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Income Tax - Case Laws
Showing 141 to 160 of 8298 Records
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2023 (12) TMI 1045
Payment of interest u/s 244A to the deductor on the refund of tax made u/s 240 - Failure to release the undisputed refund due and determined by respondents themselves in the intimation/order issued u/s 168(1) - stand of the Revenue is interest is not provided for refund of amounts deposited under the equalisation levy and, therefore, the question of payment of any interest does not arise - HELD THAT:- In Tata Chemicals Ltd. [2014 (3) TMI 610 - SUPREME COURT] Apex Court also held that refund due and payable to the assessee is debt owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course
In the present case, it is not in doubt that petitioner was entitled to refund of Rs. 4,23,60,940/- because the amount has been paid after the petition was filed. Since the excess amount has been paid over by petitioner on various dates during Financial Year 2017-2018, in our view, the refund ought to have been processed and paid latest by 31st July 2018.
The interest, therefore, of course, will become payable from 1st April 2018 if we apply the principles prescribed in Section 244A of the Act. The amount, as noted earlier, has been paid only on 21st August 2023. Consequently, we are of the view that petitioner is entitled to interest on this amount of Rs. 4,23,60,940/- from 1st April 2018 upto 21st August 2023 at the rate of 6% p.a. which is the rate prescribed under Section 244A of the Act.
Since we have awarded simple interest at 6%, we are not granting any cost in this case. This order shall be given effect to and the interest shall be paid over on or before 15th February 2024 - If not paid, with effect from 16th February 2024, the rate of interest payable will be at 9% p.a. until the date of payment. This will be in addition to other proceedings to hold the department and concerned officers to be in willful disobedience of the orders passed by this Court. The difference of 3% (9% - 6%) will be recovered from the Officer who will be responsible to have the interest paid.
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2023 (12) TMI 1044
Penalty u/s 271(1)(c) - undisclosed royalty receipts - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs. However, the assessee did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax under the provisions of the Act.
HELD THAT:- Tribunal was of the view that the issue involved in the appeal was debatable. As would be evident, in this behalf, the Tribunal had also taken recourse to the fact that the quantum appeal was pending in this court.
Concededly, the quantum appeals were filed by the respondent/assessee with this court for the AY in issue, i.e., AY 2013-14 and other AYs as well. The other AYs qua which the appeals were filed, as noticed above, were AY 2014-15 and AY 2015-16.
Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue, although, as noticed above, the respondent/assessee had preferred appeals before this court.
The question of law which was framed and answered by this court in [2023 (12) TMI 718 - DELHI HIGH COURT] decided issue in favour of assessee. Thus the penalty imposed in the instant appeal cannot be sustained.
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2023 (12) TMI 1043
Penalty levied u/s 271(1)(c) - undisclosed income taxable as "royalty" - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs but did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax - HELD THAT:- Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue by this Court in [2023 (12) TMI 718 - DELHI HIGH COURT] reads as follows:
“Whether on the facts of the case and in law, the Income Tax Appellate Tribunal [in short, “Tribunal”] erred in holding that the income received by the appellant as a consideration for providing domain name registration services amounted to „royalty‟ under Section 9(1)(vi) of the Income Tax Act, 1961 ?”
Given the position that the respondent/assessee before us has succeeded in the aforementioned appeals, the penalty imposed in the instant appeal cannot be sustained. Therefore, the impugned order, in our opinion, requires no interference.
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2023 (12) TMI 1042
GP estimation - AO has determined the GP rate at 6% as against the disclosed GP rate of 4.6%, which was reduced by the CIT(A) to 5% - ITAT has further reduced it and made an ad hoc addition of Rs. 4,00,000/- to the Gross Profit - HELD THAT:- No reason whatsoever has been assigned by the Tribunal to sustain the addition of Rs. 4,00,000/- in the GP rate of the assessee. Under the circumstances, the finding of the ITAT that ad hoc addition of Rs. 4,00,000/- to the disclosed GP rate of the assessee would be reasonable and fair, is based on no material. Even the Tribunal has not recorded any finding based on any material so as to disbelieve the GP rate disclosed by the assessee. Under the circumstances, the ad hoc addition made by the Tribunal to the GP of the assessee is wholly arbitrary and based on no evidence, consequently, it cannot be sustained. Therefore, the substantial question of law no. (i) is answered in favour of the assessee and against the revenue.
