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Income Tax - Case Laws
Showing 241 to 260 of 8298 Records
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2023 (12) TMI 805
Disallowance under the Capital Gain - Understated sale consideration on sale of property - material seized from the possession of the purchaser - CIT(A) deleted the addition - HELD THAT:- AO in the course of assessment relied upon a loose paper no.15 found from the possession of the purchaser at the time of search which reflected the sale consideration to be Rs. 40,00,00,000/- as against Rs. 36,00,76,400/- declared by the assessee. Based on material seized from the possession of the purchaser, the AO confronted the loose paper/document no.15 and also another loose paper/document no.54 to the assessee. The explanation of the assessee on the propriety of the sale consideration was called for. Summon to the purchaser was also simultaneously issued for personal deposition and to illicit information on contents of such loose paper found from their possession.
AO in the assessment order has noted that neither summon to the purchaser were complied nor the assessee has offered any clarification on the issue. Apart from raising some counter question upon the AO, the assessee has not offered any worthwhile explanation.
CIT(A) in first appeal however referred to pleading of behalf of the assessee and relied upon the contents of loose paper no.54 showing sale consideration as per registered deed and accepted the version of the assessee towards sale consideration of Rs. 36,00,76,400/- declared by the assessee.
We observe that while holding in favour of the assessee, the CIT(A) has not discussed as to how a tangible document/ loose paper no.15 found from the possession of the purchaser in course of drastic action of search is unworthy of any reliance. The overwhelming characteristic of contents of such notings/loose paper showing part payments against the agreed sale consideration and resultant outstanding was totally ignored.
CIT(A) has also not made any discussion on non-compliance of summons issued to the purchaser u/s 131 of the Act. A hand written document found from the premises of purchaser, without being disowned, called for due weight.
CIT(A), to our mind, merrily accepted mundane and stereotyped defenses raised on behalf of the assessee in a perfunctory manner without seeking any comment from the AO and without traversing glaring facts. Thus, while the AO, to our mind, has discharged his quasi judicial duties in a just and proper manner, the CIT(A), on the other hand, has failed to adhere to legitimate expectation and has passed a nondescript and cryptic order without dealing with the fundamental aspects of the matter.
It is surprising that a noting/ document reflecting not only sale consideration but also showing part payments and outstanding amounts has been found to be unworthy of any reliance.
Scope of powers vested to the CIT(A) u/s 251 are co- terminus and co-extensive with that of AO exercising quasi judicial functions. The CIT(A) is not only an appellate authority but also possess the powers of an adjudicating authority similar to that of an AO. The powers of enquiry thus in a sense, runs concurrently. Proper appreciation of all material placed before him was incumbent in law. The CIT(A) ought to have made suitable enquiries on the proprietary of sale consideration declared in the light of document seized instead of brushing aside the action of the AO in a lopsided manner.
The order of CIT(A) lacks comprehension. The CIT(A) has omitted to expound the facts in perspective while displacing the order of AO. The fallacy in action of the CIT(A) is quite visible and hence the impugned first appellate order cannot be countenanced in law.
The appellate order of the CIT(A) is thus set aside and matter is restored back to the file of the CIT(A) for fresh determination of the issue in accordance with law after making enquiries or causing enquiry through the AO in this regard. Appeal of the Revenue is allowed for statistical purposes
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2023 (12) TMI 804
Validity of notices issued u/s 153C - No valid approval as per mandate of sec 153D as alleged on absence of application of mind by the ACIT - addition u/s 68 - HELD THAT:- Since the copy of the letter of DCIT Central Circle Noida to JCIT Central Range Meerut and approval order issued by JCIT Meerut includes names of present assessee Smt. Ruchi Garg at serial no. 6 and M/s M.G Metalloy Pvt. Ltd. at serial no. 10, therefore, we have no hesitation to hold that the legal contention of assessee envisaged in ground of cross objection one is squarely covered in favour of the assessee leading to inevitable invalidation of assessment orders as the formal and cosmic approval accorded u/s. 153D of the Act issued without application of mind to the relevant assessment orders and records has to be rendered un-enforceable in law and hence the same is quashed.
