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Income Tax - Case Laws
Showing 201 to 220 of 8298 Records
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2023 (12) TMI 887
Delay in paying the audit fee - Petitioner was engaged as an auditor in exercise of the Assessing Officer’s (AO) powers u/s 142(2A) - HC held [2023 (2) TMI 861 - DELHI HIGH COURT] there is enormous delay in each case in payment of the determined audit fee. The delay is nearly four years in each case and interest ought to be paid to the petitioner at the rate of 7% per annum. Interest will run from the date of determination in each case till the date of payment of audit fee was made.
HELD THAT:- There is a delay of 204 days in filing the Special Leave Petition. The delay has not been satisfactorily explained.
The Special Leave Petition is dismissed on the ground of delay.
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2023 (12) TMI 886
Reopening of assessment u/s 147 - escapement of income on account of bank interest and cash deposits in two of its bank accounts - scope of 3rd proviso to Section 12A(2) - Validity of order passed u/subsec (d) of Section 148A being without jurisdiction and against the 3rd proviso to Section 12A(2) of the Act - petitioner uploaded its reply taking a plea that as per 3rd proviso to Section 12A(2) of the Act, there was a bar to take any action u/s 147 for any preceding year, in which the registration was granted - As decided by HC [2023 (7) TMI 506 - PUNJAB & HARYANA HIGH COURT] Registration of the petitioner-trust was granted on 30.09.2016 which was applicable from the assessment year 2016-17 and as such, said registration was valid for claiming the benefit under Sections 11 and 12 no proceedings under Section 147 can be initiated for the assessment year 2015-16 and impugned notices and the consequent order passed under Section 148A(d) being contrary to the 3rd proviso to Section 12A(2) of the Act, are set aside.
HELD THAT:- Though there is delay of 191 days in filing this special leave petition, we have heard learned ASG, appearing for the petitioners on merits also.
We are not inclined to interfere in the matter(s). Hence, the Special Leave Petition is dismissed.
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2023 (12) TMI 885
Rectification of the Assessment Order u/s 143 - whether application for rectification had been filed beyond the period of limitation ? - action for reflection of the TDS deducted against the new PAN Number obtained by the petitioner - Application for granting permission u/s 119(2)(b) - issuance of new pan - TDS deductions not reflected in Form 26AS - Petitioner seeking to rectify its Income Tax return qua the TDS now being reflected under the correct PAN - Income Tax Authorities have also reflected the TDS amount of old PAN against the new PAN Number of the petitioner, as an Association of Persons.
As decided by HC [2023 (4) TMI 340 - UTTARAKHAND HIGH COURT] rectification application could be filed by the petitioner within four years of the expiry of the Assessment Year. Admittedly, the petitioner did not do so. By resorting to Clause 3 of Circular No. 9/2015, the petitioner could have sought condonation of delay, in moving the rectification application by another two years. The petitioner did not file the rectification application either within the period of limitation, or even within the period for which the delay could be condoned, i.e. up to six years. The petitioner moved the rectification application only in the year 2021, i.e. after over 12 years.
HELD THAT:- As petitioner submitted that permission may be granted to the petitioner herein to withdraw this Special Leave petition with liberty to make a representation to the Central Board of Direct Taxes (CBDT) under Section 119 of the Income Tax Act, 1961 so as to seek adjustment in view of the rectification made by the Department with regard to the PAN number of the petitioner/entity.
The submission of learned senior counsel is placed on record.
The Special Leave Petition is dismissed as withdrawn reserving aforesaid liberty to the petitioner.
It is needless to observe that if any representation is made by the petitioner to the CBDT, the same shall be considered expeditiously and in accordance with law and a copy of the order passed thereon shall be communicated to the petitioner herein.
Since, the plea made by the petitioner herein in these proceedings was rejected on the ground of delay and not on merits as such, the representation to be made by the petitioner to the CBDT shall be considered on its own merits without being influenced by the impugned order(s).
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2023 (12) TMI 884
Gain arising from slump sale - Capital gain OR business income - assessee transferred its business activities relating to assembling of seats and seating products located at Pune, on slump sale basis - whether the transaction does not satisfy the condition prescribed u/s. 50B? - HELD THAT:- CIT(A), referring to the provisions of Section 28(iv) which the AO felt the transaction was covered under, correctly came to a conclusion that the consideration is received in terms of money whereas Section 28(iv) refers to the value of any benefit or perquisite whether convertible in money or not and Courts have held that where the consideration is monetary, Section 28(iv) of the Act will not apply.
CIT(A) also relied upon various judgments of the ITAT and came to a conclusion that assessee has rightly computed the capital gain under Section 50B of the Act. The ITAT, in the order impugned, has come to a factual finding that no material was placed before the Tribunal by the Revenue to contradict the finding given by the CIT(A). There is no challenge to this finding before us. Therefore, no question of law, let alone a substantial question of law, will arise as regards the proposed first question.
Write off of the business/trade advances receivable from a sick company - ITAT allowed deduction - ITAT relied upon various decisions of co-ordinate Benches and reiterated the well settled legal proposition that Tax Authorities should not sit in the arm chair of a businessman and assume his role to decide the correctness of a commercial decision. The ITAT has also taken support from the decision of the Hon’ble Supreme Court of India in the case of CIT v. Mysore Sugar Company Ltd. [1962 (5) TMI 3 - SUPREME COURT] to hold that unrecoverable trade advance is allowable as business loss and it would certainly be allowable as a deduction under the Act.
