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Income Tax - Case Laws
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2023 (3) TMI 1306 - ITAT AHMEDABAD
Loss from business or profession - A.R. submitted that disallowance of business expenses is bad in law and therefore, the AO should be directed to allow the same by computing the total income - A.R.submitted that the assessee’s case is covered under Section 71 and said section state that barring exception losses, business loss can be set off against other heads (as “Inter Head Adjustment”) for the Assessment Year under consideration - HELD THAT:- A.R. submitted that for A.Y. 20101-11 on the identical facts the issue was held in assessee’s favour. At that time the assessee has set off his business income against the income from house property which has been allowed by the Tribunal.
D.R. remark that the return of income was not filed and Section 139(1) will not allow the assessee to take set off of business expenses to income from house property, as incorrect as the assessee has genuinely invoke the Section 71 and has set off against the other head the business loss. The Section does not state that the assessee has to file the return under Section 139 only. Thus, appeal of the assessee is allowed.
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2023 (3) TMI 1305 - ITAT CHANDIGARH
Penalty u/s 271(1)(c) - Quantum addition deleted - HELD THAT:- Where the whole of the addition have been deleted in the quantum proceedings by the CIT(A) and which has attained finality as per records, we agree with the contention of the Ld. AR that very foundation for levy of penalty no more exist. Hence the penalty so levied is hereby directed to be deleted as pronounced in the Open Court. Appeal of the assessee is allowed.
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2023 (3) TMI 1304 - ITAT BENGALURU
Income deemed to accrue or arise in India - Royalty or FTS - Taxability of payments received by the assessee from GIPL as per terms of the distribution agreement as well as the payments received by the assessee directly from Indian advertisers - HELD THAT:- As regards assessment years 2009-10 to 2012-13 [2022 (10) TMI 1039 - ITAT BANGALORE] the issue was decided in favour of GIPL by the Tribunal by holding that the impugned payment made by it to GIL cannot be characterised as royalty under Act or DTAA
The payment made by GIPL to GIL is not in the nature of Royalty or FTS under the Act and DTAA, a different treatment cannot taken in the hands of the payee, i.e. the assessee in the instant case. The contentions raised in the written submission of the learned D.R. has been addressed by the Tribunal in the payer’s case i.e. GIPL (supra). Hence, we are not dealing with the same in this order. Therefore, we hold that a sum cannot be brought to tax in the hands of the assessee.
Receipt on sale of advertisement space from Indian customers other than GIPL - The contentions raised by the learned D.R. in her written submission regarding receipt from other Indian customers has been dealt with in the order of the Tribunal in the case of GIPL (supra). Therefore, we hold that the payment on online advertisement is not liable to be taxed as Royalty in view of the aforesaid judicial pronouncements. It is ordered accordingly.
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2023 (3) TMI 1303 - ITAT DELHI
Penalty u/s 271D - violation of provisions of Section 269 SS - assessee argued that the cash loan has been taken for urgent disbursal of the salary - HELD THAT:- In the instant case, we find that though the assessee argued that the cash loan has been taken for urgent disbursal of the salary, the same fact could not be brought on record that the salary has been indeed paid from the loans taken. The assessee could not prove the fact of payment of salary subsequent to the receipt of loan and hence, we decline to interfere with the order of the ld. CIT(A). Appeal of the assessee is dismissed.
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2023 (3) TMI 1302 - ITAT VARANASI
Maintainability of appeal before ITAT - condone delay in filing of Form No. 10B - order passed with reference to Section 12A - assessee submitted that remedy lies either by filing Writ Petition with Hon’ble Jurisdictional High Court or filing petition with CBDT, against the order passed by ld. CIT(E) refusing to condone delay in filing late Form No. 10B beyond the time stipulated Section 139 read with Rule 17 of the Income-tax Rules, 1962 - HELD THAT:- After considering the contentions of both the parties and perusing the material on record, we dismiss the appeal filed by the assessee as not maintainable. While dismissing the appeal, we have extracted the manner in which the appeal was filed with tribunal along with other factual background. Assessee has also claimed that it was under a genuine and bonafide belief that appeal against order passed by CIT(E) refusing to condone the delay in filing form no. 10B beyond due date is an order passed with reference to Section 12A which is an order challengeable before tribunal.
There is some merit in the plea of the assessee that it was persuing legal remedy before tribunal under bonafide belief. So far as condonation of delay in filing appeal with tribunal belatedly is concerned, since the appeal itself is not maintainable before tribunal we do not propose to consider the condonation of delay where the appeal itself is not maintainable before tribunal. The Court/authority where the assessee, if so advised , chose to persue further legal remedy, can certainly take cognizance of the above factual matrix, in arriving at their own independent decision w.r.t. condonation of delay, if so sought by the assessee. Thus, in nutshell appeal of the assessee stand dismissed as not maintainable. We order accordingly.