Addition u/s 68 - transaction of sale of jewellery out of receipt of gift of jewellery - HELD THAT:- The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is necessarily required to be based on proper appreciation of material and other attending circumstances available on record. The Assessing Officer has to form his opinion objectively with reference to the materials available on record and not merely on surmises and conjecture. Application of mind is a sine qua non for framing the opinion of the Assessing Officer. Since in the present set of facts the assessee has offered proper explanation based on documentary evidences and the evidences so filed by the assessee were not found to be in-genuine or fake, therefore, genuineness of the sale transaction of jewellery by the assessee could neither be disputed nor Section 68 could be invoked to make addition in the income of the assessee. The legal proposition with respect to applicability of Section 68 has also been settled by the Hon’ble Supreme Court in Commissioner of Income Tax Vs. P. Mohanakala[2007 (5) TMI 192 - SUPREME COURT] which also helps the assessee in the present set of facts. Therefore, the addition of Rs. 9,00,000/- upheld by the Tribunal cannot be sustained. Decided against the revenue.
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2023 (12) TMI 1041
Addition u/s 68 - onus to prove - ITAT sustained addition - HELD THAT:- Tribunal correctly concluded that once unexplained credit was found in the books of accounts, the initial onus under Section 68 of the Act lay on the assessee.
Tribunal held that there was no material except the assertion of the appellant/assessee that he was merely an entry provider and, therefore, only the amount received as commission ought to have been added to his income.
Appellant made a valiant attempt to defend the position of the appellant/assessee by submitting that the appellant/assessee could not assist the AO in unravelling the truth, since Mr Dinesh Prasad had expired immediately after the assessment order was passed in the first round.
Having regard to the record and the approach adopted by the Tribunal, we are unable to persuade ourselves that this is a fit case for interfering with the impugned order. No substantial question of law arises for our consideration.
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2023 (12) TMI 1040
Sham collaboration agreement - addition made after adjustments towards technical expertise and brand value - addition made by the AO is the collaboration agreement as executed between the assessee and an entity named, MGF Development Ltd. - collaboration agreement entered into between the assessee and MGF cast several obligations upon the latter, which included providing and securing funds, bank guarantee and technical expertise for the integrated hotel project and assessee was required to pay 60% of the revenue earned from the transfer/sale of the integrated hotel project to MGF.
Tribunal’s view that the contention of revenue that the collaboration agreement represented a sham transaction was not established and consideration for sharing the revenue was provided by MGF in the form of funds, technical support/assistance for execution of the project and the benefit of its brand value that had been acquired perhaps over the year - HELD THAT:- Tribunal as concluded that the obligation cast on the respondent/assessee to share the revenue from the project represented commercial expediency. In a nutshell, the Tribunal applied the well-established principle that the AO could not have put itself in “the armchair of the businessman” and decide what amount would pass as a reasonable expenditure, vis-à-vis the subject project.
In our view, having regard to the findings of facts returned both by the CIT(A) and the Tribunal, no interference is called for. As was correctly concluded by the Tribunal, the amount received by MGF had been offered for tax and quite clearly, addition in that regard could not have been made in the hands of the respondent/assessee, once the remittance had been accepted in the hands of MGF. In a manner of speech, in our view, what is sauce for the goose is also sauce for the gander. No substantial question of law arises for our consideration.
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2023 (12) TMI 1039
Rectification u/s 154 - case of the Petitioner is that in the course of re-assessment proceedings, the Assessment Officer have wrongly added ICDS while computing taxable income u/s 115JB - also stated that in terms of provisions of law, ICDS will be added in the normal course in determining the income, but in the present case on hand, the assessee is liable to pay the tax in terms of provisions u/s115JB of the Act and hence the Petitioner filed a Rectification Petition u/s. 154
HELD THAT:- While passing the reassessment order, the Respondents have added ICDS while computing income in terms of Section 115JB of the Act. There is no provision in law to add ICDS and therefore when there was no provision, the question of adding the said ICDS while calculating deemed income under Section 115JB would not arise.
In such view of the matter, the aforesaid error has to be rectified. As relying on MK VENKATACHALAM, INCOME-TAX OFFICER, AND ANOTHER [1958 (4) TMI 4 - SUPREME COURT] it is clear that in the event of any mistakes on the record both in law and on facts, it can be rectified. Following the same, this Court is inclined to set aside the impugned order.
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2023 (12) TMI 1038
Delay in filing the revised return of income u/s 139(5) - delay of 37 days in filing the revised returns - petitioner filed his return of income without claiming relief u/s 89 - petitioner is a Pilot - HELD THAT:- There was a delay of 37 days in filing the revised returns. Initially, the petitioner had filed his Income Tax Returns within the prescribed time limit. However, he has not availed the benefits available u/s 89 of the Income Tax Act. Petitioner is a Pilot, who has been travelling throughout India. That apart, he is also a Trainer for the Pilots. Therefore, by oversight, he had filed his returns without claiming the exemption, which is available u/s 89 of the Income Tax Act and there is no dispute on the aspect that the petitioner's entitlement to claim the said exemption.
