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Income Tax - Case Laws
Showing 481 to 500 of 9304 Records
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2022 (12) TMI 638
Deduction u/s 80HHC - interest paid on security direct nexus with the interest received by the appellant - Whether CIT(A) has erred in not considering deduction of 90% of interest while working out deduction u/s 80HHC? - HELD THAT:- We find that now it is a settled proposition as held in the case of Vikas Kalra [2012 (2) TMI 99 - SUPREME COURT] as well as in the case of ACG Associated Capsules Pvt. Ltd [2012 (2) TMI 101 - SUPREME COURT] that 90% of net interest [interest paid (minus) interest received] has to be reduced for the purpose of calculation of deduction u/s 80HHC of the Act. CIT(A) failed to take note of these judgments and emphasised more on the issue of nexus which no longer survives after the verdict of the Hon’ble Apex Court.
We find merit in this contention of assessee and direct AO to reduce 90% of the net interest received from the net profit for the purpose of calculating deduction u/s 80HHC of the Act. In the result, Ground Nos. 1 & 2 of the assessee are allowed.
Correctness of interest charged u/s 234B - Assumption of date of filing of return - assessee has contended that the regular assessment u/s 143(3) of the Act was completed on 29/12/2006 and, therefore, the cut-off date for charging the interest would be December, 2006, whereas the CIT(A) has confirmed the action of the AO charging the interest up to March, 2007 - HELD THAT:- We find that the ld. CIT(A) has referred to Section 234B(3) of the Act, which relates to the order of re-assessment or re-computation u/s 147 or Section 153A of the Act. However, in the instant case, the order of the ld. Assessing Officer is not framed u/s 147 or 153A of the Act. On the other hand, Section 234B(4) of the Act refers to the order u/s 154/155/250/254/260/262/263/264 of the Act and in the case of the assessee, the assessment order has been framed u/s 143(3)/251/254/263/254 of the Act. So, prima facie there remains no dispute to the fact that that in the case of the assessee interest should have been charged as per the provisions of Section 234B(4) of the Act i.e., up to December, 2006. We, therefore, fail to find any merit in the findings of the ld. CIT(A) and the same is reversed and Ground Nos. 3, 4 & 5, raised by the assessee are allowed.
Calculation of interest u/s 234B - Contention made by the ld. Counsel for the assessee has substantial merit because in the assessment order framed on 21/12/2009, interest u/s 234B of the Act has been charged at Rs.12,92,191/- where as in the order dt. 23/12/2010, interest of Rs.19,12,454/- has been charged
So far as the difference in the total income assessed is concerned, there is only an increase of Rs.45,393/-, in the order dt. 23/12/2010 as against the order dt. 21/12/2009. There is apparently a calculation error/mistake which needs necessary rectification. Therefore, we restore the issues raised in Ground Nos. 6 & 7 to the ld. Assessing Officer for necessary verification. Thus, both these grounds are allowed for statistical purposes.
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2022 (12) TMI 637
Denial of deduction u/s 80P(2)(a)(i) - interest income received from investments/FDRs in other Co-operative societies and nationalized banks - HELD THAT:- The claim of the assessee is that the deduction was claimed u/s 80P(2)(a)(i) and the same ought to have been allowed. Thus find that similar issue has been considered by the Pune Tribunal in Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. [2020 (9) TMI 964 - ITAT PUNE]. This overturn the impugned order to the extent of denial of deduction u/s 80P in respect of interest income.
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2022 (12) TMI 636
Disallowance u/s 40(a)(ia) for non-deduction of tax at source (TDS) - assessee in default - Assessee has paid interest u/s 201(1A) for non-deduction/short deduction of tax - HELD THAT:- Assessee enclosed Form No. 26A namely Form for furnishing Accountant certificate under the First Proviso to sub- Section 1 of Section 201 of the Act, wherein it is certified that interest under Section 201(1a) of Rs. 4,030/- was paid by the assessee for non-deduction or short deduction of tax vide Bank Challan No. 83 dated 22.12.2018. Further as held by the Ld. CIT(A) there is no signature by Chartered Accountant, but Director of the assessee company has signed, but in Page No. 17 the assessee produced the Interest Challan payment of Rs. 4,030/- remitted into Central Bank of India more particularly under the caption Minor Head 200 – TDS/TCS payable by taxpayer.
Thus, the assessee having paid the interest of Rs. 4,030/- the assessee cannot be construed as an assessee in default. Therefore, the provision of Section 40(a)(ia) cannot be applied in assessee’s case. Thus, the Ld. Assessing Officer and the CIT(A) has not considered the provision of Section 201(1) of the Act which is not justifiable in law. Therefore, the addition made under Section 40(a)(ia) by the Assessing Officer is hereby deleted. Appeal filed by the assessee is allowed.