ITAT has also considered the factual position that the shares of RCVPL being listed in the Bombay Stock Exchange, is a widely held Company in terms of the provisions of the Income Tax Act and thus, it cannot be said that the promoters of the assessee Company would be benefited by decision taken by them. ITAT has specifically noted the absence of any finding either by the AO or by the CIT(A) that the transaction to write off was a mere eye wash. Thus, based on the facts available on record, it cannot be said that the motive to write off was only to reduce the tax liability.
As evident from the explanation of the assessee that the decision taken by it to write off the trade deposit was based on commercial sense and cogent reasoning since RCVPL was already declared as sick Company. Furthermore, RCVPL did not adjust the trade deposit against the trade deposit as per the terms of the agreement and was asking for payments against the bills. The assessee was thus compelled to make the payment in order to ensure future supplies and thus the assessee is justified in making a decision to write off the trade advance. This is perfectly probable and acceptable. Moreover, even the Hon’ble Supreme Court in its decision into the case of Mysore Sugar Company Ltd. (supra), has observed that the money lost in doing business based the character of current expenses.
Thus we find that the matter is purely factual in nature. We do not find it jurisdictionally proper and necessary to substitute the view of the Tribunal with our view, especially since the same is based on facts. The Revenue is unable to indicate any question of law, leave aside any involving a substantial legal proposition. We do not find any error in the order of the Tribunal, impugned herein. The Appeal is thus without merit.
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2023 (12) TMI 883
Income taxable in India - attribution of profits at the rate of 50% to the India centre - fixed place PE in India or not? - core business of assessee concerns providing testing services to its clients, concerning transmission systems designed for automobiles at its centers located in U.K. - assessee had filed its Return of Income (ROI) in which it declared its income as “nil” as income earned by it from customers located in India was not taxable - AO concluded that assessee had a Permanent Establishment (PE) in India in the form of its subsidiary - AO proceeded to attribute 50% of the business profits by applying the global profit ratio
HELD THAT:- The record shows that the Tribunal has returned a finding of fact that the respondent/assessee does not dispute that it had a fixed place PE in India in the form of Ricardo India.
Inter alia, what persuaded the Tribunal to rule in favour of assessee is the other aspect which was that if the commission/remuneration paid to Ricardo India was reduced from the profit attributed to the PE, then no further attribution could have been made.
Thus when RIPL, a domestic subsidiary company, has already been remunerated at arm’s length no further attribution of profit to PE would be warranted. Even otherwise by following the order passed by the coordinate Bench of the Tribunal in assessee's own case for AY 2007-08 [2020 (11) TMI 206 - ITAT DELHI] when we deduct the remuneration/commission paid to RIPL from the amounts of profit attributed to the PE as detailed in para 11 of this order, no taxable income left in the hands of the PE. Consequently, additions made by the AO and confirmed by ld. CIT(A) are ordered to be deleted being not sustainable in the eyes of law.
Given the finding of fact returned by the Tribunal that no further profit could be attributed if commission/remuneration paid to Ricardo India is adjusted against the profit attributed to the PE, we are not inclined to interfere with the impugned order. Appeals filed by the assessee are hereby allowed.
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2023 (12) TMI 882
Addition u/s 41 - liability outstanding or not? - HELD THAT:- Under the schedule trade payables there is no liability outstanding under the name of Axom Communications - We have carefully gone through the entire financial statements and we could not find any mention of any liability in the name of Axom Communication where from the AO has picked up this figure is not known since it is not part of the financial statement. We do not find any logic / reason for making the impugned addition. For the liability in the name of Web Com India Private Limited the bills are placed and the liability pertains to the year under consideration only. For the reasons given here in above, we do not find any merit in this addition u/s.41 of the Act. Thus the addition is deleted.Decided in favour of assesee.
Disallowance u/s.40a(ia) - non deposit of tax deducted at source - scope of amendment made by the finance No.2 Act 2014 - as argued there is no doubt the tax was deducted at source from the impugned payments but was not deposited on or before the due date of filing of the return but instead of entire disallowance 30% of the total sum should have been disallowed as per the amended provision of section 40 a(ia) - HELD THAT:- It is true that the amendment made by the finance No.2 Act 2014 is effective from 01.04.2015 but we are of the considered view that it has retrospective effect as held by the coordinate Bench in the case of Smt. Kanta Yadav [2017 (5) TMI 1565 - ITAT NEW DELHI] modify the orders of the authorities below and direct the Assessing Officer to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia). Decided in favour of assesee partly.
Ad-hoc disallowance of 20% of expenditure - HELD THAT:- AO himself mentions that the expenses claimed by the assessee were also test checked and while making the addition the AO says that the books of account vouchers were not produced. The logical question arises if the books and vouchers were not produced then from where the AO test checked the expenses. We do not find in the assessment order where the AO asked the assessee to produce books of accounts / vouchers for verification. Once again a logical question arises why 20% and why not 30, 50 even 100%. Without pointing out any specific defect in the audited books of accounts the AO cannot and should not make any estimated addition. We, therefore, direct the AO to delete the impugned addition - Decided in favour of assesee.
Levy of penalty u/s. 271 (1)(c) - allegation of non specification of clear charge - defective notice u/s 274 - HELD THAT:- We are of the considered view that when the notices issued by the AO are bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Decided in favour of assesee.