In the present case, the petitioner should have filed the revised returns within the time limit prescribed under the provisions of the Income Tax Act. However, due to the nature of work, the petitioner was unable to file his revised returns in time.
No doubt, the petitioner is a Pilot, who has to travel throughout India and also he is a trainer of Pilots. As a Pilot, he cannot be excepted to reach home in time everyday. He may be compelled to stay away from his home town. Further, in this writ petition, the petitioner is asking for condonation of delay of 37 days. Therefore, this Court feels that for the interest of justice, the said delay of 37 days in filing the revised returns has to be condoned, since it is not a tax liability that the petitioner is not going to pay to the respondent, but it is an exemption, which he is entitled to claim under the provisions of Income Tax Act. The said entitlement cannot be deprived by citing the reasons of delay of 37 days in filing the revised returns.
Regarding the argument that Respondents that there must be some discipline in filing the returns, otherwise it would set an example to demoralise the work done by the Officers, who are in-charge of filing returns is concerned, this Court is of the considered view that the question of demoralisation of work will not come into picture here, since it is the duty of the Officers to scrutinize the returns and in the course of scrutinizing the returns, if anything is found, it is the duty of the Officers concerned to intimate the same to the Assessees and hence, while performing their duty. In fact, this Court expects that the officials should assist the Assessees and inform the defects in time, if any, noticed in the returns then and there.
This Court is inclined to set aside the impugned order passed by the respondent. Accordingly, the impugned order is set aside and the delay of 37 days in filing the revised returns is hereby condoned.
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2023 (12) TMI 1037
Unexplained investments - assessee alleged to have receipt it as gift - Non establish relation between the donor and the assessee with documentary evidence - addition made by the AO was non furnishing of requisite document during the assessment proceedings - DRP held that, since the basis of addition made by the AO was non furnishing of requisite document during the assessment proceedings, the panel, in the interest of natural justice and with the objective to arrive at true determination of taxable income of the assessee, considers it appropriate to take the additional evidence filed by the assessee on record - HELD THAT:- We have given credence to the following facts like Copy of UK passport of donor to prove his identity, date of birth and age of 72 years, Details of his personal residence and complete residential address, Copy of duly signed letter of confirmation from the donor stating that he had gifted a sum to his sister's son i.e. the assessee on 22.12.2015 to prove the genuineness of the transaction.
A perusal of the bank statement of the assessee showing receipt of funds, also showing the details of remittance received by the assessee in his NRE account on account of said gift. Documentary evidence to prove that the assessee and donor are both UK citizens and non-residents and thus the documentary evidence to support and substantiate documents generally applicable in India such as gift deeds were neither relevant nor executed between them. A signed letter of confirmation was submitted before the AO.
Details of PAN of donor in India to prove his identity and credit worthiness, Details of investments held by Donor in India in Bharti Airtel which were sold for approximately Rs. 2150 crores in 2005 to prove his credit worthiness. The relationship between the assessee's mother and the donor was established with a joint reading of the said affidavit along with the copy of Indian passport of the assessee's mother Smt. Sumi Malik.
Copy of assessment order u/s 147/143(3) framed by colleague of the Ld. AO himself duly scrutinizing and accepting the sale of investments by the donor in AY 2007-08. In the instant case, the sale of investment being considered was to the tune of Rs. 19,80,37,899 as against gift of Rs. 6.87 crores, to establish the credit worthiness of the donor. Copy of ITRs of the donor for AY 2016-17 and 2017-18 declaring income of Rs. 4,12,79,631 and Rs. 20,11,631 respectively to establish the credit worthiness of the donor.
Hence keeping in view in the facts narrated above, we hold that no addition is called for in this case.
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2023 (12) TMI 1036
LTCG - eligibility or claim of exemption of u/s. 54F - As per AO new asset cannot be considered as acquired within 02 years of transfer of original asset - HELD THAT:- The assessee sold residential property on 17.04.2014 for Rs. 70,00,000/- and the entire sale proceeds were invested from 01.05.2014 to 08.07.2014 in purchase of property named “ The Grands Arch” from the builder “Ireo”. - New property acquired vide Possession letter dated 04.07.2016 and conveyance deed dated 29.04.2016.
Since the assessee has invested the entire sale proceeds for the purchase of new house within three months of sale of the old house, the assessee is eligible for claim of exemption of u/s. 54F - Appeal of the allowed is allowed.
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2023 (12) TMI 1035
Shifting of income by client code modification - HELD THAT:- Addition cannot be made on the basis of DDIT report into the shifting of income through client code modification alone where the AO has not carried out any further independent verification into the matter. In the present case also the assessee has maintained all the books of account and also furnished all the documents qua the F & O segment done through the said broker.