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2022 (12) TMI 635
Exemption u/s 11 - grant of registration u/s 12AA rejected - charitable activity or not - medical aid / facilities to the poor / needy persons - running the activities on commercial basis - assessee is charging on the basis of commercial rates from the patients, either outdoor/indoor and the assessee has failed to demonstrate that the charges / fee charged by it were on a reasonable markup on the cost - DR submitted that the name of the assessee is different from ROC record and PAN to Form 10A/10G and that there was an ambiguity with regard to the name of assessee and its directors and it is evident from the declarations filed by the assessee in Form 11(5) and 13(1) DR of the Income Tax Act - HELD THAT:- We find that the CIT(E) in the present case, after analyzing the said documents had recorded the finding mentioned in the impugned order whereby he held that the assessee was running the activities on commercial basis and that the activities of assessee are not of charitable nature.
Approach of the CIT(E) cannot be faulted merely because he had examined the data supplied by the assessee at the time of making the application. Assessee had failed to bring on record any comparative chart of diagnostic charges / procedure charges / test charges prior to the conversion of the assessee into section 8 company and thereafter to show that there was a major reduction in fee / charges charged by the assessee for the above said purposes. As nothing contrary had been brought to the notice of CIT(E), hence in our view, assessee is not entitled for registration or approval under section 10(23C) / 12A.
The present case is a case of conversion of a profit making company into a section 8 Company. In fact, the assessee was earning huge profit as a private company, which was later on converted into section 8 company w.e.f. 03.08.2018. As mentioned assessee was having surplus of Rs.15,96,02,014/- in the financial year 2018-19 and Rs.34,82,52,005/- for financial year 2019-20, which only shows that the assessee has been charging cost plus unreasonable mark up on its services. If we accept the argument of the learned counsel for the assessee that only the subsequent document should be taken into consideration, despite the fact that the assessee, being a profit earning private company prior thereto, then it will be a handy tool for an otherwise profit-making company to conveniently convert into a so-called charitable company and avoid payment of due taxes to a welfare state.
In the present case, neither the activities nor the management nor the place of services nor the charges for treatment had changed in any manner by conversion and only the name of the assessee had changed albeit the assessee is claiming registration / approval under the Act. Earlier the assessee was known as “Fernandez Hospital Private Limited” and presently, it is known as “Fernandez Foundation”. Further, we are in agreement with the argument of ld.DR that the assessee can do charity by either bringing down its profit by providing services at reasonable rate or by utilizing the surplus for helping medical aid / facilities to the poor / needy persons at free of cost.
Nothing of this nature, if at all done by the assessee, has been brought to our notice. The assessee had only provided the treatment to 65 indoor patients for an amount of Rs.84,48,709/- and 5,569 outdoor patients for Rs.39,65,102/- on concessional rates and the said amount is a meagre amount when compared to its total revenue collection of the assessee i.e., Rs.141.90 crore for the period under consideration. By that standard alone the activities of the assessee cannot be said to be charitable activities.
Hon'ble Supreme Court Ahmedabad Urban Development Authorit [2022 (10) TMI 948 - SUPREME COURT] mandates that all private hospitals that had acquired land at cheaper rates must reserve 10% of their in-patient department capacity and 25% OPD for free treatment of poor patients. Though the said decision was rendered in the context of cheap allotment of land but nonetheless, we are of the view that some percentage of free treatment or treatment at concessional rate should be provided by the assessee. However, in the instant case, the free treatment / concessional rate was less than 1% of the revenue of the assessee.
In our view, ld.CIT(E) was correct in holding that the assessee is charging on the basis of commercial rates from the patients, either outdoor/indoor and the assessee has failed to demonstrate that the charges / fee charged by it were on a reasonable markup on the cost. We do not find any error in the decision of ld.CIT(E). Accordingly, the order of ld.CIT(E) is upheld and the appeal of the assessee is dismissed.
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2022 (12) TMI 634
Addition of the net benefit accruing to the assessee on account of CCM - shifting of profit to loss - Client Code Modification (CCM) - Modified Client codes with a malafide intention - contrived loss/profit to evade tax - information from search conducted on the broker of the assessee, ACFSL, that the assessee had benefited by indulging in client code manipulation through his broker, and had shifted out of profit and shifted in loss resulting in net reduction in income due to CCM - HELD THAT:- CIT(A) noted the fact that the AO had given specific transactions where profit had been shifted by CCM and the assessee had adduced no evidence to show that he had not benefited from the same. He also noted that on becoming aware of CCM by broker, the assessee did not take any corrective action by objecting to the Broker. CIT(A) also noted that the director of the Broker Company ACFSL had stated that CCM was misused by his clients. Moreover, agree with the CIT(A) that the assessee sought to justify the genuineness of the transactions by giving only general reply that CCM was carried out by broker to correct genuine punching errors. No evidence has been filed by the assessee either before the Revenue authorities or even before me to substantiate this contention that CCM was done to rectify punching errors.