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2023 (3) TMI 1301 - ITAT AHMEDABAD
Disallowance u/s 14A - both the direct as well as indirect expenditure attributable to earning exempt income needs to be disallowed u/s 14A - HELD THAT:- On perusal of the records placed before us, the AO has stated that the assessee had incurred certain amount of interest expenditure for earning exempt income, while the case of the assessee is that no interest expenditure has been incurred at all for earning such interest income. Accordingly, this ground is being set aside to the file of the AO to verify whether in fact, firstly, whether the assessee has claimed any expenditure for earning interest income and secondly whether all investments for earning exempt income were made from his personal account using own personal funds and not the funds from the proprietary concern. If both the above conditions are satisfied i.e. the investments made in earning exempt income for made out of own personal funds by the assessee in his personal capacity and secondly, no interest expenditure has been incurred and claimed for earning such exempt income, we are of the view that no disallowance is called for under section 14A of the Act.
Nature of expenses - Disallowances of expenses claimed in Stavya Spine Hospital (SG Road) - HELD THAT:- The opening of new hospital at the SG Road in the same line of speciality i.e. spine treatment, would constitute extension/expansion of the existing business and since the said expansion is in the same line of business and the same/common management as the existing hospital at Ashram Road, the expenses should be allowed as revenue expenses. It is not the case of Revenue that the expenses are capital nature or that the same have not been incurred exclusively for the purpose of business of the assessee. Accordingly, other expenses i.e. expenses other than depreciation are concerned, the same should be allowed as revenue expenditure.
Depreciation for the year under consideration - claim of the assessee is that the depreciation should be allowed since the assets purchased during the year under consideration are “ready to use” - HELD THAT:- We are in agreement with the arguments of the counsel of the assessee to the effect that once the new hospital is an extension of the existing business, the machinery viz. Air-conditioning unit and electrical fittings have been purchased during the year under consideration, the assessee has shown consultancy receipts from the new hospital unit at SG Road, the new hospital is in the same line of business i.e. Spine Speciality as the existing hospital at Ashram Road, then depreciation on the assets should be allowed to the assessee during the year under consideration. Notably, in the assessment order passed for the year under consideration, the AO held that business of the assessee commenced from assessment year 2015-16, however, in the immediately succeeding assessment year i.e. AY 2014-15, the AO allowed the assessee’s claim of depreciation in respect of those assets. Accordingly, keeping in view the totality of facts placed before us for consideration, we are of the view that the assessee is entitled to depreciation on the above assets.
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2023 (3) TMI 1300 - ITAT MUMBAI
Depreciation on editing equipment - Depreciation on the additions to plant and machinery made during the year - HELD THAT:- We find that this issue is recurring in nature since the assessment year 2004–05. We further find that assessee is claiming depreciation on computer-based editing equipment, part of which was acquired in preceding years and part was purchased during the year under consideration.
As noted addition during the year mainly consist of processors, hard disk and hard drives, software, workstation platforms, drivers, monitors, servers, display, and control panels with different types of software.
In assessee’s own case in the immediately preceding assessment year, in DCIT vs Prime Focus Ltd [2017 (4) TMI 1614 - ITAT MUMBAI] following the judicial precedent in assessee’s own case decided a similar issue in favour of the assessee. Decided against revenue.
TP adjustment - assessee raised an amount in the UK via FCCB at a compound rate of 7.375% - AO made a reference under section 92CA(1) to TPO to determine the arm’s length price of the international transactions entered into - HELD THAT:- Since the funds are borrowed in USD and advanced in USD the learned CIT(A) came to the conclusion that the question of currency and exchange risks is minimal and therefore, only risk that needs to be factored in was the lending risks by the assessee to its AE.
Accordingly, CIT(A) computed the arm’s length rate of interest on loan granted to AE at 8.375% i.e. rate of FCCB borrowings of 7.375% + markup of 1% for other lending rates. Since it is undisputed that advance was made by the assessee to its AE out of the funds generated from FCCB, therefore, we are of the considered view that the learned CIT(A) was right in considering the FCCB compound rate of 7.375% as the base rate.
Since the funds have been borrowed in USD and also advanced in USD, the currency and exchange risks are minimised and the only risk to be considered is the lending risk for determining the markup. The learned CIT(A) considered 1% markup as an appropriate markup in the above circumstances. No infirmity in the impugned order in treating 7.375% plus markup of 1% as the arm’s length rate of interest in respect of loan advanced by the assessee to its AE. Accordingly, ground No. 3 raised in Revenue’s appeal is dismissed.
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2023 (3) TMI 1299 - ITAT BENGALURU
TP Adjustment - comparable selection - exclusion of Lotus Labs as comparable by the DRP - HELD THAT:- As the company fails the RPT filters for the year under consideration. Accordingly respectfully following the decision of the coordinate bench in assessee’s own case [2023 (1) TMI 1114 - ITAT BANGALORE] we see no reason to interfere with the decision of the DRP. This ground of the Revenue is dismissed.