We also note that the AO has not doubted the F & O transactions loss incurred to the tune of Rs. 18,16,26,178.83/- and has doubted only the transactions through M/s Indianivesh Securities Pvt. Ltd. registered broker that too on DDIT Report. Under these facts, we are not in a position to sustain the order of Ld. CIT(A) which has also discussed DDIT report by SEBI without giving any independent finding on the issue. Accordingly we set aside the order of authorities below and direct the AO to delete the addition.Appeal of the assessee is allowed.
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2023 (12) TMI 1034
Estimation of income - bogus purchases - HELD THAT:- Estimation of profit of the assessee @4% is reasonable - Therefore, direct the AO to estimate the profit of the assessee @4% instead of 5%. Grounds raised by the assessee are partly allowed.
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2023 (12) TMI 1033
Penalty u/s 271(1)(c) - disallowance u/s. 36(1)(iii) - Penalty imposed for furnishing inaccurate particulars of income - HELD THAT:- It is pertinent to note that the Hon’ble Supreme Court in case of Reliance Petro-Product Pvt. Ltd. [2010 (3) TMI 19 - SUPREME COURT] categorically stated that the word inaccurate particulars means that the details supplied in the return are not accurate not exact or correct and not according to truth or erroneous. In the absence of finding by the AO that any detail supplied by the assessee in its return were found inaccurate or false cannot attract section 271(1)(c) of the Act.
In fact, the assessee at the time of assessment proceedings has given a detailed calculation related to interest u/s. 36(1)(iii) on borrowed funds for acquiring capital assets and this very same amount was added by the AO and thus it cannot be said that the assessee furnished inaccurate particulars of income or concealed particulars of income though the assessee was under bonafide mistake did not state the same in its return of income.
The notice also lapses on the part of not specifying the particular of limb of section 271(1)(c) of the Act which was decided by the Hon’ble Apex Court in case of CIT vs. SSA’s Emerald Meadows [2016 (8) TMI 1145 - SC ORDER], hence the appeal of the assessee is allowed and the penalty does not survive. Decided in favour of assessee.
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2023 (12) TMI 1032
Revision u/s 263 - LTCG - admissibility of deduction u/s 54F - CIT broadly observed that the Assessing Officer has wrongly accepted the methodology of computation of capital gains and consequent deduction u/s 54F - HELD THAT:- As pointed out on behalf of the assessee, two pre-requisites must coexist before the designated authority could exercise the revisional jurisdiction conferred on him namely; the order should be (i) erroneous & (ii) the error must be such that it is prejudicial to the interests of the Revenue. However, an erroneous order does not necessarily mean an order with which the Pr.CIT is unable to agree. The AO while passing an order of assessment, performs judicial functions.
An order of assessment passed by the AO cannot be interfered only because some other view is also possible on the issue as held in CIT vs. Greenworld Corporation [2009 (5) TMI 14 - SUPREME COURT] If in given facts and circumstances of the case, two views are possible and one view as legally plausible has been adopted by the AO then existence of other possible view alone would not be sufficient to exercise powers under s.263 of the Act by the Pr.CIT /CIT concerned. Hence, there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous and causing prejudice, that the Section will be attracted. An incorrect assumption of facts or incorrect application of law will satisfy the requirements of the order being erroneous.
In the instant case, it is sought to be demonstrated on behalf of the assessee that necessary inquiries were made towards computation of Long Term Capital Gains and deduction claimed u/s 54F of the Act. It was further pointed out that although two separate agreements have been executed due to demarcation of share in single property to different persons due to gift or bequeath by will, the property remains only one and therefore eligible for deduction under Section 54F - assessee has advanced justification for cost of improvement of Rs. 25 lakhs claimed under Section 54F of the Act.
Eligibility of deduction towards two units under two different agreements sought to be questioned by the Pr.CIT - Reasons are not far to seek. Both the agreements have been claimed to have been entered at the same time and in respect of same property. The kitchen continues to be only one and therefore, two different agreements will not give rise to different residential property. The electricity bill is also common as demonstrated. The background facts for division of property has also been narrated. These facts could have been easily appreciated by the Pr.CIT with some minimal inquiry.
CIT has simply shifted the burden on the AO and eventually on the assessee without discharging his judicial duties expected in law. Besides, such allegation does not appear in the show cause notice issued at the first instance. While it is true that the directions are not necessarily required to be restricted to the show cause notice alone but however in the same vein, opportunity must be given to the assessee in some form to meet the point in issue in the course of revisional proceedings. In the absence of notice to the assessee that the purchase of residential property is being considered as two different residential units, the assessee had no occasion to rebut the ground raised directly in the revisional order. The directions at this point given to the Assessing Officer without opportunity to assessee in the course of revisional proceedings thus requires to be set aside on this score too.