We agree with the Ld.CIT(A) that the assessee was unable to establish the genuineness of its transactions in the light of adversarial material available with the Revenue showing that the losses returned were manipulated by CCM.
It is settled principle of law that concurrent findings of the authorities cannot be interfered with without sufficient and just reason or any material irregularities in the finding being pointed out by other side. There is nothing more before me to depart from the view taken by the Revenue authorities on this issue, more so, in the absence of any assistance rendered by the assessee in regard to the issue involved in the ground raised.
Speculation loss - reason for addition is non-furnishing of supporting details and evidences to demonstrate speculation loss - HELD THAT:- While upholding the order of the AO, CIT(A) has recorded a finding that during the assessment proceedings and during the appellate proceedings, the assessee did not file any details to support his claim despite giving opportunities. The argument of the assessee that the AO should get details from the broker and accordingly verify the claim of the assessee was untenable, and therefore, the AO was justified in disallowing the impugned speculation loss.
Before us there is no contest on behalf of the assessee against the impugned orders of the Revenue authorities. Therefore, in the absence of any explanation or material evidence to support the case of the assessee, we are not inclined to disturb the concurrent finding of the Revenue authorities on this issue also. Even otherwise also, after going through orders of both the authorities, we find no infirmity in the order of the ld.CIT(A) so as to demand interference. Ground of appeal No.3 of the assessee is dismissed.
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2022 (12) TMI 633
Addition u/s 68 - identity of the creditor, genuineness of the transaction and creditworthiness of the creditor not proved - HELD THAT:- Addition made by AO invoking Section 68 does not hold it good since the assessee has filed the confirmation letter from the lender, Bank statement from the assessee, Income Tax Return and statement of total income of the lender namely Mr. Rajesh Vaswani proprietor of M/s. Sunderdeep Builders. Thus the assessee has discharged its initial onus namely identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Further AO has disbelieved Rs. 5 Crores received from creditor and not doubted about the Rs. 30 Crores received from the same lender. Assessing Officer has not doubted the interest payment of Rs. 1,83,79,553/- as against the above loan, with appropriate TDS made by the Assessee. Therefore the addition made by the AO u/s. 68 of the Act is not sustainable in law.
We have no hesitation in confirming the order of the Ld. CIT(A), who deleted the addition made by the Assessing Officer u/s. 68 - Decided in favour of assessee.
Assumption of jurisdiction under 153C - what is the relevant date from which the amended provisions of section 153C would be applicable? - HELD THAT:- No doubt, the amended provisions has been expressly brought into force with effect from 01.06.2015. However the search action has been conducted in this case on 10.03.2015 which is prior to 01.06.2015. Hence the provisions of law, as existing on the date of search namely 10.03.2015 in this case is to be followed. Therefore the satisfaction note recorded by the Assessing Officer on 17.11.2017 (which is extracted in Para 2.1 of this order), invoking the amended provisions of section 153C namely "various documents were seized which "relates to" and the information contained therein "pertains" to the assessee is not correct in law.
Even as per the pre-amended provisions of Section 153C, AO has to record satisfaction to the effect that seized material "belongs" or "belongs to" other person. In this case, the A.O. has not put on record that any material seized during the course of search does belong to the assessee. However seized materials related to other third party. Therefore in our considered view, the invocation of proceedings u/s. 153C is against the provisions of law.
As relying on ANILKUMAR GOPIKISHAN AGRAWAL case [2019 (6) TMI 746 - GUJARAT HIGH COURT]the grounds raised by the assessee in the cross objection is allowed and assessment order is hereby quashed.
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2022 (12) TMI 632
Non-grant of TDS credit - assessee is an individual having residential status of “Not Ordinarily Resident” - HELD THAT:- TDS credit for the aforesaid amounts was not granted to the assessee on the allegation that the credits claimed in the return of income are not reflected in Form 26AS statement. However, on a perusal of Form 26AS statement submitted before us, it is observed, the amount being the TDS deducted by Employees Provident Fund organization is reflected in From 26AS.
Similarly, TDS deducted by the employer M/s. Yaskawa India Pvt. Ltd. is also reflected in Form 26AS with TAN number. Thus, the allegation of the CPC that these two amounts are not reflected in Form 26AS, prima facie, appears to be perfunctory. In any case of the matter, since, tax has been deducted at source on the income of the assessee, full credit of such TDS has to be given to the assessee in spite of the fact that the assessee might have committed some technical/typographical error in the return of income, as alleged by Commissioner (Appeals). This is for the reason that the assessee cannot be deprived of getting the benefit of tax genuinely deducted on his behalf.
We restore the issue to the Assessing Officer for the limited purpose of factually verifying assessee’s claim qua the amounts reflected in Form 26AS and allow credit for the TDS amount reflected therein. Grounds are allowed for statistical purposes.