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2023 (12) TMI 881
Unexplained cash credit u/s.68 - assessee taken loan from nine parties being companies connected with an accommodation entry provider - mere submission of PAN, account number and books of accounts could not establish the creditworthiness of the parties - CIT(A) deleted addition on the basis of details/documents submitted by the assessee - HELD THAT:- The assessee submitted the reply with respect to these 9 loans, submitting the ledger confirmation, their bank statements, their return of income and their balance sheet.The assessee also categorically stated that there is no material provided to the assessee, which suggests that the loans taken by the assessee are not genuine.
Assessee further stated that AO has relied upon the statement of accommodation entry provider, however, neither the cross examination of the same despite request, was provided and further no material was also given by AO to show that the impugned loans are not genuine. Ld AO did not give any evidence to the assessee to show that loans are not genuine.
When the assessee has discharged its initial onus, it is duty of AO to carry out necessary enquiries either [1] by issuing notice under Section 133(6) of the Act to the lenders, [2] by issuing summons to the parties, [3] by asking the assessee to produce parties or [4] by deputing the inspectors for verification, or [5] or carry out survey etc. at the premises of the lenders.
AO has not conducted any enquiry with respect to all or any of the lenders. This is also when the assessee has made a written request to the ld AO to examine his evidences submitted and make inquiry. Despite this, LD AO did not conduct any inquiry.
It merely stated that income shown by the parties from trading activities is a loss to offset interest income, etc. That may be the reasons for suspicion, the learned Assessing Officer should have conducted further enquiry to support his suspicion, and otherwise the suspicion merely remains suspicion. If it is without any evidence, it has no value. So We agree with the argument of the learned Authorized Representative that mere suspension without further enquiry does not take place of "proof or evidence" that the loans are not genuine.
We agree with the arguments of DR that mere repayment of the loans subsequently does not make the original acceptance of loan as genuine. Such an argument is against the language of the provision of section 68 of the act. Criteria of "identity, creditworthiness and genuineness" are to be tested at the time of amount credited in the books of the assessee. All subsequent events are immaterial. Thus the order of the CIT (A) in deleting the addition under Section 68 confirmed - Decided against revenue.
Interest disallowance with respect to lenders whose loans are added u/s 68 - As we find that addition u/s 68 is deleted of those parties; consequent disallowance of interest also cannot survive. Accordingly, we confirm the order of the learned CIT (A) in deleting the disallowance on account of interest. Ground no.2 of the appeal is also dismissed.
Disallowance u/s 14A - HELD THAT:- As we find that assessee has suo moto disallowed ₹9,60,000/-, whereas exempt income earned by the assessee is merely ₹4,60,006/-, CIT (A) has correctly deleted the disallowance following the decision of Hon'ble jurisdictional high court inM/S. NIRVED TRADERS PVT. LTD.[2019 (4) TMI 1738 - BOMBAY HIGH COURT] - Thus, the learned CIT (A)‟s order deleting the disallowance under Section 14A of the Act is upheld and ground no. 3 and 4 of the appeal is dismissed.
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2023 (12) TMI 880
Bogus purchases - protective addition of 5% in hands of assessee - addition on account of alleged commission/brokerage as business income - HELD THAT:- Tribunal in its decision in the case of Orient Craft Ltd. [2021 (10) TMI 154 - ITAT DELHI] had held that purchases made by M/s. Orient Craft Ltd. from the assessee were genuine. Hence, protective addition in the hands of the assessee in all the assessment years under consideration here is not sustainable. As a sequel, the order of the ld. CIT (A) making addition of alleged commission/brokerage as business income in the hands of the assessee for all the assessment years cannot be sustained. Decided in favour of assessee.
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2023 (12) TMI 879
Reassessment order issued without mentioning DIN as per CBDT’s Circular No.19 of 2019 - legality of communication issued by any income tax authority w/o DIN - HELD THAT:- From the perusal of the CBDT Circular No.19 of 2019 dated 14/08/2019, we find that in order to maintain a proper audit trail of all the communication, the CBDT in the exercise of its power u/s 119 of the Act had decided that no communication shall be issued by any income tax authority, inter-alia, relating to assessment to the assessee or any other person, on or after 01/10/2019 unless a computer-generated DIN has been allotted and duly quoted in the body of such communication. In the present case, it is undisputed that such a DIN as required in para 2 of the aforesaid Circular is not mentioned in the body of the assessment order dated 05/12/2019.
In Ashok Commercial Enterprises v/s ACIT, [2023 (9) TMI 335 - BOMBAY HIGH COURT] as held that the object of the said Circular is clear and laudatory and intended to ensure that proper trail of all assessment and other orders are maintained and further that any deviation therefrom can only be undertaken after prior written approval of the higher authorities under the Act. Accordingly, the Hon’ble jurisdictional High Court quashed the communication issued without mentioning DIN as per CBDT’s Circular No.19 of 2019.
As para 2 of CBDT Circular No.19 of 2019 specifically mentions that the computer-generated DIN is to be duly quoted in the body of communication, which in the present case is the assessment order dated 05/12/2019. Therefore, we are of the considered view that the intimation letter dated 09/12/2019 intimating that the DIN generated in respect of the computation sheet may be treated as common DIN for the relevant order and all its annexures is not sufficient compliance with the aforesaid Circular No.19 of 2019, as no DIN is mentioned in the body of assessment order passed on 05/12/2019. Accordingly, the assessment order dated 05/12/2019 passed under section 143(3) read with section 147 of the Act is set aside as being not in compliance with the CBDT Circular No.19 of 2019. Assessee appeal allowed.