We hardly see any merit in the plea of the assessee that amount of Rs. 25 lakh set apart and kept in the Capital Gain Account Scheme towards cost of improvement of residential property acquired is eligible for deduction under Section 54F of the Act. Such cost of improvement can, at best, be treated as cost of improvement deductible at the time of sale of such property as and when happens. The direction of Pr.CIT on the point thus cannot be assailed.
Appeal of the assessee is partly allowed.
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2023 (12) TMI 1031
Approval u/s. 10(23C)(vi)(via) - Claim denied on the ground that the institution is engaged in the multi-objects apart from education - HELD THAT:- It is pertinent to note that the distinguishing facts which have been pointed out by the ld. A.R. does not stand in toto in light of decision of Hon’ble Apex Court in New Noble Education Society [2022 (10) TMI 855 - SUPREME COURT] and in fact after verifying the objects of the society which is placed before us clearly sets out that the assessee is not solely into the activity of education.
A.R. pointed almost 19 decisions, but the same will not be applicable in Assessee’s case as in Assessee’s case, the assessee is doing other activities and not exclusively dealing with education as explained and decided by the latest decision of Hon’ble Apex Court in case of New Noble Education Society (Supra). Therefore, there is no need to interfere with the findings of CIT (Exemption). Thus, both the appeals filed by the assessee are dismissed.
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2023 (12) TMI 1030
LTCG - Deduction u/s 54EC on account of investment in REC Bonds - whether exemption under Section 54EC can be denied on account of the fact that deeming fiction of short term capital gain was created u/s 50 ? - HELD THAT:- As decided in the case of Aditya Medisales Ltd. [2013 (11) TMI 576 - GUJARAT HIGH COURT] has held that exemption u/s 54EC of the Act could not be denied on account of the fact that deeming fiction of short term capital gain was created under Section 50 of the Act. In this case the assessee company sold automatic electric monitoring system. The company invested gain amount in Rural Electrification Bonds and claimed exemption under Section 54EC of the Act.
AO found that short term capital gain was offered by assessee under Section 50 of the Act and disallowed exemption under Section 54EC claimed by the assessee on the ground that same was not available on a short term capital gains. The High Court held that since capital gains arose out of long term capital asset and same was invested in specified assets, exemption under Section 54EC could not be denied on account of the fact that deeming fiction of short term capital gain was created - The aforesaid decision has also been followed by Ahmedabad Tribunal in the case of DCIT M/s. Liva Healthcare Ltd. [2019 (1) TMI 210 - ITAT AHMEDABAD]
Whether benefit u/s 54EC of the Act is available in case the assessee invested a sum of Rs. 50 lakhs in two Financial Years? - As decided in C. Jaichander [2014 (11) TMI 54 - MADRAS HIGH COURT] held that where assessee invested a sum of Rs. 50 lakhs each in two different Financial Years, within a period of six months from date of transfer of capital asset, he was eligible for deduction u/s 54EC - The facts in this cases were that the assessee sold a property vide sale agreement dated 18.02.2008 and invested a sum of Rs. 1 crores out of sale proceeds in certain bonds in two Financial Years 2007-08 and 2008-09.
AO held that assessee could take benefit of investment in said Bonds to a maximum of Rs. 50 lakhs only under Section 54EC(1) and accordingly, held that the other sum of Rs. 50 lakhs invested over and above ceiling prescribed did not qualify for exemption. However, the Madras High Court held that from a reading of Section 54EC(1) and first proviso, it was clear that time limit for investment was six months from the date of transfer and even if such investment felt under two Financial Years, benefit claimed by the assessee could not be denied and there was no cap on investment in Bonds. Accordingly, the Madras High Court held that the assessee was eligible for deduction under Section 54EC of the Act in respect of said investments.
The position becomes clear that for the impugned A.Y. 2014-15, as it stood at the relevant time, if the assessee made investment in REC Bonds for Rs. 50 lakhs each, the assessee would be eligible for deduction under Section 54EC of the Act, provided both the investments were made within a period of six months as prescribed under 54EC of the Act. In the present case, the assessee had sold the asset under consideration on 16.12.2013, whereas the second investment in REC Bond was made on 30.06.2014.
In the case of Alkaben B. Patel vs. ITO [2014 (3) TMI 842 - ITAT AHMEDABAD] held that in terms of General Clauses Act, 1897 the period of six months mentioned in Section 54EC has to be recorded as six British Calendar months. The issue for consideration before ITAT Special Bench was that whether for the purpose of Section 54EC, the period of investments should be calculated as six months after the “date of transfer” or to be reckoned as 180 days from “date of transfer”. The ITAT held that the term “month” is not defined in the Act and therefore, as per the definition of the term “month” as per General Clauses Act, 1897 shall mean of month recognized according to the British Calendar.