Expenses by pharma companies - expenditure incurred towards freebies to doctors by the Pharma Agencies as disallowable u/s.37(1) - HELD THAT:- The additional evidence furnished by the assessee providing the details of expenditure and the breakup incurred on doctors goes to the root of the dispute, therefore for substantial justice the same is admitted and taken on record for adjudication.
We remit the issue back to the AO to examine the nature of expenditure incurred by the assessee and to verify the issue afresh in the light of the recent judgement of the Hon'ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. [2022 (2) TMI 1114 - SUPREME COURT] Ground Nos. 4 to 7 are allowed for statistical purposes.
Disallowance of contribution towards gratuity funds - HELD THAT:- We noticed that the AO has not examined the details as per the directions of the DRP and has admitted that gratuity payment required further enquiry. AO has made disallowance considering the provisions of Section 144C(8) of the Act and sustained the disallowance. Since the AO has not verified the details of gratuity based on the details furnished by the assessee we remit the issue back to the AO with a direction to examine the details of payment of gratuity and decide the allowability accordingly. This ground is allowed for statistical purposes.
Disallowance of expenditure incurred under Voluntary Retirement Scheme (VRS) - assessee in the original return inadvertently claimed deduction of entire VRS payment instead of 1/5th of the amount as per section 35DDA and filed revised return rectifying the same - AO disallowed the same on the reason that same was not disclosed in the tax audit report - HELD THAT:- We noticed that the AO has not examined the details as per the directions of the DRP and has made disallowance considering the provisions of Section 144C(8) and sustained the disallowance. Since the AO has not verified the details of spends towards VRS payments based on the details furnished by the assessee we remit the issue back to the AO with a direction to examine the details of and decide the allowability accordingly. These grounds are allowed for statistical purposes.
TP adjustments @ 5% of the expenses reimbursed by the AE - HELD THAT:- In our view whether the mark-up of the cost of the services rendered by the Third Party can be applied for determining the ALP in the hands of the assessee should be examined from the angle of whether by making the payment on behalf of AE the assessee is performing any function or deploying any assets or has born any risks.
DRP has not examined these facts based on the details furnished and has calculated an adhoc margin of 5% without any bench marking analysis and without attributing any reasons as to why the reimbursement is a separate international transaction.
DRP has not considered the assessee’s submission that the entire expenses incurred on behalf of AE does not pertain to coordination of clinical trial segment since the AEs who have reimbursed the expenses are not those to whom clinical trial services are rendered by the assessee. The issue should be remitted back to the DRP to examine the various details and submissions furnished by the assessee and decide the issue in accordance with law. The DRP is directed to keep in mind the decision of the Hon’ble Delhi High Court in the case of Li and Fung India Pvt Ltd [2014 (1) TMI 501 - DELHI HIGH COURT] while deciding the issue. Accordingly this ground is allowed in favour of the assessee for statistical purposes
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2023 (3) TMI 1298 - ITAT BANGALORE
TP Adjustment - assessee had advanced loan to its overseas subsidiary and assessee charged interest at the rate of 3.24% per annum - interest was charged at LIBOR plus 300 points - HELD THAT:- As submitted that the assessee charged interest on loan at 3.24% p.a. This fact is also evident which is the notes to Audit report in Form No 3CEB. During the year under consideration, average USD LIBOR was 0.58%. Interest rate considering LIBOR + 300 bps would be 3.58%. This rate is within +/- 5% range applicable for the year under consideration as per second proviso to section 92C(2). Hence, the interest received from loan given to Sasken Inc, USA should be considered at arm’s length price. The TP addition should therefore be deleted. We direct the Ld.AO/TPO to consider the claim of the assessee based on the observation hereinabove. Accordingly this ground raised by the assessee stands allowed.
Corporate guarantee given in respect of loan from banks availed by Sasken OY came to an end in September 2011 - There is a consistent approach taken by this Tribunal in adopting the rate of corporate guarantee at 0.5% in assessee’s own case. We direct the Ld.AO/TPO to restrict the corporate guarantee adjustment at 0.5% based on the outstanding payables from Nordea Bank during F.Y. 2011-12.
Adjustment made on use of trademark “sasken” as royalty - Assessee contended that question of AE’s paying royalty does not arise - HELD THAT:- As decided in assessee own case [2021 (8) TMI 1359 - ITAT BANGALORE] passive association should be distinguished from active promotion of the MNE group's attributes that positively enhances the profit-making potential of particular members of the group. Each case must be determined according to its own facts and circumstances.
Ld.TPO shall carry out necessary verification based on the which it must first be determined whether there is any Royalty that could be attributed. In the event Royalty is to be attributed, proper benchmarking needs to carried out the accordance with section 92CA of the Act, by selecting an authorised method and comparables.
Adjustment proposed on software development segment - TPO rejected the TP analysis of the assessee in respect of the software services rendered and received by assessee which was done based on internal comparables - HELD THAT:- As margins of comparables as per the TPO for provision of services and receipt of services is 20.5% and 19.22% respectively and the above details have been not considered by the Ld.TPO/AO. In the interest of justice, we remand this issue to the Ld.AO/TPO to verify the above details. In the event, the margins computed at segmental levels are found to be within +5%, no adjustment is warranted. The Ld.AO/TPO is directed to consider the claim of assessee based on the above observations in accordance with law. Accordingly, this ground raised by assessee stands allowed for statistical purposes.
