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Income Tax - Case Laws
Showing 441 to 460 of 9304 Records
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2022 (12) TMI 695
Revision u/s 263 - Plant & Machinery which were acquired and installed are eligible for deduction u/s. 32(1)(iia) for additional depreciation as the same being part of new EDC Plant (Ethylene Dichloride Plant) commissioned during the financial year - HELD THAT:- In the present case, AO has issued a detailed notice u/s. 142(1) calling for various details from the assessee and the assessee also had made detailed replies to the above notices with proper evidences and necessary records were being submitted before the AO for verification. AO having carried out such detailed inquiries satisfied with the explanation offered by the assessee, it was not open for the PCIT to thereafter revise the issues on mere apprehensions and surmises. Assessing Officer had made detailed inquiries and after applying his mind and satisfied genuineness of the transactions which is plausible view adopted by the AO.
Thus, we find no error in the order passed by the AO so as to justify initiation of revision proceedings u/s. 263 by the Ld. PCIT. Therefore the Revision order dated 27-03-2015 is hereby quashed and the grounds of appeal raised by the Assessee are hereby allowed.
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2022 (12) TMI 694
Rectification u/s.154 adding prior years income as book profit u/s.115JB - HELD THAT:- As noted that the assessee could prove before us that this income has already been offered in assessment year 2007-08 and this cannot be added again in assessment year 2009-10. We noted that since the assessee has already offered this income in assessment year 2007-08 and issue is settled, only adjustment was made in the books of account of financial year 2008-09 relevant to assessment year 2009-10 and this fact was in the knowledge of AO at the time of making adjustment and even this was explained during the course of rectification proceedings by the assessee.
In view of the above, first of all the assessee has offered this in assessment year 2007-08, it cannot be added again and moreover, this being highly contentious issue and debatable whether this is to be assessed in assessment year 2007- 08 or 2009-10, it cannot be rectified while acting u/s.154 of the Act. Hence, we allow the appeal of assessee.
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2022 (12) TMI 693
Addition u/s 56(2)(viia) - buy back of its own shares by the assessee company as “property” in the hand within the meaning of Section 56(2)(viia) - assessee company has bought back its own shares under buy back scheme and the same has to be extinguished by reducing the paid-up capital of the assessee company - HELD THAT:-Respectfully following the order of M/s Vohra Financial Services Pvt. Ltd. [2018 (7) TMI 64 - ITAT MUMBAI]. We hold that the provisions of section 56(2)(viia) of the Act are applicable only in the cases where the purchased share become property in the hands of the buyer company and, if the shares are of any other company.
In the present case, the assessee purchased its own shares under buyback scheme, and, as per the submissions made by the ld. Counsel at the bar, the same has been extinguished by reducing the paid up capital of the assessee company.
The fact remains that the factum of extinguishment of the purchased shares by reducing the paid up capital of the assessee company has not been examined and verified at the level of the AO. Therefore, the issue is restored to the file of the AO for a limited purpose of examining and verifying the fact of extinguishment of shares by reducing the paid-up capital of the assessee in the accounts of the assessee. AO is directed to delete the addition in case the said fact is found to be correct - Appeal filed by the Revenue is allowed for the limited purpose of verification.
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2022 (12) TMI 692
TDS u/s 194H - Addition on account of discount extended to prepaid distributors - assessee was required to confirm whether the figures have been shown after netting off the discount given to distributers/ franchisees and was further asked to explain whether tax at source in term of provisions of section 194H was deducted from the discount given and, if not, why the same should not be disallowed u/s 40 (a) (ia) - HELD THAT:- We find force in the contention of the Counsel. This Tribunal in A.Y.2009-10 has considered a similar quarrel [2017 (10) TMI 1093 - ITAT DELHI]
As in our considered opinion disallowance made u/s. 40 (a) (ia) is not sustainable and, therefore, the AO is directed to delete the impugned disallowance. This ground is accordingly allowed.
Addition on account of IUC charges paid to foreign/ non-resident telecom operators - HELD THAT:- On finding parity of facts respectfully following the decision of the Coordinate Bench A.Y. 2009-10 [2017 (10) TMI 1093 - ITAT DELHI] we direct the AO to delete the impugned disallowance. This ground is also allowed.