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2022 (12) TMI 631
Gain on sale of land - nature of land sold - urban land or agricultural land - profit on sale of land earned by the assessee at Mannur near Sriperumbudur holding the same as taxable income as against claimed by the assessee as agricultural land exempt from capital gains tax - HELD THAT:- From the revenue records i.e., patta, chitta and adangal papers issued by Revenue Department of TamilNadu that use of the land owned by assessee is for the purpose of agricultural operation. Assessee has also filed the financials of financial year 2008-09, 2009-10 & 2010-11 relevant to assessment years 2009-10, 2010-11 & 2011-12 which indicates that assessee has offered agricultural income and disclosed in the financials and accepted by the Income-tax Department in these years.
The contest of the Revenue that this agricultural income are not declared in the returns of income is totally contrary on facts that these incomes are declared in the financials, which has been produced before us and verified by us, which are not contradicted by ld. CIT-DR. It means that the assessee has declared agricultural income varying from Rs.25,000/- to Rs.1,80,000/- and as per revenue records, the assessee has grown crops in the land and earned some agricultural income. The assessee is able to prove that the land is kept for agricultural activity and it has actually carried out agricultural activity, as the evident shows. In view of these facts and circumstances, we are of the view that the CIT(A) has rightly treated this land as agricultural land and held that the same is not assessable to capital gains. We affirm the findings of CIT(A) on this issue and Revenue’s appeal is dismissed.
Addition u/s.43B towards service tax - assessee before us submitted that the matter can go back to the file of the AO for verification, whether the assessee has paid this amount or not within the due date, as prescribed under Service Tax Act - HELD THAT:- CIT-DR has not objected. We also noted that the CIT(A) has confirmed the disallowance only on the absence of any evidence not produced by assessee in regard to payment of service tax within the due date. Since, the assessee is now requesting for producing evidence, we are setting aside this issue to the file of the AO, who will verify the payment of taxes within the due date and accordingly, decide the claim. This issue of assessee’s cross objection is allowed for statistical purposes.
Disallowance of diminution in the value of DFL shares and claiming the same as loss - HELD THAT:- The ld.counsel stated that in the initial years the DFL performed extremely well and the assessee company received substantial dividend but subsequently due to severe competition and stringent RBI regulations particularly on public deposit and NPA norms, the business of the company did not do well and hence, there is a fall in the share market. Assessee could not produce any evidence before us that how and to what extent the shares fall to Rs.2 and what is the basis for the same. In the absence of any evidence, we also are of the view that the disallowance made by the AO and confirmed by the CIT(A) is to be confirmed. This issue of assessee’s cross objection is dismissed.
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2022 (12) TMI 630
Penalty u/s 271(1)(c) - interest income earned during the year on fixed deposits and savings bank accounts were not offered to tax in the return of income filed for the assessment year under dispute - HELD THAT:- While explaining the reason for not offering the interest income to tax in the return of income, the assessee had explained before the departmental authorities that the TDS figure and the corresponding income relating to second, third and fourth quarter of the relevant financial year were made available on the 26AS site only in September, 2017 by ICICI Bank. The aforesaid explanation of the assessee appears to be believable in view of the certificate issued by the concerned bank on 28th April, 2018.
Therefore,there was reasonable cause in terms with section 274 of the Act in not offering the interest income to tax in the return of income. Departmental authorities have failed to consider the explanation of the assessee in proper perspective. In any case of the matter, the assessee has offered the entire interest income to tax whether in the return of income or in course of assessment proceeding.
That being the factual position emerging on record, the assessee should not be visited with penalty under section 271(1)(c) of the Act. Accordingly, we delete the penalty imposed. Assessee appeal is allowed.
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2022 (12) TMI 629
Addition of interest on interest free advances given by the assessee - CIT-A deleted the addition - AR submitted that the assessee has interest free funds available at its disposal and hence, the benefit of availability of such interest fee funds should be allowed in computing the disallowance of interest - HELD THAT:- The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. [2019 (1) TMI 757 - SUPREME COURT] has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders’ funds, presumption gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds.
It is clear that where interest free funds are available with the assessee and there is net availability of funds, a presumption has to be drawn that the advance made for non-business purposes were advanced by such interest free funds available at the disposal of the assessee. We, therefore, setaside the impugned order and remit the matter to the file of the AO for examining the availability of interest free funds and then compute the disallowance of interest u/s.36(1)(iii) accordingly. Needless to say, the assessee will be allowed reasonable opportunity of hearing. Appeal is allowed for statistical purposes.
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2022 (12) TMI 628
Addition u/s 56(2)(vii)(b) - AO referred the valuation of property to Valuation Cell of the Income Tax Department and the DVO has determined value of property - difference between guideline value of the property and consideration paid for purchase of said property, then, said difference should be treated as income of the assessee in terms of s.56(2)(vii)(b) - difference between the DVO value and consideration shown in the registered document, at the rate of 1/5th on each co-owner name and made addition - HELD THAT:- There is no dispute with regard to the fact that there is a difference between consideration paid for purchase of property as per registered document and guideline value of the property fixed by the authorities for payment of stamp duty. In dispute that the AO has referred valuation of the property to the DVO and the DVO has determined value of the property.