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2023 (12) TMI 878
Revision u/s 263 - assessee had transferred capital asset which is an agriculture land which resulted in capital gain within the scope of section 45(3) - in respect of capital gain revealed that capital asset was held by the assessee for less than two years and deduction claimed u/s 54B was therefore incorrectly claimed by the assessee - As per CIT AO while framing the assessment order u/s 143(3) of the Act has not looked into this issue, which is erroneous and prejudicial to the interest of the Revenue - HELD THAT:- The assessee herein is one of the co-owners of the land. Even in this case, the assessee and the legal heir failed to produce any material evidence in support of the grounds raised in the appeal. In the absence of the same, we do not find any infirmity in the order passed by the Ld. PCIT, that the assessment order passed by the Assessing Officer is an erroneous order and prejudicial to the interest of Revenue, which is correctly revised by invoking power u/s. 263 of the Act. Thus the grounds raised by the assessee are devoid of merits and the same are hereby rejected.
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2023 (12) TMI 877
Treatment of LTCG as unexplained cash credit u/s. 68 - AO has made proper enquiries before concluding the transaction as a sham - as per AO the assessee has involved in manipulating the stock prices in penny stocks and has derived LTCG and has claimed exemption u/s. 10(38) by manipulating the share prices - loose sheets found and seized at the residence of the assessee wherein the sale of shares, quantity sold, date, sale price and the computation of the LTCG were found and seized - HELD THAT:- In the instant case, since the transactions were through proper banking channels, this case is of no help to the Revenue.
Similarly, the decision in the case of Sanjay Bimalchand Jain [2017 (5) TMI 983 - BOMBAY HIGH COURT] it is distinguishable on the fact that the details of persons who purchased the shares were not provided. In the instant case, the details of buyers are very much available in the order of the Ld. AO and hence this decision cannot be applied.
Further, in the case of Pr. CIT vs. Mehndipur Balaji [2022 (7) TMI 294 - ALLAHABAD HIGH COURT] relied on by the Ld. DR, the addition for the bogus LTCG received by the assessee were made on the basis of the incriminating material available on record.
However, in the instant case, no such incriminating material along with corroborative evidence has brought on record to say that the assessee has involved in manipulation of the stock prices to earn bogus LTCG. It is also noted that the assessee has sold the shares through recognized Stock Exchange and hence he is not aware of the company of the buyers and therefore the arguments of the Ld. DR are not accepted - thus we find that the assessee has not involved in manipulation of stock prices for the purpose of earning bogus LTCG and hence we are inclined to allow the ground raised by the assessee.
Treatment of commission expenditure as unexplained expenditure u/s 69C - Since the LTCG earned by the assessee are bonafide in nature, the commission expenditure shall be allowed as a deduction from the LTCG and hence this ground raised by the assessee is allowed.
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2023 (12) TMI 876
Disallowance u/s 14A r.w.r. 8D - disallowance suo moto computed by the appellant - HELD THAT:- Disallowance offered u/s 14A as per Rule 8D in the return of income for AY 2018-19 was Rs. 14,19,009/-. Having regard to the above calculation, it is thus held that direct expenses disallowable under Rule 8D(2)(i) was Rs. 8,369/- and the AO had wrongly computed the same at Rs. 9,80,615/-.
Coming to the disallowance as per Rule 8D(2)(ii), as noted that the disallowance suo moto computed by the appellant at Rs. 14,10,610/- exceeded the sum of Rs. 13,32,000/- worked out by the AO. AR fairly stated that the correct sum disallowable under Rule 8D(2)(ii) was Rs. 14,10,610/-. We thus hold that the aggregate sum disallowable u/s 14A read with Rule 8D for the relevant year was Rs. 14,19,009/- [8,399 + 14,10,610] which is noted to have already been offered by the appellant in the return of income. Hence, the plea of the assessee that no further disallowance u/s 14A is warranted on these given facts, is accepted. Accordingly, the excess disallowance of Rs. 8,93,606/- retained by Ld. CIT(A) is directed to be deleted. Ground Nos. 1 & 2 of the appeal are therefore allowed.
Disallowance of the deduction claimed u/s 35(2AB) - appellant had incurred scientific research expenditure, both revenue and capital, at their approved in-house R&D facility at Bengaluru - HELD THAT:- It is noted that the DSIR has issued Form 3CL dated 31.08.2023, in terms of which, the appellant is entitled to weighted deduction of Rs. 25,89,66,000/- [17,26,44,000 X 150%] u/s 35(2AB) of the Act. The balance sum of Rs. 55,00,605/- [17,81,44,605 – 17,26,44,000] however is only eligible for normal deduction, as rightly held by the Ld. CIT(A). Accordingly, the total deduction allowable u/s 35(2AB) and 35(1)(i)/(iv) of the Act works out to Rs. 26,44,66,605/- [25,89,66,000 + 55,00,605] as opposed to the deduction of Rs. 26,72,16,908/- claimed by the appellant in the return of income. Accordingly, the disallowance of Rs. 8,90,72,303/- confirmed by the Ld. CIT(A) stands restricted to Rs. 27,50,303/- [26,72,16,908 - 26,44,66,605]. These grounds are therefore partly allowed.