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2022 (12) TMI 691
Addition u/s 43B - non depositing of Service Tax as before the due date of filing of its return of income, as per Annexure-IV of the 3CD Report - The Service Tax collected from the clients but not paid to the Service Tax Deptt. is an income of the assessee irrespective of the fact whether or not the Service Tax is routed through P&L Account of not - HELD THAT:- The amount of service tax has not been routed through P&L account. Hence, ratio of the decision Planet Advertising Pvt. Ltd. [2013 (7) TMI 1205 - ITAT DELHI] that the provisions of section 43B are not applicable to the service tax liability, is applicable. Accordingly, we uphold the order of the ld. CIT (A) - Appeal filed by the Revenue stands dismissed.
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2022 (12) TMI 690
TDS u/s 194C or 194I - Short-deduction of taxes - payments towards maintenance charges - Addition u/s 201(1) / 201(1 A) - assessee-in-default’ - HELD THAT:- Payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges. However, the AO noted that this arrangement has been made to avoid the higher deduction of TDS rate applicable to which we do not agree as when the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct, then, the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194I.
From the material available on record, it is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C - we are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company.
Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of subsections (1) and (1A) of section 201 - respectfully following the case of Nijhawan Travel Service (P) Ltd. [2022 (7) TMI 176 - ITAT DELHI] the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act. Appeals filed by the assessee are allowed.
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2022 (12) TMI 689
LTCG OR STCG - Period of holding of asset - subsequent “cancellation deed” annulled or cancelled revoked the original registered sale deed - Whether cancellation deed were to be treated as a fresh sale/transfer deed by the daughter in favour of the assessee? - AO held that the gain earned by appellant on sale of alleged property is short term capital gain and not long term capital gain since property was reacquired by the appellant on the date when sale deed with daughter was cancelled i.e. 30.07.2015 - HELD THAT:- With respect to the first argument that the sale deed between the assessee and her daughter dated 16-03-2006 was cancelled subsequently after nine years by way of cancellation deed dated 30-07-2015, the Ld. CIT(A) has dealt with this aspect in great detail and has also produced a large number of judicial precedents directly on the subject, which have held that duly registered sale deed cannot be cancelled/annulled/ revoked by way of a subsequent deed. No specific case law or statutory provision has been produced by the counsel for the assessee to controvert the findings of Ld. CIT(A) in the appellate order. There is no prescribed provision of law or any procedure which has been brought to our notice in support of the argument that the subsequent deal has effectively cancelled the original registered sale deed after nine years from when it was entered.
There is no legal capacity for two parties to a transaction entered by way of registered deed to cancel the same except with the permission of the Court as prescribed in section 31 of the Specific Relief Act. Another notable aspect is that on cancellation of the sale deed, the assessee has paid stamp duty. This also clearly indicates of the fact that the subsequent “cancellation” deed is only a fresh transfer by the daughter in favour of the assessee by way of a fresh transfer/sale deed upon the payment of full stamp duty. Accordingly, in our view, the subsequent “cancellation deed” has not annulled or cancelled revoked the original registered sale deed, but it is effectively a fresh transfer/sale deed by the daughter of the assessee in favour of the assessee.
A perusal of the document indicates that they are an identical reproduction of schedule A of the conveyance deed dated to 05-08-1986 and reading of the provisions does not seem to indicate that only a specific part relating only to the superstructure was sought to be transferred by the assessee to her daughter by the deed dated 16-03-2006, while the remaining land was to be retained by the assessee. Here, it would be pertinent to also analyse the submissions filed by the assessee before Ld. CIT(A) wherein the assessee has mentioned that “upon knowledge of this fact, your appellant has approached the Gujarat Housing Board to clarify the ownership of such open land area of 235.94 m² in favour of my daughter”.
Accordingly, the above submission of the assessee clearly indicates that by way of sale deed dated 16-03-2006, all rights in the property was sought to be transferred including that of the open land area and the sale deed was verbatim reproduction of the original conveyance deed dated 05-08-1986 in favour of the assessee. Another notable aspect is that it was only when the Gujarat Housing Board clarified that the correction in respect of open land area can be made in the name of the assessee only and not in the name of the daughter, that the said property was transferred back to the assessee for carrying out the necessary rectification in the property records.
We find no infirmity in the order of Ld. CIT(A) when he has held that the entire transaction, looking into the instant set of facts, would qualify as short-term capital gains in the hands of assessee. Appeal of the assessee is dismissed.