Disallowance computed u/s. 14A r.w.r.8D - HELD THAT:- AO has not made any disallowance under Rule 8D(2)(ii) whereas the disallowance has been computed under Rule 8D(2)(iii). There is a conscious application of mind by the Ld.AO because of which no disallowance has been made under interest. We therefore cannot agree with the submissions of assessee that there needs to be an expressed satisfaction recorded by the Ld.AO. The act of the Ld.AO in computing the disallowance reveals that the accounts of the assessee has been verified. No merit in the Ld.AR’s argument that an expressed satisfaction has to be recorded by the Ld.AO.
Computation of disallowance under Rule 8D(2)(iii), the ratio laid down by Hon’ble Special Bench of Delhi Tribunal in case of ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has to be followed. We direct the Ld.TPO to restrict the disallowance only to the extent of the investment that has yielded exempt income during the year under consideration under Rule 8D(2)(iii).
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2023 (3) TMI 1297 - ITAT PANAJI
Not giving credit of the TDS as available in the form 26 AS - appellant is governed by the system of community of property under the Portuguese Civil Code of 1867 which is in force in the State of Goa - whether the appellant apportioned half of the income earned by the appellant with his spouse as required from the assesses governed by u/s. 5A of Income Tax Act, 1961? - appellant's 26AS disclosed the TDS Credit but credit of less was given while processing the return thus reducing the refund received
HELD THAT:- Section 5A is a special provision wherein the legislature has prescribed in the latter limb thereof that “and the remaining provisions of the Act shall apply accordingly.” Therefore, apply the age old principle generilia specialibus non derogant i.e., the other general provisions of the Act in other chapters’ must make way for the same for all intents and purposes. A perusal of section 198 of the Act that all TDS amounts deducted under Chapter XVII of the Act, are indeed deemed as income received of the concerned assessee - we wish to reiterate here that the legislative expression “assessee” herein must be read as “the spouses assessees” in light of section 5A of the Act and therefore, such TDS amount has to be consequentially apportioned going by scheme of the Act. The assessee’s instant arguments seeking entire TDS credit in his hands stand rejected therefore.
As stated that Rule 37BA in Income Tax Rules does not provide for such an apportionment for the purpose of claiming TDS credit and, therefore, the assessee husband herein has rightly raised the claim of entire TDS credit. There is hardly any merit in the assessee’s contentions as Rule 37BA (2) read with “Proviso” thereunder casts a liability on the concerned deductee /assessee herein to file a declaration with the deductor that the whole or any part of the income on which the TDS has to be deducted, which is assessable in the hands of any other person i.e., the spouse herein by virtue of section 5A. The assessee could hardly be allowed to take advantage of his own failure in not furnishing the necessary declaration before his deductor therefore. His instant last argument also fails. Assessee’s appeal is dismissed.
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2023 (3) TMI 1296 - ITAT BANGALORE
TP Adjustment - Addition with regard to payment of interest on CCDs by recharacterising the same to be external commercial borrowings - HELD THAT:- Respectfully following the decision of the coordinate bench of the Bangalore Tribunal A.Y. 2012-13 [2022 (2) TMI 1279 - ITAT BANGALORE] and A.Y. 2011-12 we uphold the TP study done by the assessee to arrive at the interest rate of 9% and 12% calculated based on the average rupee cost comparing the same with SBI prime lending rate.
Adjustment made with respect to the payment of royalty at 1% - HELD THAT:- As per assessee own case [2021 (12) TMI 1167 - ITAT BANGALORE] we allow this ground in favour of assessee and hold the payment of royalty by assessee to be at arms length.
Disallowance of expenditure u/s. 14A r.w.Rule 8D - as submitted by the Ld.AR that there is no exempt income earned by the assessee for year under consideration - HELD THAT:- We note that Coordinate Bench of this Tribunal for A.Y. 2012- 13 has deleted the disallowance u/s. 14A [2022 (2) TMI 1279 - ITAT BANGALORE] as assessee do not have any exempt income for the year under consideration. Thus, as there is no difference in facts, we direct the Ld.AO to delete the addition made u/s. 14A r.w.Rule 8D.
MAT computation on addition u/s 14A - addition made to the books profits by applying the provisions of section 14A - HELD THAT:- This issue is no longer resintegra by virtue of the decision of ACIT vs. Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and the decision of Gokaldas Images Pvt. Ltd. [2020 (11) TMI 345 - KARNATAKA HIGH COURT] - Thus we direct the Ld.AO to delete the disallowance u/s. 14A while computing book profits u/s. 115JB of the Act.
Short credit of TDS - HELD THAT:- We direct the Ld.AO to verify the same and consider the claim in accordance with law.