Admissibility of claim not made in ROI - Computation of short term capital on sale of listed investments following FIFO Method - whether the claim made by the appellant regarding re-computation of STCG on sale of investments on FIFO basis in the course of assessment, is admissible in absence of such claim being raised in the return of income? - HELD THAT:- As in the appellant’s own case which is reported in Commissioner of Income Tax, Kolkata Versus M/s Britannia Industries Ltd. [2017 (7) TMI 502 - CALCUTTA HIGH COURT]. In the decided case the Hon’ble Court after considering the decision of Goetze (India) Ltd. [2006 (3) TMI 75 - SUPREME COURT] and Gurjargravures (P.) Ltd. [1977 (11) TMI 1 - SUPREME COURT] has held that the appellate authority has the power to entertain new claim if the grounds raised are bonafide. Thus, in principle, we agree that the appellant is legally entitled to raise this claim before us.
Whether short term capital gain is to be worked out on FIFO Method and not weighted average cost method? - According to the appellant, the short term capital gain which was originally computed by following weighted average cost method shall stand rectified under the FIFO Method. The lower authorities have, however, observed that the appellant did not furnish any document / calculation in support of its claim. To this, the Ld. AR showed us that the complete statement giving scrip-wise break-up was furnished before the AO vide letter. Having regard to the same, we set aside this issue to the file of the AO to verify the calculation/computation submitted by the assessee and accordingly re-compute/quantify the correct taxable short term capital gain in terms of Section 45(2A) of the Act. This ground is therefore allowed for statistical purposes.
Disallowance of deduction claimed u/s 80G - appellant had contributed sum towards its CSR obligations to Nowrosjee Wadia Maternity Hospital and Sir Ness Wadia Foundation - appellant had disallowed and added back the aforesaid expenditure in terms of Explanation 2 to Section 37(1) of the Act, while computing the taxable business income - HELD THAT:- Explanation (2) to Section 37 of the Act which denies deduction for the expenses incurred on CSR initiative by way of deduction from computation of ‘Business Income’ cannot be read into Chapter VI of the Act, which is applicable for arriving at taxable income from the Gross Total Income. It is also noted that wherever the Legislature intended that CSR contributions to any specific charitable trusts should be denied deduction, necessary provisions were incorporated in the specified subclauses, viz. sub-clauses (iiihk) and (iiihi). It is noted that no such debar has been set out by the Legislature in any other sub-clauses of Section 80G of the Act. As far as the reasoning given by the AO to deny the deduction is concerned, we find the same to be of no relevance as the same is not borne out from the provisions contained in Section 80G of the Act.
As decided in JMS Mining Pvt. Ltd. [2021 (7) TMI 907 - ITAT KOLKATA] specific prohibition/restriction has been made for CSR contributions only to two eligible charitable organizations, then it automatically implies that there is no prohibition/restriction in respect of claim of CSR expenses, in any other cases, which are otherwise eligible under Section 80G of the Act. Following the same, this Tribunal in the case of Acme Chem Ltd Vs ACIT [2023 (3) TMI 1434 - ITAT KOLKATA] has deleted similar disallowance made by the AO u/s 80G of the Act in relation to the CSR donations made to registered charitable trusts. Thus we are inclined to hold that the assessee is eligible for deduction claimed u/s 80G of the Act.
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2023 (12) TMI 875
Adjustment of refund for arriving at interest - calculation of interest u/s 244A is the way in which the AO has adjusted the refunds issued - AR submitted that where the refunds have been issued in parts, the AO while adjusting the refund issued earlier has erred in apportioning amount of earlier refund towards the principal and interest component determined then i.e. without considering the present relief - AO has reduced interest only to the extent it was determined at the point of issuance of the earlier refunds, thus, leading to larger adjustment of the refund towards the tax component as against the interest component - HELD THAT:- Amount of interest u/s. 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component.
Therefore we hold that the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. AR during the course of hearing submitted a detailed working of the manner in which the AO has calculated the interest and also the correct way in which the same is to be calculated - Accordingly the assessing officer is directed to compute interest u/s 244A as per the claim of the assessee after giving a proper opportunity of being heard.
Thus as relying on Pfizer Limited [1991 (3) TMI 121 - BOMBAY HIGH COURT] as well as the decision of CIT vs. K.E.C International [2005 (7) TMI 733 - BOMBAY HIGH COURT] assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 18.08.2022. Accordingly the AO is directed to re-calculate the interest up to the date of actual receipt of refund by the assessee.
Interest calculation is that additional interest u/s. 244A(1A) to be calculated on the total amount of refund including Interest - The provisions of sub-section (1A) to section 244A are inserted by the Finance Act, 2016 as a remedial measure to compensate the assessee in cases where there are delays in granting refunds due on account of delay in passing order giving effect to appellate or revisional orders. Applying the ratio laid down in the case of Bharat Petroleum Corporation Ltd [2021 (7) TMI 215 - ITAT MUMBAI] we are of the considered view that the provisions of section 244A(1A) would be applicable in assessee's case from 01.06.2016 till the date of actual receipt of refund and accordingly we remit the issue back to the AO to examine the issue afresh and calculate the additional interest under section 244A(1A) in accordance with law.
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2023 (12) TMI 874
Validity of assessment order passed u/s. 143(3) with no quote/state any Document Identification Number (DIN) as per mandate of CBDT Circular 19/2019 dated 14.08.2019 - Subsequent generation of DIN - HELD THAT:- As all the communication to the assessee should have DIN generated from ITBA to maintain proper audit trail of all the communications. In para 3 of this circular, the it had provided that in exceptional circumstances, wherein communication is to be issued manually, the reasons have to be recorded in the file and prior written approval of the CCIT/DGIT may be obtained in such cases. As per para 5, such communication shall have to be regularized within 15 working days by uploading the manual communication on system, compulsory generating the DIN on system and communicating to the assessee.