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2022 (12) TMI 688
LTCG - ownership of property - Liability of power of attorney holder (GPA) - income/gain arising on the transfer of the property in the hands of the assessee, acting as a sales facilitator - HELD THAT:- As observed by the Hon’ble Supreme Court in the case of ITO vs. Ch. Attchaiah [1995 (12) TMI 1 - SUPREME COURT] the income has to be assessed in the hands of the right person and the right person alone, and while giving effect to the said scheme of taxation the interest of the revenue cannot be allowed to come in the way. Thus, in the case before us, merely for the reason that the whereabouts of the real owners were either not to the knowledge of the department, or the bare minimum effort were not put in by the A.O to gather the whereabouts of the said persons who were the right persons in whose hands the LTCG on sale of the property was liable to be brought to tax, would by no means justify bringing the said income/gain to tax in the hands of a wrong person i.e the present assessee before us.
We, thus, on the basis of our aforesaid observations are unable to persuade ourselves to subscribe to the view taken by the lower authorities who had brought the income/gain arising on the transfer of the property in question to tax in the hands of the assessee, who had merely facilitated the sale transaction in question in the status as that of a power of attorney holder for and on behalf of the actual owners, viz. S/sh. Tafazzul Hussain and Abbas Hussain. We, thus, in terms of our aforesaid observations setaside the order of the CIT(Appeals) and vacate the addition of long-term capital gain made by the A.O in the hands of the present assessee. Appeal of the assessee is allowed.
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2022 (12) TMI 687
TP Adjustment - determining the Arm’s Length Price (ALP) of the International Transaction pertaining to consideration received for the transfer of business undertaking to AE of the assessee - whether the assessee had transferred its entire business undertaking to its AE or whether the assessee has retained part of assets and liabilities pursuant to Business Transfer Agreement? - contention of the assessee that part of the assets and liabilities were retained and in support of its contention that assessee has placed various documents in the form of Addendum to BTA, etc. to demonstrate that part of the assets only were transferred to its AE - HELD THAT:- We noticed that the contention of the assessee was rejected as neither the Addendum to BTA nor the exhibits forming part of Business Transfer Agreement (BTA) were filed before the TPO. We also noticed that even though the Addendum to BTA and exhibits forming part of BTA were filed before the Ld. DRP the Ld. DRP finds no reason to interfere with the order of the TPO which in our view is not correct. The Addendum to BTA which was placed before us clearly show what all the assets and liabilities to be transferred by the assessee to its AE as per BTA. Since what all the assets and liabilities to be transferred by the assessee are clearly reflected in the Addendum to BTA the TPO/DRP are not justified in assuming that the assessee has transferred the entire assets and liabilities to its AE under BTA as slump sale completely ignoring the evidences on record and making some observations on assumptions. Assessee has clearly demonstrated with evidences that it has transferred only part of the assets to its AE under BTA read with Addendum to BTA and, therefore, there is no reason as to why the Addendum should not be considered and acted upon. Therefore, taking the totality of facts and circumstances into consideration, we direct the TPO to take cognizance of the Addendum the exhibits forming part of BTA and the other evidences and calculate the value of only those assets transferred by the assessee and exclude the assets which were retained, for the purpose of determining the ALP.
TP Adjustment under the head “Income from business or profession” instead of "income from capital gains" - HELD THAT:- We are of the view that the consideration received by the assessee on transfer of assets shall be computed under the head “Income from capital gains” and not under the head “Income from Business”. AO is directed to compute the adjustment under the head “Capital gains” and not under the head “Income from Business”.
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2022 (12) TMI 686
Disallowance u/s 40A(3) read with Rule 6DD - expenses incurred in cash - payment through agent - cash purchase of old vehicles from unknown sellers for business of dealing of old vehicles, equipment’s and machineries - HELD THAT:- It is not disputed that before the ld.CIT(A) the assessee had furnished all evidences to prove genuineness of the transaction by giving all details of the seller of the vehicles, their names, address, identity proof and also furnished their affidavits affirming on oath that they had received cash on selling vehicles to the assessee, besides also stating that they had no bank account.
Assessee had explained that he had purchased these vehicles through an agent, Shri Mohansingh Rawat, who was produced before the AO in remand proceedings, and the AO had examined him, when the said person had confirmed having received cash from the assessee for making payment in cash for purchases made from these very persons. CIT(A) has upheld disallowance for the reason that circumstances in which the payment in cash was made by the assessee did not fall in any of the specified circumstances under Rule 6DD of IT Rules which notifies circumstances which are exempt from rigour of section 40A(3) of the Act.