Therefore, difference between the DVO value and consideration paid for purchase of property should be assessed as income of the purchasers in terms of s 56(2)(vii)(b) - AO after considering relevant facts has rightly made addition towards differential consideration u/s 56(2)(vii)(b) - CIT(A) has rightly appreciated the facts and sustained the additions made by the AO and thus, we are inclined to uphold the findings of the CIT(A) and dismiss the appeals filed by all the assessees.
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2022 (12) TMI 627
Income accrued in India - income from rented properties held by the appellant in Australia and UK - right of the resident country to tax its residents - AO referred to the Notification No. 91/2008 dated 28.08.2008 and construed the words “may be taxed” as “shall be taxed” - DTAA with UK - assessee is a tax resident of India received rental income from the properties outside India held by her in England and Australia and declared the rental income received by her in her return of income filed in Australia and United Kingdom - HELD THAT:- We find that in the absence of an express provision, the right of the resident country to tax its residents cannot be taken away under the DTAA. Therefore, the expression “may be taxed” cannot be construed to mean “shall be taxable only in the resident state”, unless it is expressly stated. Provisions of Section 90(1)(a)(i) is clearly applicable to the facts of the case. Appeals of the assessee are allowed.
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2022 (12) TMI 626
TP Adjustment - MAM selection - HELD THAT:- As we direct the TPO to apply CUP as the MAM and recompute the ALP after giving the assessee a reasonable opportunity of being heard.
Disallowance of provision for warranty - HELD THAT:- We respectfully follow the decisions of the Co-ordinate Bench [2020 (3) TMI 471 - ITAT BANGALORE] and hold that the provision for warranty is an allowable expenditure.
MAT computation u/s 115JB - HELD THAT:- Addition of provision for warranty to the book profits u/s 115JB is incidental. In view of the decision on the allowability of provision for warranty, this ground which is incidental, does not warrant any separate adjudication and hence dismissed.
Disallowance u/s 37(1) of advertisement and business promotion expenses - HELD THAT:- For the purpose of an expenditure to be claimed u/s 37(1), the expenses should not be capital in nature and should have been incurred wholly and exclusively for the purpose of business. Assessee has submitted various details, including the details of tax deducted at source, bank statement, etc., to substantiate that the expenditure towards advertisement expenditure is actually incurred and that the payments are made to the vendor, Mudhranna Creations. The fact that the vendor has wound up the operations is supported by the report from MCA website and that can be inferred as a reason for non-response from the vendor for the notice under section 133(6) which cannot be the only reason for disallowance, when other documents submitted by the assessee evidences the genuineness of the expenditure. We are, therefore, of the considered view that no disallowance is warranted for the advertisement expenditure incurred by the assessee, which is otherwise substantiated based on the various details submitted. This issue is allowed in favour of the assessee.
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2022 (12) TMI 587
Disallowance on account of foreign exchange fluctuation loss (mark to market) wherein the loss being provisions for future is notional in nature - Whether Tribunal in deleting the disallowance/addition made by the AO was perverse having regard to the evidence and materials on record ? - HELD THAT:- It is not disputed by the revenue that questions involved in this case were considered by this Court in the case of Principal Commissioner of Income Tax-1, Kolkata –vs.- M/s. Pricewaterhouse Coopers Pvt. Ltd [2021 (12) TMI 1400 - CALCUTTA HIGH COURT] as held that identical issue was considered in the case of Principal Commissioner of Income Tax vs. Suzlon Energy Ltd.[2018 (2) TMI 1789 - GUJARAT HIGH COURT] and the Court held that the decision of the Tribunal in so far as deleting the disallowance being notional loss on outstanding foreign derivative contracts was approved by holding that the decision is in-conformity with the decision of the Hon’ble Supreme Court in Woodward Governor India [P] Ltd. & Ors[2009 (4) TMI 4 - SUPREME COURT]. The revenue had filed a Special Leave Petition In the case of the same assessee, namely Suzlon Energy Limited, the Hon’ble Supreme Court in Principal Commissioner of Income Tax vs. Suzlon Energy Ltd.[2020 (1) TMI 1505 - SC ORDER] approved the decision of the High Court upholding the order of the Tribunal allowing the assessee’s claim of foreign exchange fluctuation loss on mark to market basis.