Interest charged u/s. 244A - HELD THAT:- As submitted that the Ld.AO has not provided the consequential interest u/s. 244A - We direct the Ld.AO to verify the same and consider in accordance with law.
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2023 (3) TMI 1295 - ITAT DELHI
TP adjustment - international transaction of provision of IT enabled data conversion services - assessee adopted TNMM as the most appropriate method for demonstrating that this international transaction - assessee pleaded that foreign exchange fluctuation gain should have been considered as operating revenue of the assessee as well as that of the comparables - HELD THAT:- In light of the business profile of the assessee, this contention raised on behalf of the assessee about inclusion of foreign exchange gains in operating revenue finds merit. Apparently, it seems that foreign exchange gain earned by the assessee is in relation to the revenue earned from its AE in connection with provision of ITES. We find that foreign exchange gain directly results from consideration received from rendering ITES to AE and therefore, we fail to understand how such foreign exchange fluctuation gain should be considered as non-operating.
Since the TPO has computed PLI of the assessee as well as comparables by ignoring the amount of forex gains, we set aside the impugned order and remit the matter back to the file of the AO/TPO to recompute assessee’s margin as well as that of comparables by considering forex gain as an item of operating revenue.
It would be pertinent to make it clear that our direction is restricted to consider forex gain from transactions of revenue nature only as part of operating revenue. If some part of forex gains is found to be relatable to transactions on capital account, then that part should be excluded from the operating revenue.
Selection of comparable companies - Eclerx Services Limited, ICRA Techno Analytics Limited, Acropetal Technologies Limited - A close look at the business profile of the three comparable companies mentioned elsewhere shows that the services offered by these companies are in the nature of ITES only. In fact, we are unable to understand how single customer business (like that of the assessee) affects the functional similarity of the company. The assessee is having single customer business and so also TCS E-Serve Limited, Eclerx Services, which offers ITE services to city group.
Similar is the case of ICRA Techno Analytics Limited and Acropetal Technologies Limited.
Inclusion of CG Vak Software and Exports Limited and Calibre Business Point Business Solutions Ltd. - High turnover or high profit can be no reason to eliminate an otherwise comparable company. The same applies with full force in the converse manner as well to a low turnover/low profit company. We, therefore, hold that a company cannot be excluded from the list of comparables on the ground of its low turnover. In principle, we direct the inclusion of the relevant segment of this company in the list of comparables. The TPO is directed to include the operating profit/operating costs of the ITES segment of this company in the list of comparables, after due verification of the necessary figures for determination of the operating profit margin etc.
Inclusion of R System International Ltd, Jindal Intelicom Private Limited and Calibre Business Point Business Solutions - We set aside the impugned order and remit the matter to the file of TPO/AO for examining this aspect of the matter. It is clarified that only if the assessee succeeds in providing the relevant data of these companies for the concerned financial year on the basis of the information available from their Annual reports only, the TPO should include these companies in the list of comparables by considering their OP/OC on the basis of the financial year ending 31.3.2010. If however, even though their quarterly data is available and can be compiled for the relevant financial year, but the amounts of operating profit or operating cost etc. for the relevant financial year are not directly available without any apportionment or truncation, then these companies should not be considered as comparable.
Exclusion of Cosmic Global Limited and Informed Technologies India Ltd. - In so far as Cosmic Global Limited is concerned, we find that this Tribunal in earlier years i.e. Assessment Years 2009–10 and 2010–11 has held that export earnings filter need not be applied which has been followed by the DRP and, therefore we do not find any merit in exclusion of these comparables and it will remain in the final set of comparables
Informed Technologies India Limited is concerned, it is contended that the turnover of this company is more than Rs. 1 crore and, therefore, passes turnover filter applied by the Assessing Officer whereas the TPO has rejected because this company does not pass turnover filter. It appears that this company was rejected by the TPO on the basis of turnover filter in show cause notice itself. Therefore, the DRP has directed to verify the turnover and decide the inclusion/exclusion of this company after affording reasonable opportunity of being heard to the assessee. We do not find any error or infirmity in such direction of the DRP and, we accordingly direct the TPO/Assessing Officer.
We set aside the impugned order and remit the matter for determination of ALP of the international transaction of provision of ITE data conversion services to the file of the AO/TPO for fresh decision in accordance with our above observations/directions after affording adequate opportunity of being heard to the assessee.
Interest on a delayed/Non-realization of export proceeds - HELD THAT:- TPO has taken normal credit period of 60 days and accordingly made addition on account of transfer pricing adjustment for the period in excess of 60 days. In our considered opinion, since the assessee has entered into an agreement with its AE for realization of invoices within the period of 150 days, therefore the interest amount of non-realization of invoices upto 150 days appears to have been factored in the price charged for the services rendered.
Interest should be charged in excess of 150 days - This is also additional/ supplementary grounds taken by the assessee at 4.1.5. We, accordingly direct the AO/TPO to charge interest for delay of more than 150 days, which means that any delay above 150 days should be considered as a separate international transaction in terms of Clause C of Explanation to section 92B of the Act.