As far as the assessee’s case falling under section 6DD(g) is concerned, which specifies that payment made in village or town which on the date of payment is not served by any bank to any person ordinarily resides or carries on business there, we find that the ld.CIT(A) has rightly held that such Rule is of no help to the assessee, since there was nothing on record to suggest existence of such circumstances. Even the ld.counsel for the assessee has been unable to demonstrate the same before us.
Applicability of Rule 6DD(k) is concerned, we find that the ld.CIT(A) has clearly erred in holding that the same does not apply to the case of the assessee - In the present case, the Revenue does not dispute the fact that the assessee had made payment in cash not directly to the seller, but through his agent i.e. he had paid cash to the agent, who in turn paid to the seller for procuring vehicles from them.
There is no finding of the Ld.CIT(A) to the effect that the agent was not genuine .Further it is a fact on record that the agent had appeared before the AO and confirmed the said fact to him that he had acted as agent for the assessee in the impugned transactions taking cash from him for making payment further to the sellers. The sellers on affidavits have stated that they did not have any bank account and had therefore insisted on receiving money in cash. It is amply clear that the situation envisaged in clause (k) of Rule 6DD is clearly satisfied in the present case, and therefore, the assessee is entitled to be exempt from the rigours of section 40A(3).
CIT(A), we find has mis-appreciated/misunderstood clause (k) of Rule 6DD of the Rules. The ld.CIT(A) we find has stated inapplicability of clause (k) by stating that it has not been proved beyond doubt that the agent who received cash from the person selling vehicles was required to make payment in cash for goods or services on behalf of such person to third party, which means that the ld.CIT(A) has understood clause (k) to mean that the agent should be receiving cash from the sellers. But this cannot be the interpretation since sellers are not required to make any payment. It is the buyer who is required to make payment. - Decided in favour of assessee.
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2022 (12) TMI 685
Addition u/s 68 - unexplained investment - Addition on protective basis - assessee company invested in the shares / given loans and advances to companies of JP Minda group and in respect of amount so invested addition have been made in the hands of companies of JP Minda group u/s 68 of the Income Tax Act on substantive basis and the addition in the hands of appellant have been made on protective basis - HELD THAT:- For AY 2011-12 and 2012-13 we observe that the Ld. CIT(A) has recorded finding of fact and came to the conclusion that all the investments made by the assessee are genuine. DR could not controvert the above finding recorded by CIT(A) in both the years. We, therefore, decline to interfere with the order of the CIT(A) for both the years and reject the appeals of the Revenue for AY 2011-12 and 2012-13.
AY 2013-14 perusal of the appellate order would reveal that it was contended by the assessee that the substantive addition is the amount credited to the bank account which have been realised by liquidation of investment/loans and advance. The amount so realised by liquidation of investment/loans and advance have been invested in the companies in respect of which addition have been made on protective basis.
CIT(A) agreed with the above contention of the assessee and recorded the finding that the addition to the extent of Rs. 1,35,10,464/- cannot be made as it amounts to double taxation and the assessee deserved to be allowed the benefit of telescoping. Accordingly, the Ld. CIT(A) directed deletion of this addition. We agree with the approach of the Ld. CIT(A).
Addition on account of equity on protective basis, the Ld. CIT(A) examined the issue in the light of the proviso to section 68 inserted by the Finance Act, 2012 w.e.f. 1.4.2013. He observed that the onus which lay upon the assessee has not been discharged as the assessee has neither produced the investors nor arranged to provide the requisite information and documents directly from it. He, therefore, sustained the addition of Rs. 1,44,00,000/- (made by the Ld. AO on protective basis) on substantive basis.
CIT(A) looked into the matter from the angle of the provision of section 56(2)(viib) brought on the statute book by the Finance Act, 2012 w.e.f. 01.04.2013. He observed that the premium charged by the assessee has to be subjected to the provisions of section 56(2)(viib) read with Rule 11UA(1)(c)(b) and it is for the assessee to furnish reliable valuation determining such share premium from a qualified valuer. The same premium are to be brought to tax. The Ld. CIT(A) gave necessary direction to the Ld. AO in this regard. Nothing has been brought on record by the Revenue to enable us to take a different view.