In the light of the above, we find no grounds to interfere with the order passed by the Tribunal. Also see HINDUSTAN GUM AND CHEMICALS LTD. [2021 (1) TMI 1282 - CALCUTTA HIGH COURT] - Thus the appeal filed by the revenue is dismissed
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2022 (12) TMI 586
Liability to pay excise duty and service tax - admissible deduction under the law - Allowability of revenue expenditure in its P&L account under commercial expediency - AO and the CIT (Appeals) upheld the disallowance merely on the ground that the liability to pay service tax is not of the assessee, but rather it is the client - HELD THAT:- Neither by the A.O in the assessment order nor by the Ld. CIT(A) in the first appellate order nor by the Ld. Senior D.R. before during argument before us, the factum was not controverted that the assessee could not recover impugned amounts of service tax and excise duty from its clients but paid the same to the Government and claimed it as business expenditure under commercial expediency to comply with the taxation provisions of the Government. It is not also a case of the A.O that the assessee recovered the amount from Vishakhapatnam Steel Plant and contract manufactures and did not pay the same to the Government or the assessee has wrongly claimed impugned amounts as revenue expenditure because the assessee had already recovered the same from Vishakhapatnam Steel Plant and contract manufacturers.
In the situation when the assessee complying with the provisions of indirect taxation and deposit the service tax and excise duty to the exchequer as applicable to the business activity of the assessee. In a situation when the assessee is not able to recover such amounts fully or partially then the assessee is very well entitle to claim the same as revenue expenditure in its P&L account under commercial expediency of complying with the taxation liability as well as maintaining business relations with the respective clients/costumers. Therefore we hold that the A.O was not right in making disallowance in the hands of assessee
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2022 (12) TMI 585
Penalty u/s 271(1)(c) - disclosure or admission made u/s 132(4) of the Act during the course of search proceedings - HELD THAT:- Presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or based on misconception of facts, then, solely on the basis of such admission, no addition is required to be made. As true that admission being declaration against an interest are good evidence, but they are not conclusive, and a party is always at liberty to withdraw the admission by demonstrating that they are either mistaken or untrue. In law, the retracted confession even may form the legal basis of admission, if the AO is satisfied that it was true and was voluntarily made.
But then basing the addition on a retracted declaration solely would not be safe. It is not a strict rule of law, but only a matter of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT issued Circular No.286/2/2003 prohibiting the departmental officials from taking confession in the search.
The board is of the view that often the officials used to obtain confessions from the assessee and stop further recovery of the material. Such confessions have been retracted and then the addition could not withstand the scrutiny of the higher appellate authority, because no material was found, supporting such addition.
Keeping the provisions of section 132(4) in justaposition with provisions of Explanation 5A to Section 271(1) (c), the inference of ownership of any money, bullion, jewellery or other valuable articles, to our mind, ought not be based merely on the joint disclosure petition - When the assessee has taken specific plea that no money, bullion or jewellery or income based on any entries in any books of account or other documents for these two assessment years was found during the course of search, AO ought to have immediately referred the documents, entries or any asset found, which is relevant to these assessment years in the penalty proceedings.
He should have rejected the explanation of the assessee by demonstrating it as incorrect. Rather, the authorities have proceeded on the assumption that had there been no money, bullion, jewellery or income based on entries was not found, the assessee would not have made voluntary disclosure of the income in his returns.
Inference of availability of money, bullion or assets or income embedded in the entries cannot be drawn merely from the disclosure petition referred above. These should have been found in physical form and pertaining to these specific years in the course of conduct of such and seizure operation, only then deeming fiction of concealment as stated in Explanation 5A of Section 271(1) (c) would get triggered.
Revenue authorities have not referred any documentary evidence demonstrating the fact that voluntary incomes offered by the assessee in these two years were actually unearthed during the course of search and are based on any entry in any books of account or other documents so unearthed which are specific to such additions whereon impugned penalty is imposed. Therefore, to our mind, penalty so imposed by applying Explanation 5A to Section 271(1)(c) deserves to be deleted. Accordingly, appeal of the assessee is al lowed and the penalty so imposed is deleted. Appeal of assessee allowed.
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2022 (12) TMI 584
Revision u/s 263 by CIT - accrual of income - accounting of delayed payment surcharge (‘LPS’) on cash basis - assessee was declaring LPS on outstanding credit receivables on accrual basis - hybrid system of accounting - HELD THAT:- AO has conducted the necessary enquiry on the said issue referred in the show-cause notice u/s 263 called for the details, made proper applcation of mind on the said details, considering the fact that the said treatment of LPS on cash basis is consistently being followed from AY 2003-04 onwards and accepted by predecessors and financial statements are duly audited by three auditors including CAG and the assessee has followed the directions of Ministry of Power dated 19.08.2003 and also considering the fact that in the past also huge amount of outstanding LPS are waived of and there is no certainity of receiving LPS charges from the Government companies and also considering the fact that similar views of accepting such treatment of LPS charges on cash basis even when the books of account are maintained on mercantile system have been taken by judicial forums, the view taken by the ld. AO was permissible in the law and not unsustainable and, therefore, in our considered view, the order of the ld. AO is neither erroneous nor prejudicial to the interest of revenue. We accordingly quash the revisionary proceedings carried out under section 263 by ld. PCIT and allow the grounds of appeal raised by the assessee.