Rate of interest - We find that this issue is covered by the decision of Cotton Natural [I] Pvt Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] as held that it is the currency in which loan is to be repaid which determine the rate of interest and hence prime lending rate should not be considered for determining interest-rate.
We, therefore, set aside the impugned issue and remit the matter back to the file of the TPO/AO for fresh determination of addition on account of TP adjustment towards interest not realized from its AE on the debts arising during the course of business in line with our above observations.
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2023 (3) TMI 1246 - MADRAS HIGH COURT
Show cause notice issued under Block Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - penalty proceeding initiated - non disclosure of investments - petitioner submit that he did not have any personal knowledge about the alleged investments and was ignorant of the bank account details and amounts could have been made by his late father and that he was taking steps to contact his father's chartered accountant - petitioner submit that if the Court is inclined to direct the petitioner to appear to answer the show cause notices, then the payment of the penalty may be deferred till the disposal of the appeal.
HELD THAT:- As considering the fact that the petitioner has responded in great detail to the impugned notices, the interest of justice would be subserved if the Writ Petition is disposed of with the following directions:-
i) The petitioner shall appear before the respondent concerned on 27.03.2023 at 10.30 am., and make his submissions.
ii) The respondents shall thereafter pass appropriate orders on the same. Till such time the orders are pronounced, no coercive steps shall be initiated by the respondents.
Writ Petition is disposed of.
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2023 (3) TMI 1245 - GUJARAT HIGH COURT
Validity of reopening of assessment u/s 147 - reasons to believe - increase in share capital - HELD THAT:- It is difficult for this Court to come to a conclusion that there is a failure on the part of the assessee in disclosing true and correct facts, more particularly, when it is also not the case of the Department that there is a failure on the part of assessee in disclosing true and correct facts. Hence, when the reopening is sought beyond the period of four years, this basic element of failure on the part of the assessee is missing. Accordingly, it appears that the entire reopening which is sought by the authority is based upon a change of opinion and the law on the change of opinion is already well established, and as a result of this, a case is made out by the petitioner to call for an interference.
As we have noticed that the entire reassessment is not on the basis of any fresh tangible material distinct from what was already available during the assessment proceedings, and as such, the petitioner has made out a case to fall within the proposition as laid in the case of Shanti Enterprise [2016 (9) TMI 1614 - GUJARAT HIGH COURT]
There was no allegation that there is any failure on the part of the assessee, i.e., the petitioner to truly and fully disclose the material facts, and further the reopening is sought on the basis of verification of record, and as such, there was no fresh tangible material distinct from what was available at the time of assessment proceedings and by making a reference to the notice by virtue of which the petitioner was called upon to furnish all the details as stated herein above, the assessment order is passed, and as such, this entire exercise which is sough to be undertaken by the authority is based upon change of opinion.
Contention with regard to escapement of income being assessed, the respondent-authority has hardly made out any case for invoking the provisions of Section 56(1) or Section 68. Since the entire exercise is sought to be undertaken on the basis of change of opinion, simply because the Assessing Officer, while passing an order of assessment, has not dealt with specifically in an elaborate form, would not be a ground for opening of an assessment.
In view of the aforesaid circumstances and the conjoint effect of the relevant discussion in consonance with the proposition of law, we are of the opinion that a case is made out by the petitioner to call for an interference. The impugned notice of reopening are hereby quashed and set aside.
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2023 (3) TMI 1244 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - Validity of order u/s 148A - scope of new enactment of Section 148A - Period of limitation to issue notice issued u/s 148A(b) - notices issued u/s 148 referable to the old regime - HELD THAT:- As already noted, the department took shelter of the time limit extended by Notifications of the Central Board of Direct Taxes to treat the above class of notices to be within time.
In Keenara Industries Pvt. Ltd. [2023 (3) TMI 104 - GUJARAT HIGH COURT] this Court proceeded to hold that enacting the provisions in Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, was not the permissible device whereby the time limit could be legitimately extended for the purpose of issuing Notices under Section 148, which were otherwise barred in terms of Section 149, as it exists in the old regime.
The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench in Keenara Industries Pvt. Ltd. (supra) as per observations in paragraph 36 of the judgment, the concept of freezing the time limit. It was held that it was not permissible in law for the Revenue to travel back in time. Nor does the Taxation and Other Laws Act endorse to such concept. It was held as per paragraphs 38 and 39 of the Keenara Industries Pvt. Ltd. (supra) that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions.
The point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore, all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore, these notices cannot be issued as per the amended provision of the Act.
Revenue was entirely at his receiving end, unable to dispute the position of law holding the field as above.
All the impugned notices in the respective petitions under section 148 of the Act relatable to Assessment year 2013-14 or the assessment year 2014-15, as the case may be, are beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction. Since the petitions deserve to be allowed on the aforesaid crisp legal ground alone, learned advocates for the parties submitted to agree that facts and other legal issues may not be gone into by the Court. Accordingly, they are neither delineated, nor are gone into in respect of the above petitions.