Again, in the case of Niamat Mahroof Virji [2016 (12) TMI 1081 - ITAT MUMBAI] held that in terms of General Clauses Act 1897, period of six months mentioned in Section 54EC has to be recorded as six British Calendar months. Accordingly, it was held that where assessee sold his ancestral property on 13.10.2010, investment of capital gain made in REC Bonds on 30.04.2009 was eligible for deduction under Section 54EC of the Act.
Thus we are of the considered view that investment of Rs. 50 lakhs in REC Bonds on 30.06.2014 falls within the period of six months as stipulated under Section 54EC of the Act and is hence eligible for deduction under Section 54EC of the Act. Appeal of assessee allowed .
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2023 (12) TMI 1029
TP Adjustment - US Transactions non US Transactions - scope of MAP agreement - associated enterprise of the assessee in the USA filed an application under mutual agreement procedure (MAP) with the competent authority of the US under article 27 of the India USDTAA and the settlement has been arrived at between the competent authority of India with respect to the adjustment on account of Transfer Pricing issues relating to the US transactions - DR vehemently stated that the same treatment should be given to the non US transactions as there is no difference in FAR of US transactions and non US transactions.
HELD THAT:- It is true that this is an appeal by the assessee but it is equally true that the other party i.e. the revenue can raise issue under rule 27 orally as settled in the case of Sanjay Sahney [2020 (5) TMI 441 - DELHI HIGH COURT] and respectfully following the same the oral request of the DR is accepted.
It would be better to refer to the settlement arrived between the competent authority of India and the competent authority of USA to resolve the cases relating to Hewitt India for A.Y. 2006-07 to 2010-11 by adopting the values relating to US related international transaction - No hesitation to direct the AO / TPO to adopt the same approach for the non US transactions as adopted in the MAP for US transactions and determine the TP adjustment, if any, after affording a reasonable and sufficient opportunity of being heard to the assessee. See J.P. Morgan Services India Private Limited [2019 (4) TMI 219 - BOMBAY HIGH COURT] Appeal of the assessee is allowed for statistical purpose.
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2023 (12) TMI 1028
Revision u/s 263 by CIT - excess claim of deduction u/s 80P - assessee stated to have earned income by way of interest from deposits made in Nationalized Banks - PCIT reveals that on scrutiny of the records of the assessee he noted that the assessee being a Co-operative Society engaged in providing credit facility to its members for agriculture it had been allowed excess claim of deduction u/s 80P of the Act in the assessment framed u/s 143(3) - PCIT noted that while the assessee had earned both exempt income and taxable income, the expenses had not been properly apportioned between two sets of income - HELD THAT:- We find merit in the contention of assessee that the basic premise of PCIT for arriving at finding of excessive claim of deduction u/s 80P(2)(a)(i) by the assessee, rested on assumption of incorrect and unverifiable facts. It is not clear to us as to how the Ld. PCIT arrived at the finding that the income of the assessee eligible to deduction u/s 80P(2)(a)(i) was only Rs. 36 Crore and not Rs. 41 Crore as claimed and allowed to the assessee.
While the assessee claim of deduction of Rs. 41 Crores of profit u/s 80P(2)(a)(i) emanated from the records including the financial statement, the tax audit report and computation of income filed by the assessee, all documents filed before us in Paper book, and was also examined during assessment proceedings by issuance of notice u/s 142(1) of the Act and replies filed by the assessee placed before us,the basis of the Ld. PCIT for holding that the assessee was eligible to only Rs. 36 Crores deduction under Section 80P(2)(a)(i) of the Act is not clear nor does it seen to arise from the records before us.
Therefore, we hold that the very basis for assumption of jurisdiction to revise assessment order fails on account of the error in the assessment order having been found by the Ld. PCIT on the basis of incorrect facts.
Records do not support the finding of the PCIT that the assessee had claimed excessive deduction u/s 80P(2)(a)(i) - And as long as the finding of error of PCIT is based on facts which palpably do not emanate from records, it is immaterial whether this fact is pointed out for the first time before us. In view of the same there is no error in the assessment border vis a vis quantum of allowance of deduction to the assessee u/s 80P - The revisionary order passed by the Ld. PCIT, therefore, needs to be set aside for having failed to fulfill one of the twin conditions , of the assessment order being both erroneous and prejudicial to the interest of the Revenue, necessary for invoking revisionary jurisdiction , as laid down in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] this ground alone.