Ostensibly, the assessment order in question does not comply with the requirements of Para-3 of the Circular (supra) and thus, we find no reason to uphold the decision of the CIT(A) on this aspect. We may note here that this facet of the controversy has been specifically dealt with in the case of Ashok Commercial Enterprise [2023 (9) TMI 335 - BOMBAY HIGH COURT] wherein it has been held that the subsequent generation of DIN can only regularize the failure to generate the DIN, but yet the requirements of Paragraph-3 remaining uncomplied, would result in the communication being treated as invalid and never to have been issued. The aforesaid judgment completely dispels the stand of the CIT(A) in the present case.
Therefore, we deem it fit and proper to treat the assessment order dated 31.12.2019 as invalid and is deemed to have never been issued and is accordingly set-aside. We hold so.
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2023 (12) TMI 873
Levy of penalty u/s 270A - defective notice - as per assessee AO had not struck off the irrelevant portion and no specific offence committed by the assessee was mentioned by the ld. AO in the show cause notice - whether the assessee has underreported its income or misreported its income - HELD THAT:- We find that the assessee being a charitable trust enjoying registration u/s 12AA of the Act consequentially eligible for exemption u/s 11 of the Act had claimed disallowance of depreciation on certain fixed assets as an application of income, ignoring the amendment brought u/s 11(6) of the Act w.e.f. 01.04.2015. This disallowance of deprecation was accepted by the assessee in the quantum proceedings.
AO initiated penalty proceedings u/s 270A of the Act on 01.11.2019 wherein in the said notice issued u/s 274 r.w.s. 270A of the Act, the ld. AO had not struck off the irrelevant portion i.e. whether the assessee has underreported its income or misreported its income.
We also find that different rates of penalty are stipulated in Section 270A of the Act for underreporting of income; for misreporting of income and for underreporting as well as misreporting of income. Hence, it is even more onerous on the part of the ld. AO to specifically mention the offence committed by the assessee whether it had underreported the income or misreported the income or committed both the offence so as to apply the respective penalty amounts as stipulated u/s 270A of the Act.
This onerous task being not fulfilled by the AO would result in entire penalty proceedings getting vitiated. In view of the specific provisions of the Act and in view of the decision of Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)], we direct the AO to delete the penalty levied u/s 270A of the Act in the facts and circumstances of the instant case - Appeal filed by the assessee is allowed.
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2023 (12) TMI 872
Validity of Reopening of assessment u/s 147 - as argued approval u/s 151 was mechanically accorded and that too without application of mind - addition u/s 68 on the ground that the assessee has received the said sum from two parties which remained unexplained - HELD THAT:- Approval has been granted in a mechanical manner without application of mind and is therefore, against the spirit of the Act in which this mechanism has been provided that approval has to be taken u/s 151 of the Act by the competent authority so that a settled assessment is not unsettled in a casual manner. The competent authority after going through the proposal of the AO if finds the proposal cogent and plausible, only then the approval is to be granted but in the present case, Addl. CIT, Range-4, Kolkata has just signed the proforma placed before him without any application of mind. The said re-opening of assessment on the basis of the approval granted by Addl. CIT, Range-4, Kolkata vide approval dated 30.03.2015 is therefore, not as per the provisions of the Act and cannot be sustained. The case of the assessee finds support from the decision of Ajay Trading Company [2023 (2) TMI 263 - ITAT KOLKATA]
Thus approval granted without application of mind and in a mechanical manner would render the reopening of assessment as void and invalid. Accordingly, we quash the reopening of assessment. Decided in favour of assessee.
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2023 (12) TMI 871
Reopening of assessment - commission income on the turnover of amount in the bank account which was used to facilitate for the marble traders of Kishangarh - either the assessee is the owner of the money found deposited in her bank accounts as claimed or the assessee is merely a facilitator and earns commission income - HELD THAT:- Even though there was direction of the bench the revenue has not placed on record the report or the records of the investigation wing. Therefore, we believe that the assessee has already provided the information which she possessed and revenue (Investigation wing) was satisfied with the information submitted by the assessee.
It is not disputed that the assessment was reopened to tax the commission income on the transactions facilitated by the appellant for the marble traders of Kishangarh. This aspect of the reasons recorded by the revenue has not been controverted. Therefore, considering the decision of the apex court in the case of Sun Engineering [1992 (9) TMI 1 - SUPREME COURT] while assessing the income of the assessee reasons recorded are to be considered.
CIT(A) while deciding the appeal of the assessee has dealt with the two-remand report of the assessing officer on of March 2015 and another of August 2015. The non disputed facts emergeis that the assessee admitted that bank accounts were opened, wherein different parties at different places deposited the money, in turn at Kishangarh, the money was withdrawn and after charging commission, which was ranging from Rs. 100 to Rs. 300 per lac and the remaining amount was given back to the persons as advised by the depositors. CIT(A) noted that the assessee reminded that the ld. AO himself agreed to these facts in the first half of the assessment order that the money was deposited by different Marble Traders were given back to them after withdrawing from the bank.
CIT(A) noted that there is no basis to swing in the position from taxing commission on the transaction facilitated by the appellant to estimating gross profit as marble trader. CIT(A) also noted that none of the corroborative factors that were inquired into through remand report proceeding support such imaginary action of the ld. AO. In the remand report the ld. AO admit that the assessee neither have any establishment nor infrastructure to conduct business of marble trading.