All other questions on facts involved in the reasons weighed with Assessing Officer seeking to reopen the assessment are kept open in all cases.
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2023 (3) TMI 1243 - KARNATAKA HIGH COURT
Rejection of request for NIL TDS in terms of Section 197 - Denial of natural justice - Application submitted by the petitioner seeking NIL TDS has been rejected by the respondents by addressing a communication in this regard at Annexure-A - grievance of the petitioner that no separate order, much less any speaking order has been passed by the respondents and the attachment to the aforesaid communication only indicates that the claim of the petitioner has been summarily rejected and the same being violative of principles of natural justice, the petitioner is before this Court by way of the present petition.
HELD THAT:- As rightly contended by petitioner, the material on record discloses that except the impugned communication at Annexure-A dated 28.02.2022 enclosing a copy of the attachment, which discloses that the claim of the petitioner has been summarily and unilaterally rejected by the AO without assigning any reasons, the impugned communication and order are clearly non-speaking, cryptic, unreasoned and laconic and passed without application of mind and in violation of principles of natural justice and consequently, the same deserves to be quashed and the matter be remitted back to the concerned respondent for reconsideration afresh in accordance with law. Petition is hereby allowed.The impugned order and the impugned communication/e-mail along with the accompanying screen shot is hereby set aside.
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2023 (3) TMI 1242 - ITAT RAIPUR
Validity of Reopening of assessment u/s 147 - issue of notice by non-jurisdictional officer - validity of the jurisdiction that was assumed by the AO for framing of assessment u/s 144/147 - ITO, Ward- 1(3), Bhilai Jurisdiction to issue notice - whether or not the ITO, Ward-1(3), Bhilai had validly initiated proceedings in the case of the assessee and issued notice u/s.148 dated 09.03.2018? - HELD THAT:- The very basis for transferring of the case of the assessee for the year under consideration i.e. A.Y.2013-14 by the ITO, Ward-1(3), Bhilai to the ITO, Ward-2(2), Bhilai was the fact that in light of Notification No.01/2014-15 dated 15.11.2014 of the JCIT, Range-2, Bhilai, the jurisdiction over the case of the assessee was with latter i.e. ITO, Ward- 2(2), Bhilai. On the basis of the aforesaid admitted fact, we are unable to fathom that now when the ITO, Ward-1(3), Bhilai had admitted vide his letter dated 10.04.2018 that pursuant to Notification No.01/2014-15 dated 15.11.2014 of the Joint Commissioner of Income Tax, Range-1, Bhilai, the jurisdiction over the case of the assessee remained with the ITO, Ward-2(2), Bhilai, then on what basis he had issued notice u/s.148 of the Act dated 09.03.2018. It is neither the case of the department nor a fact discernible from the records that at any point of time the jurisdiction over the case of the assessee was either transferred to; or had remained vested with the ITO, Ward-1(3), Bhilai.
Now when the ITO, Ward-1(3), Bhilai did not have any jurisdiction over the case of the assessee as on 09.03.2018, i.e. the date of issuance of the notice u/s.148 of the Act, therefore, the inescapable view that can be drawn therefrom is that he had wrongly assumed jurisdiction and initiated proceedings u/s.147 of the Act in the case of the assessee under consideration.
When the assessee has assailed the framing of the assessment u/ss.144/147 dated 07.12.2018 on the ground that the initiation of proceedings u/s.147 of the Act by the ITO, Ward-1(3), Bhilai is without authority of law and, therefore, wholly without jurisdiction, the aforesaid objection of the Ld. DR that the failure on the part of the assessee to call in question the jurisdiction of the A.O within the time limit prescribed under sub-section (3) of Section 124 cannot be accepted.
Assessment framed on the basis of “reasons to believe” dated Nil a/w. notice u/s.148 issued by the ITO, Ward-1(3), Bhilai, i.e. a non-jurisdictional Officer, cannot be sustained and is liable to be quashed. Decided in favour of assessee.
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2023 (3) TMI 1241 - ITAT MUMBAI
Income deemed to accrue or arise in India - invocation of Article 28 of India-Malaysia DTAA - West Indies Cricket Board Inc has confirmed that they intend to contract with the TSA Cayman Island for sponsorship rights to West Indies Men’s National Cricket Team in respect of the ICC Champions Trophy 2013 tournament and ICC T20 World Cup 2014 tournament - HELD THAT:- All the parties including West Indies Cricket Board Inc and the sponsor honoured all the agreements. No evidence contrary to the above has been brought on record. Thus, in our considered view, the aforesaid reason cannot be the basis to invoke Article 28 of the India-Malaysia DTAA. It is also pertinent to note that the AO-TDS in order to invoke the provisions of Article 28 of India-Malaysia DTAA has not placed sole reliance on this anomaly and rather also alleged that Malaysian entity was a mere conduit in the entire transaction.