Subsequently, after noting that as per records the assessee was eligible to lesser claim of deduction under Section 80P(2)(a)(i) of the Act, the Ld.PCIT has gone on a different tangent after receiving the assessee’s reply to the show cause notice. We find from the reply filed by the assessee during revisionary proceedings that the assessee stated to have earned income by way of interest from deposits made in Nationalized Banks. Picking this information he held that the assessee was not eligible to claim deduction on this interest income as per the provisions of law and having been allowed deduction on the same, the assessment order was in error causing prejudice to the Revenue.
We are not in agreement with the Ld. DR. Even if the Ld. PCIT had noted the fact of assessee having claimed deduction on an ineligible income from the assesses statement of facts before him, it was his bounden duty to confront the assessee that it was ineligible in law for deduction u/s 80P of the Act, before holding the assessment order being erroneous on having allowed the assessee’s claim of deduction under Section 80P(2)(a)(i) of the Act on the same. In the absence of any show cause notice being given to the assessee, the finding of error by the Ld. PCIT on account of the same is not sustainable in law and the revisionary order passed, therefore, is liable to be set aside for the same reason also.
PCIT is unclear and is not sure as what exactly is the error in the assessment order. He begins by noting error on account of excess claim of deduction under Section 80P(2)(a)(i) due to incorrect apportionment of expenditure to exempt income while assuming jurisdiction u/s 263 but goes on to hold the error to pertain to allowance of claim of deduction u/s 80 P to income which was otherwise not eligible in law to such claim, and then concludes by reverting back to his original finding of error on account of excessive claim of deduction on account of incorrect appropriation of expenses. The powers of revision being exercisable on a categorically finding of error in assessment order causing prejudice to the Revenue, this uncertainty in the finding of the error by Ld. PCIT renders the revisional order completely unsustainable in law. Decided in favour of assessee.
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2023 (12) TMI 1027
Addition towards limited return on share capital - limited return on share capital needs to be given out of reserves and cannot be debited to P & L Account as expenditure - DR submitted that the limited return on share capital at 1% on the share capital amount paid to the farmers is identical to the dividends and cannot be a charge to the P & L Account and it cannot be construed as a Finance Cost as claimed by the assessee - CIT(A) deleted the addition stating that it is legitimate business expenditure - assessee-company is a special category company under the Companies Act and is covered by the Part-IXA of the Companies Act, 1956 - HELD THAT:- The limited return is nothing but a maximum dividend payable / paid to the Members of the Producer Company as authorized by the Articles of Association and hence it cannot be considered as an expenditure and claimed as expenditure. It is not a charge to the P & L Account but only an appropriation of the profit and hence the Ld. AO has rightly disallowed the same. We therefore allow the Grounds No. 1 & 2 raised by the Revenue.
Disallowance towards withheld price / additional price - as per DR same is only application of income as the company makes payment towards additional price / withheld price of milk procured out of profit and therefore, the same cannot be debited to P & L Account as an expense and not an allowable deduction - CIT(A) deleted addition - HELD THAT:- We find that the assessee-company has paid withheld price to the milk suppliers even in the earlier assessment years and the same was allowed by the Ld. AO. The Coordinate Bench of the Tribunal in the assessee’s own case for the AY 2010-11 [2017 (11) TMI 1363 - ITAT VISAKHAPATNAM] has allowed the appeal of the assessee thereby directed the Ld. AO to delete the addition of payment of withheld price made to the milk producers. However, as pointed out by the Ld. DR, the Revenue is in appeal before the Hon’ble High Court of Andhra Pradesh contesting the order of the ITAT. In this connection, we hereby direct the Ld. AO to decide this issue based on the outcome of the decision of the Hon’ble High Court of Andhra Pradesh, in order to avoid multiplicity of litigation. Accordingly, this ground raised by the Revenue is disposed off for statistical purposes.
Allowability of expenditure incurred during the General Body meeting by way of payment of gifts to the Members of the Producer Company - CIT(A) deleted the disallowance made - as per DR distribution of gifts are not encouraged in AGM to curb cooperate misdoing and is against established practice of corporate governance - HELD THAT:- Admittedly these amounts of gifts were distributed at the time of AGM which is being gifted to the milk producers who were also Members of the assessee-company. We also find that these gifts are made to the Members who were also suppliers of milk and are also shareholders of the assessee-company. Hence we are of the considered view that these expenditures are in the nature of business promotion expenditure which shall be allowed as deduction U/s. 37 of the Act. We therefore find no infirmity in the order of the Ld. CIT(A) on this ground - Decided against revenue.