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2022 (12) TMI 583
Ex-parte order - Computation of Long Term Capital Gains - assessee’s father purchased two properties 1961 in the name of the assessee and his brother who at the time were minor children. After the death of the farther, the aforesaid properties vested with both the sons in equal proportion as per the will of their Father - aforesaid properties (two) were sold by the assessee and his brother, with his sister acting as a power of attorney holder) vide sale deed - CIT-A so computed unexplained credits in the hands of assessee, interest income and short-term capital gains on mutual funds in the hands of assessee - HELD THAT:- In the instant case, we observe that despite a large number of opportunities, the assessee has not caused appearance before us to argue his case on merits. We observe that Ld. CIT(A) has after taking into consideration all the facts has passed a detailed and reasoned order, the relevant extracts of which have been reproduced above. The assessee has not produced any material or given any arguments to controvert any of the findings made by Ld. CIT(A). Accordingly, in our view, we find no infirmity in the order of Ld. CIT(A) and we accordingly dismissed the appeal of the assessee in light of the detailed order passed by Ld. CIT(A) considering the facts of the case. Appeal of the assessee is dismissed.
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2022 (12) TMI 582
Expenditure claimed on account of overstatement of expenditure - over-statement of expenses, i.e., on account of the same relating to a prior period - deduction of interest expenditure on GPF - HELD THAT:- The impugned sum comprises three sums representing liabilities on account of interest and employee terminal benefits, admittedly pertaining to the immediately two preceding years, while the fourth is a credit representing a lower provision for depreciation on fixed assets, ostensibly on account of a smaller assignment of fixed assets to the assessee-company. It is not clear if the differential depreciation is on account of the revision therein for the current year and/or the preceding year/s.
Continuing further, while the AO relied on the statutory auditor’s report, further stating that the impugned expenditure does not relate to the current assessment year, the ld. CIT(A) has allowed relief on the basis that the liability has crystalized only during the year under consideration. In fact, the sense that we got on hearing the parties, as indeed the documents referred to thereat, was that it is the increased liability/s as on 31/5/2005, i.e., in the opening statement of assets and liabilities (balance-sheet) as on 01/6/2005, to the extent modified by GoMP, that stands claimed by the assessee through debit to the profit & loss account, i.e., the operating statement, for the relevant year. The same, even as also observed by the Bench during hearing, are capital liabilities, of course at net of capital assets.
As even, notwithstanding the fact that they stand – to the extent modified or varied, intimated and confirmed by GoMP only later, so that they could not be co-opted in the books of account on 31/5/2005 (31/3/2005), but only later, i.e., on 12/6/2008 (31/3/2008), would be of no consequence inasmuch as the same does not alter the nature of the liability (asset) as on capital account, but only its quantum.
The interest liability for the 22 month period, i.e., from 01/6/2005 to 31/3/2007, would, in the given facts and circumstances of the case, stand to arise to the assessee only on 12/6/2008, i.e., during fy 2008-09, corresponding to AY 2009-10. Assessee following mercantile system of accounting, with prudence and conservatism being fundamental accounting principles, the same stands correctly provided for on 31/3/2008 inasmuch as the books for fy 2007-08 had not been closed by that date (12/6/2008).
Assessee could not have provided for the same at any time earlier; the books for fys. 2005- 06 & 2006-07 having been since closed, and the delay in making the provision in its respect is not on account of any error or omission in finalizing the accounts for those years. Reference in this regard may be made to Accounting Standards I & II issued by the Central Government u/s. 145(2) of the Act. It is therefore not necessary to dwell on the accounting standards by ICAI. There is no question of accrual and, resultantly, accounting for the interest obligation for the period prior to 01/6/2005, i.e., the period prior to the transfer date, as, as afore-explained, it is a capital liability in the assessee’s hands, and which stands incorporated at its value as on 31/5/2005.
The expenditure on the salary or GPF of the employees of other entities and, correspondingly, interest thereon, cannot possibly be the liability of the assessee’s business, even if statutorily assumed by the assessee. The Income Tax Act is, as is well-settled, a separate code in itself for the computation and assessment of income liable to charge to tax thereunder. The same would therefore, where so, need to be segregated. We may though hasten to add that if however a separate, dedicated funding in its respect, i.e., the capital liability/salary in respect of the employees other than the assessee’s employees, stands provided for by GoMP on reorganisation, though it does not appear to be so, the income arising on these assets shall stand to be assessed u/s. 56 as “Income from other sources” and, consequently, corresponding interest liability deductible as expenditure there against u/s. 57(iii).
The matter shall accordingly travel back to the file of the AO, who shall:
(a) subject to (b), compute the qualifying amount for deduction of interest expenditure on GPF at Rs. 2317.76 lacs for the 22 month period (from 01/6/2005 to 31/3/2007), as per the interest arising under the relevant arrangement/s.