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2022 (12) TMI 684
Schemes of merger and demerger approved by NCLT - AO exceeding his jurisdiction - Deemed dividend addition u/s 2(22)(e) - demerger of the "financial services business" ("FSB") by the Appellant to the resulting company - Proceedings u/s 115O before LD Assessing officer - demerger of the assessee as in accordance with provision of section 2 (19AA) of the ACT - Whether approval of NCLT does not preclude revenue from examining the scheme for tax compliances? - Whether scheme can override the existing provision of the Act? - As per AO demerger of the assessee is not in accordance with provision of section 2 (19AA) of the ACT and therefore there is a distribution by assessee company of its accumulated profits, which entails the release by the company to its shareholders of all or any part of the assets of the company, so it has distributed dividend to its shareholder - HELD THAT:- We do not have any hesitation in upholding the finding of the learned dispute resolution panel that it is the duty of the learned assessing officer to examine the impact of the scheme for tax purposes. It is not the case of the AO and as confirmed by the learned Additional Solicitor General, that there is any attempt by revenue to rewriting the scheme of merger and demerger, but it merely doing an exercise of determining the true and correct taxliability of the assessee under the income tax act.
The order of the National Company Law Tribunal has not examined the tax liability of the assessee pursuant to the above scheme but has merely approved the scheme. The determination of the tax liability on the basis of the scheme of composite merger and demerger approved by the learned national company law tribunal, looking at all the terms and conditions laid down therein, is the statutory duty of the assessing officer. The order of the National Company Law Tribunal does not says that if any tax liability arises in the hands of the assessee that cannot be examined by the assessing officer.
The dispute between assessee and revenue is the claim of the assessee that the learned assessing officer is rewriting the scheme which is already approved by national company law tribunal. We do not agree with the contention of the assessee. No attempt by the learned AO to tinker with the scheme approved by NCLT. He is merely examining that according to the terms and condition of the scheme, the assessee fulfils the conditions of demerger for tax neutrality u/s 2 (19 AA) of the act as well as the chargeability of deemed dividend in the hands of the shareholders of the assessee company.
According to us, he is duty-bound to do so. None of the decisions cited by the learned senior advocate held that the revenue does not have an authority to compute the tax liability of the assessee in pursuance to the scheme of corporate reorganization approved by the National Company Law Tribunal. Further, the object of the representation before the National Company Law Tribunal is only with respect to the scheme, if it is to defraud the revenue. Naturally, any scheme which is framed for with the object of defrauding the revenue cannot be approved by the NCLT.
The circular of Ministry of corporate affairs as well as the instructions of central board of direct taxes are also conveying the same intent that if revenue has any objections to the scheme, it should make available its view before the NCLT.
Both these above instructions and circular does not prevent the assessing officer in applying the provisions of the income tax act to the return of income of the assessee filed in compliance with the scheme approved by National Company Law Tribunal.
The ld. Special Counsel has also placed before us decision of NCLT in Panasonic India Pvt Ltd V Panasonic Life Solutions India P Ltd. [2022 (5) TMI 1490 - NATIONAL COMPANY LAW TRIBUNAL] where in even NCLT has agreed that even if a proposal of a scheme of amalgamation is approved by the Adjudicating Authority, it is clarified that no provision of such a scheme can override the existing provision of the Act. In any case, the issues may come up before the ld. AO at time of the assessment of those companies, and the department can analyze the scheme and is entitled to take any decision as per the provisions of the Income Tax Act on issues including issues in NCLT order. That decision also noted that Transferee Company has deposited anundertaking before court/NCLT also to that effect.
In commentary of Kanga , Palkhivala and Vyas in “the Law and practice of income tax “it has been observed that provisions relating to the taxation of the companies involved in the demerger and their shareholders are applicable only if the demerger fulfils the conditions provided u/s 2 (19 AA) of the act, 1961. Mere sanction of scheme is by High Court of demerger under the companies act 1956 is by itself not sufficient.
Thus, in present case the ld. AO has not exceeded his jurisdiction and has also not ceded his jurisdiction. Accordingly, ground no 3 of the appeal of assessee is dismissed. Accordingly, appeal of assessee is partly allowed.
Computation of deemed dividend - As in view of our finding in appeal of assessee, that there is no deemed dividend chargeable to tax in the impugned case, these grounds also do not survive, hence, are dismissed.
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2022 (12) TMI 683
TP Adjustment - Exclusion of Nile Ltd. as comparable in applying Transaction Net Margin Method (TNMM) - HELD THAT:- Though the Department has impliedly accepted Nile Ltd. as a comparable while computing TNMM, but since the issue of segmental accounts was not raised/examined at any earlier point in time by the Department, it is not possible to ascertain whether the facts in respect of Nile Ltd. as a comparable in the earlier years are same as compared to facts prevailing in the present year. Department has raised the issue of comparability of Nile Ltd. as a comparable with the assessee for the first time during the year under consideration and in any of the earlier years, this issue was not considered or analysed by the Department. Further, though the assessee made factual and legal submissions on this issue before CIT(Appeals) in support of the acceptability of Nile Ltd. as a comparable, however, he also inadvertently omitted to make any observation/given any findings in respect of the same in the appellate order.