Considering the above aspect of the matter the swing from charging commission to charge the GP as marble trader has no basis and are contrary to the facts already on record. Considering all these aspects of the case discussed here in above we find no infirmity in the finding of facts that the income of the assessee be taxed on commission, however, as regards the ld. CIT(A) contention of allowing 25 % from the commission income estimated has no basis or proof that has been argued by the ld. AR of the assessee and therefore, we see no reason to consider the claim of the 25 % as allowable and therefore, the same is not be considered as expenses in the absence of any details or evidence.
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2023 (12) TMI 870
Depreciation on land development expenditure incurred on lease hold property - disallowance of and leveling expenses incurred for creating a backup yard is treated as building, wherein depreciation was claimed @ 10% of total cost incurred on land development - HELD THAT:- The issue on hand first arose in the hands of the assessee in the assessment year 2011-12 [2023 (3) TMI 1350 - ITAT AHMEDABAD] In that assessment year, the assessee claimed the depreciation which was disallowed by the AO and subsequently the order of the AO was also upheld by the learned CIT-A. Against the finding of the learned CIT-A, the assessee did not challenge the same before the higher forum. Thus, the finding of the learned CIT-A reached the finality. Now, the controversy arises whether the issue relating to the depreciation can be raised by the assessee in the subsequent year without challenging the initial/ first assessment year as discussed above.
The answer stands against the assessee. In simple words, the assessee in its own case has admitted the disallowance of depreciation and therefore the same cannot be agitated in the later years. Hence, the ground of appeal of the assessee is hereby dismissed.
Disallowance of deprecation claimed on “right to use leasehold land” - assessee has been allotted land on lease basis by the Gujarat Maritime Board (GMB). The assessee accounted for the right to use leasehold land in the A.Y. 2011-12 at present value of future annual lease and claimed depreciation on the same @ 25% by treating the same as intangible assets - HELD THAT:- It is pertinent to note that the recognition of the right to use lease hold land as intangible asset as per the statement of account and the same was not disputed by the Department at any stage. Thus, the claim of depreciation was correctly made and the same should have been taken into account by the Assessing Officer as well as CIT(A). Thus, this ground allowed.
Disallowances u/s 14A - AO has worked out the amount of disallowance u/s 14A as per the provision of rule 8D of Income Tax Rule which includes disallowances on account of interest expenses as well administrative expenses - AO has also made the addition to the book profit calculated under the provisions of section 115JB - CIT(A) restricted the quantum of disallowance under section 14A of the Act to the extent of exempted income only whereas deleted the addition to book profit in entirety - HELD THAT:- It is settled position of law by several competent court that if there are mixed funds or interest free funds exceed the amount of investment then the power of presumption would be that the investment has been made out of interest free funds. In holding so, we draw support and guidance from the judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. Torrent Power Ltd [2014 (6) TMI 185 - GUJARAT HIGH COURT]
In the case of the present assessee, the interest free fund of the assessee exceeds the amount of the investment yielding the exempted income. Therefore, no disallowance can be made on account of interest expenditure under the provision of rule 8D IT rule in the given facts and circumstances.
Disallowance of administrative expenses, in our considered opinion, the contention of the assessee cannot be accepted that no expenditure in relation to the investment was incurred. Therefore, the disallowance of administrative as per rule 8D of the Income Tax Rule needs to be made. As per the provision of rule 8D(2)(iii) the amount of administrative expense shall be equal to 0.5% of average value of the investment, income from which does not or shall not form part of total income.
Question arises while computing the average value of investment whether all the investment capable of yielding exempted income shall be considered or only those investments which yielded exempted income during the year shall be considered. The question has been answered in the case of ACIT vs. Vireet Investment (P.) Ltd [2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that only those investment shall be considered which yielded exempted income during the year.
Thus amount of disallowance under rule 8D(2)(iii) shall be computed only considering the investment in Kutch Railways Company Ltd of which average value stand at Rs. 4000 Lacs only and accordingly the amount of disallowance shall be at Rs. 20 Lacs only whereas the assessee has already made disallowances of Rs. 25 lacs. Therefore no further disallowance is required to be made - appeal of the assessee allowed.
Addition to book profit computed u/s 115JB - We hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of Sec. 115JB of the Act as per the direction of Jayshree Tea Industries Ltd. [2014 (11) TMI 1169 - CALCUTTA HIGH COURT]
Determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently - There is no mechanism/ manner given under clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore, we feel that adhoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation.
In the given the assessee itself has made adhoc disallowances of Rs. 25 Lacs under normal computation of income in connection with the exempted income earned during the year. Therefore amount which been admitted by the assessee itself as incurred in connection with exempted shall be added to the book profit as per the provion of clause (f) to explanation 1 of section 115JB of the Act. Thus we direct the AO to make the addition of Rs. 25 Lacs as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus, the ground of appeal of the Revenue in relation to addition to book profits is partly allowed.
Deduction u/s. 80IAB on sale of scrap - gain on foreign currency derivative swap as eligible income under section 80IAB and holding derivative swap loss as business loss - HELD THAT:- As respectfully following the order of the tribunal in the own case of the assessee as 122 & 167/AHD/2015 for AY 2011-12 [2023 (3) TMI 1350 - ITAT AHMEDABAD], we do not find any infirmity in the finding of the learned CIT(A) and direct the AO to delete the disallowance made by him.
Depreciation on the block office equipment @ 15% allowec by following the order of this tribunal in the case M/s Adani Enterprise Ltd. [2019 (2) TMI 2018 - ITAT AHMEDABAD] in ITA No. 1840/Ahd/2012.
