in disallowing/sustaining the disallowance of the interest expenditure u/s.14A of the Act. As held in the case of CIT Vs. Sociedade De Fomento Industrial (P). Ltd. [2020 (11) TMI 277 - BOMBAY HIGH COURT] the A.O before rejecting the disallowance offered by the assessee remains under a statutory obligation to give a clear finding with reference to the accounts of the assessee that the other expenditure which were being claimed to have been incurred in respect of the non-exempt income, were in fact related to its exempt income.
As in the case of the present assessee neither of the lower authorities had demonstrated that as to how any part of the interest expenditure as was claimed by the assessee as a deduction, was not relatable to any part of its taxable income - disallowance made by the A.O u/s.14A cannot be sustained and is accordingly vacated.
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