In our considered view, in the interests of justice, this ground is being restored to the file of Ld. CIT(Appeals) for adjudication on this aspect in light of the arguments put forward by the counsel for the assessee on this issue on whether it would be appropriate for Nile Ltd. to be excluded as comparable, since as per the assessee it is one of the eminent players in this line of business and exclusion thereof would render the entire exercise of computation of ALP meaningless in the instant set of facts.
On this issue, the file is being restored to Ld. CIT(Appeals) for fresh adjudication after giving due opportunity of hearing to the assessee.
ALP of loan given by the assessee to foreign subsidiary at the rate of interest Swiss Libor + 200 basis points - HELD THAT:- We observe that the assessee has itself charged the lesser interest by 25 basis points (bps) as compared to what was quoted by Citibank. This fact was also observed by Ld. CIT(Appeals) in the appellate order. In view of the above, in the interest of justice, we are restricting the addition to interest rate at Swiss Libor plus 150 basis points, equivalent to the quotation obtained by the assessee from Citibank in respect of the said loan. In the result, ground of the assessee's appeal is partly allowed.
Disallowance being administrative expenses u/s 14A - HELD THAT:- As in the assessee's own case for the immediately preceding assessment year 2009-10, as against disallowance of 0.5% of the average investment, which works out to Rs. 3,22,431/-, in our view, the disallowance may be restricted to a lump-sum disallowance of Rs. 250,000/- towards administrative cost incurred on maintaining investments in tax free funds.
Interest expenditure u/s 36(1)(iii) - AO made disallowance out of interest paid by the assessee on the ground that the assessee had made investment in various subsidiaries on which no interest has been charged - HELD THAT:- We observe that this issue has been decided in favour of the assessee in the assessee's own case before ITAT vide [2019 (3) TMI 2006 - ITAT AHMEDABAD]
Addition on account of royalty payment - disallowance of royalty paid for the usage of trademarks to Pfaulder Inc. USA. - AO held that the assessee has not been able to explain the basis of royalty payment - HELD THAT:- As in the assessee's own case for assessment year 2010-11 [2019 (3) TMI 2006 - ITAT AHMEDABAD] thus following the decision in the assessee's own case, which are concurring with the observations made by Ld. CIT(Appeals) in the appellate order as well, we are hereby dismissing the Department's appeal on this issue.
Disallowance of education expense - HELD THAT:- We observe that in the case of Mallige Medical Centre (P.) Ltd [2015 (4) TMI 547 - KARNATAKA HIGH COURT] the High Court held that where daughter of managing director of assessee-company which was running a hospital was sent abroad for acquiring specialised knowledge in medical field and after acquiring same, she was working with assessee, expenses incurred towards daughter's education were to be allowed under section 37(1) - In the case of Kostub Investment Ltd [2014 (2) TMI 1072 - DELHI HIGH COURT], the High Court held that where expenditure on higher education of employee had an intimate and direct connection with assessee's business, it would be appropriately deductible, even though such an employee was son of a Director.
In the case of Aswathanarayana & Eswara [2018 (9) TMI 967 - MADRAS HIGH COURT] the High Court held that expenditure by firm on partner's foreign education was to be allowed when post graduate course underwent was directly related to profession carried on by firm. CIT(Appeals) has not erred in facts and in law in deleting the additions made by the AO, considering the facts of the present case.
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2022 (12) TMI 682
Revision u/s 263 by CIT - Unexplained Cash deposited in the bank account - HELD THAT:- It is not in dispute that prior to receiving the notice issued u/s. 148 the assessee had filed return of income declaring of Rs.159880/-. Only after receiving the notice u/s. 148 the assessee revised the return claiming that his income is subject to presumptive tax u/s. 44AD of the Act and treating the cash deposit as his business receipt he returned profit @ 8% u/s. 44AD of the Act.
This action of the assessee was accepted by the AO without realising that provisions of section 44AD of the Act do not apply to a commission agent thereby making the assessment order erroneous in law and because of this error the AO did not examine the cash deposit making the assessment order pre judicial to the interest of the revenue.