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2023 (12) TMI 1026
Disallowance of the standard deduction u/s 24(a) against the income declared by the assessee under the head Income from House Property - HELD THAT:- We are of considered opinion that judgement of the Hon’ble Supreme Court in the case of Suraj Lamps & Industries (supra) is in regard to transfer and conveyance of a title for civil consequences between private parties. However, with regard to the fiscal purposes, between assessee and Revenue, where on the basis of existence of an interest in an immovable property, certain rights or interest including those right to executed further convey the title are involved, the documents like GPA, sale agreement or Will have to be considered valid and effective for all purposes for creating a liability on assessee or to give benefit to the assessee. Although in the judgement relied by the ld. AR in the case of Rita Kuchal [2015 (5) TMI 1254 - ITAT DELHI] there is no specific discussion on this aspect, however, cognizance of the judgement of the Hon’ble Supreme Court in the case of Suraj Lamps & Industries [2011 (10) TMI 8 - SUPREME COURT] was taken, but, for the purpose of section 24(a), the right of an assessee to be entitled to receive the rental income was given precedence.
Thus, the judgement which the ld. AR has relied in CIT vs. Smt. Wiran Bai Jaggi [2002 (8) TMI 889 - DELHI HIGH COURT] wherein the judgement of the Hon’ble Supreme Court in case of CIT vs. Podar Cement [1997 (5) TMI 2 - SUPREME COURT] has been relied is still applicable to the case of the assessee. The observations of the Hon’ble Supreme Court in the case of Podar Cement Pvt. Ltd. (supra) are worth to be reproduced to understand how the law propounded in regard to section 22 of the Act is different from the one propounded for the purpose of section 17 of the Registration Act in Suraj Lamps & Industries [2011 (10) TMI 8 - SUPREME COURT].
Thus, furthermore, the ld. DR could not defend the argument that in the subsequent years the CIT(A) has deleted the addition made by the AO holding that the rent received by the assessee is to be assessed as ‘income from house property.’ Thus, we are inclined to allow this ground no 2.
Addition on account of business expenses - disallowance on the ground that appellant has no money lending business whereas assessee claims that the money lending business was dormant and the assessee was in litigation with the debtors to recover the principal and interest - HELD THAT:- As coming to the present assessment year, at the outset, we would like to reiterate the settled proposition of law that every assessment year is independent and there is no applicability of principle of res judicata, if the facts are distinguishable and there is evidence in that regard. In the present year 2015-16, the assessee is no more into subletting business, but, has earned income from property and has also claimed deduction u/s 24(a) of the Act which we have allowed in ground No.2. During the year, the assessee has changed the receipts from LIC India from one received in the capacity as a lessee who has created the sublease to an owner who has rented the premises. Thus, certainly the expenses of the description mentioned in the assessment order could not be attributed to the income from property as standard deduction u/s 24(a) of the Act stands allowed.
It appears that during assessment proceedings the assessee claimed that apart from leasing of property business the assessee is also engaged in money lending business. This was considered by the AO to be an afterthought, but, the CIT(A) has gone into the issue in a more detailed manner.
As in the present assessment year there is no interest income at all either under the heads, ‘Income from other sources’ or ‘business income.’ The claim of the assessee is that the lending business should be accepted on the basis of consistency. However, the same cannot be accepted as ld.CIT(A) has made a very specific observation on the basis of the financials. There are only two entries which the assessee claims to be money lending business.
Now, in regard to one of those the assessee has filed a copy of complaint u/s 138 of the Negotiable Instruments Act filed against Sunil Mantri Realty Ltd. and the averments of this complaint shows that the assessee had entered into an agreement on 01.01.2010 to purchase certain flats from Sunil Mantri Realty Ltd., for which payments were made, but, as that vendor could not supply the flats, the vendor had given a cheque of Rs. 4,10,00,000/- to the assessee to return the sale consideration and that cheque was dishonoured. Thus, the averments in the complaint do not at all indicate that the money claimed to have been standing as a loan was ever given as a loan for the purpose of money lending business. In fact, in AY 2012-13, there was an issue of undisclosed income of Rs. 12 lakhs wherein the AO had made an addition of Rs. 12 lakhs on the ground that the assessee has been showing interest income from M/s Sunil Mantri Realty Ltd. on accrual basis. M/s Sunil Mantri Realty Ltd., had paid interest and deducted tax which was reflected in 26AS, but, there was lack of reconciliation.
The order of ld.CIT(A) for AY 2012-13 show that there is a mention of cheque of Rs. 4,10,00,000/- given by the debtor on 01.09.2013 which could not be encashed and for which the assessee has filed the case and the ld.CIT(A) had confirmed the addition of Rs. 12 lakhs. Thus, we are of the considered view that what ld. AR has relied in regard to the previous or subsequent years about the money lending business of the assessee is not sustainable in the facts discussed above from the perspective of ld.CIT(A) and we do not consider that there is any error in the sustenance by ld.CIT(A). Accordingly, this ground is decided against the assessee.
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