(b) segregate the interest on GPF to the extent it relates to the employees other than the assessee’s employees, and exclude it from the total interest on GPF (i.e., Rs. 2317.76 lacs);
(c) set-off the interest liability as excluded (as per (b)) against income, if any, arising to the assessee from the separate, dedicated funding provided by GoMP in respect of the proportionate GPF. If not, the said excluded amount cannot be setoff by regarding it as the liability of the assessee’s business.
(d) Likewise for the interest cost on loan for Rs. 1318.75 cr. (as against earlier figure of Rs. 1379 cr.), i.e., as per (a). It would though need to be clarified as to how the interest liability (which is to be in terms of underlying agreement/s) arises; the final loan (capital borrowed), rather than exhibiting an increase with reference to the provisional sum, stands decreased by Rs. 6025.44 lacs in the final opening balance sheet (as on 01/6/2005). There ought to be thus, on the contrary, a reversal of the interest provided on the excess loan for the preceding two years, resulting in a prior period income, i.e., on the same basis and principle as the increased liability results in an additional interest cost/liability. The adjudication, thus, though in agreement with the assessee’s stand in principle, would need to be determined on quantum, and which may though result in an income, qua which the AO shall of course seek clarification, and issue clear and definite finding/s.
e). the interest as per (a) and (d) shall be allowable u/s. 36(1)(iii) (loan) or s. 37(1) (GPF), in computing the assessee’s business income. However, the interest liability shall, where and to the extent subject to the condition of tax deduction at source and/or of payment, its deductibility would subject to relevant provisions, viz. s. 40(a)(ia); 43B, et. al.
Needless to add, the requisite data, information and explanation/s for the purpose shall be furnished by the assessee, as also the necessary working. The AO shall make necessary verification in the manner deemed proper and, in case of any difference, extend reasonable opportunity to the assessee to present and explain it’s working, deciding as per law issuing clear findings of fact. We decide accordingly.
Liability in respect of the terminal benefits, being pension and gratuity, provided at defined rates for the two preceding years - HELD THAT:- The quantum of provision is to be governed by the underlying arrangement/s. We make it clear that the allowance of provision shall though be subject to specific provisions, if any, under the Act in respect thereof viz. s. 40A(7); s.43B, etc. Further, if and to the extent the same relates to the employees of other than the assessee’s business, i.e., employed by it and working therefor, the same shall be subject to the same directions/adjudication as in respect of GPF. We are conscious that the pension liability could be in respect of the retired (i.e., as on 31/5/2005) employees of the Board. The same shall be subject to the same adjudication as qua the employees of other than the assessee’s business. The AO shall, upon verification, allow the assessee’s claim accordingly, granting it reasonable opportunity to present and explain its working.
Credit for a lower depreciation charge - HELD THAT:- The written down value (WDV) of the fixed assets is to be u/s. 43(6) the actual cost less depreciation actually allowed. The actual cost to the assessee-company, it may be clarified, would be the transfer price (value), i.e., at which it takes-over/is assigned the fixed asset/s. The AO shall work the depreciation claim exigible u/s. 32(1) based on the revised working, adopting the cost as now revised, and modify the assessee” claim for depreciation, i.e., if and to the extent not consistent with the working u/s. 32(1) r/w s. 43(6), of course, upon allowing the assessee an opportunity to present and explain itself working. Reference in this context be made to Maharana Mills (P.) Ltd [1959 (4) TMI 7 - SUPREME COURT] - We are conscious that the fixed assets as finally allotted to the assessee are at an increase (i.e., by Rs. 252.74 lacs, after adjusting the capital WIP), rather than a decrease, over that initially assigned, and which should therefore result in an enhanced charge for depreciation. So, however, the methodology adopted, which is to be in terms of s. 32(1) r/w s. 43(6), would coalesce the charge of depreciation for the current year to a single sum, obviating the need for any reversal of, or additional, charge for depreciation for the current year.
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2022 (12) TMI 581
Unexplained income/Debtors - violation for receiving SBN [Specified Bank Note] - assessee explained that the cash was received from Sundry Creditors the amount was received in SBN - assessee submitted the confirmation of AD Traders, bank account as proof of deposited amount during demonetization - HELD THAT:- Considering the order of the revenue authorities the assessee was not able to submit the confirmation from the sundry debtor, M/s AD Traders. The assessee received SBN during demonetization period on dated 10.11.2016. The amount was deposited in the bank account. The amount was received before the appointed day i.e.,dated 31.12.2016. So, the assessee shall not in a violation for receiving SBN as per the Act.
In Income tax Act the source was unexplained before the revenue authorities as the evidence was not able to submit before any of the lower authorities by the assessee - we direct to set aside the matter before the ld.AO for necessary verification denovo. Both the revenue and the counsel of the assessee had not made any objection for remanding back the issue before the ld. AO.
AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. Appeal of the assessee allowed for statistical purposes.
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