TP Adjustment - corporate guarantee - an international transaction or not? - HELD THAT:- The provisions of section 92B of the Act define the parameters of what constitute an international transaction. Although, the ambit of international transaction was wide enough, yet due to judicial interpretation, certain classes of transactions were being left out of the transfer pricing net. To tackle the same, by the Finance Act of 2012 an Explanation to Section 92B[2] of the Act was brought in the statute with retrospective effect from 1st April 2002. The explanation is clarificatory in nature and added certain categories of transactions, inter alia, the transaction as specified under clause (c) of explanation (i) to section 92B of the Act within the ambit of international transactions.
The corporate guarantee was included within the ambit of international transaction by the Finance Act 2012 with retrospective effect. Thus, there remains no ambiguity to the fact that the corporate guarantee extended by the assessee to its AE is an international transaction and therefore the same has to be benchmarked at the arm length price.
We find that in the case of PCIT vs. Redington (India) Ltd. [2020 (12) TMI 516 - MADRAS HIGH COURT] has held that corporate guarantee is covered under the limb of international transaction and having bearing on profit and loss account. Thus we hold that the bank/corporate guarantee extended to AE is an international transaction. Therefore, the same has to be bench marked for determining the ALP.
Determine the benchmarking for working out the ALP of the impugned international transaction - Coming to the case on hand, we note that assessee has borrowed loan from the Standard Chartered bank at an effective rate of interest at 4.06% per annum whereas the AE has borrowed loan at the rate of 4.92% per annum despite the corporate guarantee furnished by the assessee
The assessee has not obtained any saving of the interest/bank charges. Accordingly, the question arises, whether the assessee should be made subject to the addition for the corporate guarantee furnished by it in the given facts and circumstances. To our understanding, on applying the interest saving approach, it is not justifiable to make any addition on account of furnishing the corporate guarantee to the AE. In other words, the assessee would have saved huge interest cost if it would have advanced money on interest to the AE after borrowing at its own from the Standard Chartered Bank. Hence, we do not find any infirmity in the order of learned CIT-A. Thus, the ground of appeal of the revenue is hereby dismissed.
Upward adjustment in TP on account of interest - HELD THAT:- CIT(A) failed to appreciate the fact that in the given case a holding company extended interest free loans and advances to its foreign subsidiary to grow the business. Such a transaction cannot be compared with loan extended by the banks whose main activity is extending loans to generate revenue. In holding so, we draw support and guidance from the judgment of judgment of Hon’ble Bombay High Court in case of CIT vs. Everest Kento Cylinders Ltd. [2015 (5) TMI 395 - BOMBAY HIGH COURT]
The above finding of the Hon’ble Bombay High Court is in relation to extension of corporate guarantee, but the principle laid down can be applied here in the case of extension of loans and advances also. Therefore, in our considered TPO was not right in considering the upfront fee charged by the bank as well adjustment of risk associated with unsecured loan.
We also note that in case of M/s Arvind Ltd [2023 (6) TMI 1065 - ITAT AHMEDABAD] where the facts and circumstances were identical to the case on hand, the tribunal after considering series of finding of different tribunal held that in case of loan extended by parent company to foreign subsidiary the reasonable rate of interest should be LIBOR +2% - Thus we hereby hold that suo-moto notional interest offered by the assessee at LIBOR + 2.8 % is ALP and no further adjustment is required to be made. Hence, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the upward adjustment made on account of benchmarking of interest free loan to AE.
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2023 (12) TMI 869
Addition u/s 68 - assessee has received the amount in dispute as unsecured loan - as per DR assessee has failed to prove through supporting evidences that the amount of Rs. 35 lakhs was towards repayment of loan - HELD THAT:- Assessee had advanced an amount to the said entity through cheque on 23.06.2008. The said amount was repaid to the assessee in two tranches respectively. Even the repayments to the assessee were through banking channel.
Though, FAA has alleged that interest received on such advance has not suffered TDS and no documentary evidences have been furnished to establish the fact that the interest income was received, however, the materials on record are to the contrary. From the evidences furnished as observed that the assessee has received interest on the advances and after deduction TDS assessee has offered the net interest amount of Rs. 4,12,042/-.
Pertinently, though, AO has accepted the amount of Rs. 15 lakhs received by the assessee from the very same entity, strangely enough, he has treated the balance amount of Rs. 35 lakhs as unexplained cash credit. This, in our view is unsustainable. Since, the source of credit in the books of the assessee is well explained; we are of the view that the addition made is unsustainable. Accordingly, we delete the addition - Decided in favour of assessee.
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2023 (12) TMI 868
TP Adjustment - Comparable selection - Excluding two comparable companies M/s Exclerx Services Ltd. and M/s Vishal Information Technologies Ltd. from the set of comparables for benchmarking assessee’s international transaction of provision of back office support services - HELD THAT:- Vishal Information Ld. Outsourced significant portion of its business whereas assessee company entirely carried out its business without outsourcing therefore we justify the decision of ld. CIT(A) in excluding this company from the list of comparable.
In respect of Eclerx Service Ltd. we find that the function of that company was not similar to the assessee company therefore we do not find any merit in the ground of appeal of the Revenue. No infirmity in the decision of ld. CIT(A). Accordingly, ground no. 1 of the appeal of the revenue is dismissed.
M/s R System International Ltd. company was functionally comparable with the assessee company and consistently accepted as a comparable for the earlier years by the lower authorities, we don’t find any reason to interfere in the decision of ld. CIT(A) for including this company in the set of comparable. Therefore this ground of appeal of the revenue is dismissed.
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