On finding these errors the CIT rightly assumed the jurisdiction cast upon him by the provisions of section 263, we do not find any error or infirmity in the findings of the Pr. CIT. The appeal of the assessee is accordingly dismissed.
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2022 (12) TMI 681
Penalty u/s 271F - belated filing of income tax return u/s 139(4) - HELD THAT:- From the facts noted the assessee’s total income for the relevant Assessment Years was above the taxable limit in spite of the fact that he did not file his return of income within due date as specified under section 139(1) of the Act in any of the above assessment year. Therefore, he is liable for penalty under section 271F of the Act. The CIT(A) is justified in confirming the penalty as per section 271F of the Act. Assessee will not get the immunity as per section 273B of the Act. Therefore, we dismiss the appeals of the assessee.
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2022 (12) TMI 680
Penalty u/s 271(1)(c) - assessee failed to produce clinching evidence to justify claim of various expenditure - HELD THAT:- As observed, the assessee contested the additions/disallowance made by the Assessing Officer by filing an appeal before Commissioner (Appeals). However, the appeal was ultimately withdrawn. Essentially, assessee accepted the additions / disallowances made by the AO. Neither before AO nor before Commissioner (Appeals) the assessee was able to furnish any reasonable explanation to demonstrate that there is no deliberate attempt to either conceal the income or furnish inaccurate particulars of income. The aforesaid factual position remains unaltered before us.
Keeping in view the concurrent finding of the Departmental Authorities in the assessment and penalty orders, which the assessee has failed to rebut by leading proper evidence before us, we are inclined to uphold the decision of learned Commissioner (Appeals). Grounds raised are dismissed.
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2022 (12) TMI 679
Disallowance of interest u/s. 36(i)(iii) - amount of interest on investment made in the assets not used for the business purpose is not allowable - AO estimated interest @12% p.a. attributable to such investment in land - AO held that the aforesaid amount of interest has been incurred towards purchase of capital asset being advance towards land and therefore the assessee is not entitled to deduction of such interest expenditure u/s 36(1)(iii) - HELD THAT:- It is the case of the Revenue that interest expenditure has been incurred on investment made in assets and is in the nature of capital expenditure wrongly claimed as Revenue expenditure by the assessee. The assessee is, on the other hand, claims that (a) the interest free funds to the extent of Rs.5,52,50,000/- was available to meet the advance towards land, (b) the ITAT in Assessment Year 2007-08 has observed that Assessee is engaged in real estate activity as one of its business activity.
We notice that the CIT(A) took note of the decision of the Tribunal rendered in Assessment Year 2007-08 and observed that the assessee is indeed engaged in the business of real estate and not merely in coal trading. As a consequence, it was observed that the interest expenses incurred on acquisition of real estate has to be treated as ordinary business activity and therefore the interest incurred on acquisition of real estate partakes the character of Revenue expenses and thus cannot be disallowed.
We find that the CIT(A) has taken note of the object clause in the MOA as well as past and present state of affairs to come to a conclusion that acquisition of land is ordinary business activity in the business of real estate and therefore attendant interest expenses cannot be disallowed by treating it for non business purposes with reference to Section 36(1)(iii) - We do not see any error committed by the CIT(A) for returning such finding. Hence, we decline to interfere.
Addition u/s 2(22)(e) - deemed dividend of income - CIT-A restricted the addition to the extent of ‘General Reserve’ after excluding the ‘Security Premium Reserve’ which has been regarded to be outside the ambit of expression ‘accumulated profits’ under Section 2(22)(e) - HELD THAT:- CIT(A) in essence, held that the security premium reserve cannot be regarded as part of accumulated profits u/s 2(22)(e) and when such security premium is excluded, the General Reserve available for the purposes of addition under Section 2(22)(e) only and thus sustained the addition to the extent accumulated profit excluding share premium reserve. We find the approach of the CIT(A) is in consonance with judicial precedent available in this regard as cited by the CIT(A). We thus see no infirmity in the action of the CIT(A). Hence, we decline to interfere.