Thus, when TSA Malaysia has been found to be existing much prior to TSA Cayman Island and the assessee, and its revenue and setup have not been disputed by the Revenue, we are of the considered opinion that it would be wrong to allege that TSA Malaysia to be mere conduit and paper company existing merely to avail the benefit of India-Malaysia DTAA. The conclusion could have been different if the entire setup would have been in Cayman Island and the Malaysian entity would have been a mere name lender in this set of transactions with no role to play. However, such being not the facts, therefore, we find no infirmity in the order of the learned CIT(A) in quashing the invocation of Article 28 of India-Malaysia DTAA in the present case.
Whether the payment made by the assessee to TSA Malaysia in respect of the advertising package/rights, which includes (a) Logo Rights, (b) Advertising Privileges, (c) Promotion Activities Rights, and (d) Rights to Complimentary Tickets constitutes Royalty for being taxed in India? - Rights of similar nature are involved and the definition of the term “Royalty” in India-Malaysia DTAA is worded similarly to the provisions of India-Canada DTAA, therefore, respectfully following the aforesaid decision of the Hon’ble Delhi High Court, we are of the considered opinion that payment in respect of aforesaid rights does not fall in the category of royalty as defined under Article 12(3) of the India-Malaysia DTAA.
Once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Act, as in terms of section 90(2) the provisions of the Act or the DTAA, whichever is more beneficial to the assessee shall be applicable. Since the payment was only alleged to be Royalty by the Revenue, therefore, there is no need to examine its taxability under any other provision of the India-Malaysia DTAA, in the present case.
Assessing Officer is directed to delete the addition on account of the advertising package/rights in respect of Sri Lanka Cricket and West Indies Cricket Board Inc.Grounds raised by the Revenue are dismissed.
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2023 (3) TMI 1240 - ITAT RAIPUR
Reopening of assessment u/s 147 - Reasons for issuing notice u/s.148 - issue of notice by non-jurisdictional officer - undisclosed cash deposits in saving bank account - HELD THAT:- As the ITO, Ward-1(1), Bhilai did not have any jurisdiction over the case of the assessee either at the time of recording the reasons to believe, i.e. on 09.05.2016; or at the time of issuance of notice u/s.148 of the Act dated 25.10.2016, therefore, the initiation of proceedings as well as issuance of notice u/s.148 of the Act, dated 25.10.2016 being devoid and bereft of any force of law cannot be sustained and is liable to be quashed.
Now when the assessee has assailed the framing of the assessment u/ss.143(3)/147 on the ground that the initiation of proceedings u/s.147 of the Act by the ITO, Ward-1(1), Bhilai is without authority of law and, therefore, wholly without jurisdiction, then, the aforesaid objection of the Ld. DR that the failure of the assessee to call in question the jurisdiction of the A.O within the time limit prescribed under sub-section (3) of Section 124 cannot be accepted.
On the basis of the aforesaid deliberations, assessment framed on the basis of “reasons to believe” recorded on 09.05.2016 a/w. notice u/s.148 of the Act dated 25.10.2016 issued by the A.O, i.e. ITO, Ward-1(1), Bhilai, a non-jurisdictional Officer, cannot be sustained and is liable to be quashed.
ITO, Ward-1(1), Bhilai at the time of initiating proceedings and issuance of notice u/s.148 dated 25.10.2016 was not vested with any jurisdiction over the case of the assessee, therefore, the aforesaid notice so issued by him de-hors valid assumption of jurisdiction will have no existence in the eyes of law and would be non-est. Non-est notice u/s.148 dated 25.10.2016 issued by the ITO, Ward-1(1), Bhilai can by no stretch of imagination be validated pursuant to the transfer of the case of the assessee by him on 03.08.2017 to ITO Ward-2(1), Bhilai. Appeal of the assessee is allowed.
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2023 (3) TMI 1239 - ITAT AHMEDABAD
Admission of additional evidence by CIT-A - Addition of LTCG - CIT(A) admitted additional evidence in support of contention that the investments were not liquidated by the assessee during the year under consideration but the same were liquidated/withdrawn by the assessee in the succeeding assessment year - CIT(A) admitting fresh evidence in contravention to Rule 46A of I.T. Rules - Whether CIT(A) has erred in not remanding the case back to the AO for examining fresh evidence which is in the form of Bank Statement of assessee ? - HELD THAT:- Evidently, before admitting such additional evidence in support of the assessee’s case, the ld. CIT(A) has not referred the matter back to the ld. Assessing Officer for his comments and has not sought remand report from the ld. AO before adjudicating the appeal in favour of the assessee. We observe that the due process as prescribed under Rule 46A of the Income Tax Rules has not been followed in the instant facts.
Thus looking into the facts of the case, in the interest of justice, the matter is being restored to the file of ld. Assessing Officer for examining the case of the assessee afresh after examining the claim of the assessee in the light of the supporting documents to the effect as to which year the investments have been liquidated by the assessee i.e. whether or not the same sere liquidated by the assessee during the year under consideration. Appeal of the Revenue is allowed for statistical purposes.
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