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2022 (12) TMI 678
Revision u//s 263 by CIT - writing off of inventory in the form of non-convertible debentures - net realisable value of the debentures as on 31.03.2017 were ascertained as NIL and the un-recoupable cost of inventory i.e. the balance amount of cost of debentures was written off in the profit & loss account - As per CIT debentures were still showing in the DEMAT statement of the assessee, such write off was not correct and ld. AO failed to consider these facts and did not conduct any enquiries or verifications - HELD THAT:- Details were placed before ld. AO who has thoroughly examined and after being satisfied that since M/s. Amtek Auto Ltd. has gone into liquidation and was unable to pay the balance sum of Rs. 4,54,00,000/- to the assessee, accepted the assessee’s claim of write off of the said amount. It is also worth noting that Note no. 2.25 of the audited balance sheet states the said transaction and the writing off of Rs. 4.54 Cr. in the statement of profit & loss account which was held as stock-in-trade by the assessee.
During the course of assessment proceedings AO asked the assessee to specifically explain the basis of valuation of the debentures of M/s. Amtek Auto Ltd. to which the company replied on 20.12.2019 furnishing the complete details. Ld. AO after being satisfied with the details and explanations passed the order u/s 143 of the Act drawing no adverse inference in relation to claim of valuation loss arising on writing off of the debentures held as stock-in-trade.
We find that the transaction referred in the show cause notice has been examined by ld. AO and one of the view permissible under the law has been taken. Even otherwise it has been stated before the lower authorities and before us that in case the assessee will be able to recover the alleged sum, the same will be offered to tax in the year when it will be received - we find that the assessment order dated 27.12.2019 is neither erroneous nor prejudicial to the interests of the Revenue and thus, ld. PCIT erred in invoking jurisdiction u/s 263 of the Act and therefore, the same deserves to be quashed. Appeal of assessee allowed.
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2022 (12) TMI 677
Revision u/s 263 by CIT - Taxation of income from shareholders account - main plea of the assessee is that only for presentation purposes, the assessee prepares ‘policyholders account’ and ‘shareholders account’ and that shareholders account cannot be treated as other regular business carried out by the assessee so as to make it liable for taxation @30% - whether the income from shareholders account is to be treated as part of life insurance business and get taxed @12.5% prescribed u/s.115B of the Act or not? - HELD THAT:- This issue is no longer res integra in view of the decision of ICICI Prudential Insurance Co. Ltd [2015 (7) TMI 1259 - BOMBAY HIGH COURT]
Also we find that the AO had made adequate enquiries in this regard during the course of assessment proceedings in response to the notice issued u/s.142(1) - assessee had indeed made detailed submissions. Hence, the ld. PCIT seeking to invoke revision jurisdiction u/s.263 of the Act on the ground that no enquiries were made by the ld. AO by applying Explanation 2 to Section 263 of the Act is grossly incorrect and is hereby quashed. In any case, the issue sought to be revised by the ld. PCIT u/s.263 of the Act is also covered in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court on merits. Appeal of the assessee is allowed.
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2022 (12) TMI 676
Disallowance of bad debts written off - Addition of bad debt written off under the head other expenses on the ground that assessee does not fulfill the conditions prescribed u/s.36(2) - HELD THAT:- On a pointed query raised by the Bench as to whether the expenditure was incurred during the impugned financial year, the ld.cousnel for the assessee submitted that these were incurred in the past years and does not relate to this year. To another query raised by the Bench as to what is the date of the Arbitration Award, the ld.counsel for the assessee submitted that the arbitrator gave his award on 18.05.2016. Thus a perusal of the award given by the arbitrator shows that the arbitrator gave his award on 18.05.2015, which falls under FY 2015-16 i.e relevant to AY 2016-17. We, therefore, do not agree with the argument of the ld. counsel for the assessee that the same should have been allowed as business loss during this year. In our opinion, when the assessee is not entitled to claim the same as bad debt, the assessee cannot claim the same as business loss as per his sweet will. The law is well settled on this aspect and business loss, if any, can be claimed by the assessee in the year of incurring of the expenditure and not as per his sweet will. In this view of the matter, the order of the ld.CIT(A) sustaining the addition of Rs.29,30,000/- is upheld and the grounds raised by the assessee on this issue are dismissed.
Direction of the ld.CIT(A) to bring to tax the amount received by the assessee on the basis of the award by the Arbitration Court - As we find first of all the same is not emanating from the assessment order. Further, the ld. DR could not bring on record any evidence to show that the ld.CIT(A) has given any enhancement notice, which is required as per law to be issued to the assessee before making an enhancement. Thirdly, the amount was already shown by the assessee in the balance sheet as receivable from Mr.Prabir Ghose and therefore, once the arbitrator gives the award for refund the same cannot be brought to tax in the hands of the assessee. We, therefore, set aside the order of the ld.CIT(A) on this issue and the grounds raised by the assessee on the second issue are allowed.
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