It is pertinent to mention that the said conclusion also gets strong support from the judgement of Anuj Bansal [2023 (7) TMI 1214 - DELHI HIGH COURT] as relied by the ld. AR. Our conclusion drawn for AY 2011-12 would also apply mutatis mutandis to other three appeals pertaining to AY 2012-13, 2013-14 & 2015-16 and consequently impugned reassessment orders in other three appeals are also quashed - Cross objection no. 1 is allowed
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2023 (12) TMI 803
Assessment u/s 153A - addition based purely upon the report of the DVO - whether the report of the DVO obtained after search action can be based for making the impugned additions in this case in the absence of any incriminating material during the course of search action? - HELD THAT:- The peculiar fact to be noted in this case is that no incriminating material was found during the course of search action at the premises of the assessee. The time period for initiating original scrutiny assessment u/s 143(3), by issue of notice u/s 143(2) of the Act, in this case has already lapsed on the date of search action, which means that the original assessment in this case stood completed and not abated on the date of search. The Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] has settled the proposition of law that in case of no incriminating material is found during the course of search action and the assessment stood completed and not abated for that assessment year, then no addition can be made in the absence of any incriminating material found during the course of search action.
Validity of reference to the DVO - We note that as per the relevant provisions of the Act, if the department wanted to act on the said document, the proceedings could have been initiated u/s 153C of the Act against the assessee by recording satisfaction by the Assessing Officer of the searched person. Thereafter, after receipt of the documents from the Assessing Officer of the searched person, the Assessing Officer of the assessee could have initiated the proceedings u/s 153C of the Act. However, the department did not act on the said documents. Even otherwise, the said slip was a third party document, which was never confronted to the assessee.
The difference of the amount mentioned in the said slip was also meager as compared to the additions made by the Assessing Officer. Thirdly, since the said document was not sufficient enough to base additions in this case, the said document at the most could have been a trigger point to initiate search action in the case of the assessee. As per the facts on the file, the matter was referred to the DVO after the search action at the premises of the assessee and admittedly, no incriminating material whatsoever was found during the search action, however no incriminating material was found, which could have been stated to be a trigger point to refer the matter to the DVO.
Report of the DVO is based on pure estimation of investment. The DVO has taken the CPWD rates and as noted above, the CPWD rates are on more than 25% higher side as compared to the state-PWD. there is force in the contention of the ld. AR that a very high profit rate of the contractor is embedded in the departmental rates and further a lot of difference in expenditure occurs between a work got done through government contractor and the work got done under self-supervision and self-purchasing of the material.
As per the settled law, neither reference to the DVO in this case was valid in view of the various decisions of the Hon’ble High Courts as noted above nor the addition in this case was justified based purely upon the report of the DVO which was a work of pure estimation of cost based on government rates.
Since the assessee company’s business has not commenced and that the construction of the building was done out of the capital invested by the shareholders and hence, there was no case of earning of any income, what to say of any income from undisclosed sources, therefore, the substantive addition in the hands of the assessee company was not justified. The issue is squarely covered by the various decisions including the decision of Bharat Engineering & Construction Co. [1971 (9) TMI 14 - SUPREME COURT] referred by the assessee in the written submissions. The action of the CIT(A) in reversing the view point of the Assessing Officer on this issue, therefore, cannot be held to be justified. In view of this, the additions made in the case of the assessee cannot be held to be justified and the same are accordingly ordered to be deleted. Assessee appeal allowed.
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2023 (12) TMI 802
Income taxable India - taxability of receipts from consultancy services and reimbursement of expenses - characterizing receipts as Fee for Included Services (“FIS”) under Article 12(4)(b) of India – USA Double Taxation Avoidance Agreement (“DTAA”) as well as section 9(1)(vii) - assessee is a non-resident corporate entity and a tax resident of Unites States of America (“USA”) - Receipts were not offered to tax on the ground that they are in the nature of business profit, hence, in terms with the treaty provisions, are not taxable in India in absence of a Permanent Establishment (PE) - HELD THAT:- As decided in own case [2023 (9) TMI 106 - ITAT DELHI] Tribunal having analyzed the nature and character of the services rendered and the provisions contained under Article 12(4)(b) of the tax treaty, has concluded that the receipts cannot be treated as FIS/FTS, either under the treaty provisions or under the provisions of the Act.
Taxability of receipts from business consultancy services, we observe, as per Example 7 of the Memorandum of Understanding to India-USA DTAA, a receipt cannot be treated as FTS merely because the service provider while providing consultancy services has used substantial technical skill and expertise. Because, while providing such services, the American Company is not making available to the Indian Company, any technical expertise, knowledge or skill etc. but is merely transferring commercial information to the Indian Company by utilizing technical skill. Thus, no hesitation in holding that the receipts in dispute are not in the nature of FIS under Article 12(4)(b) of India-USA DTAA.
Taxability of reimbursement of expenses payment cannot be treated either as FIS under Article 12(4)(b) of the Tax Treaty or royalty.
Addition being receipts from provision of support services as FIS - As per AO not only the services are in the nature of technical/consultancy services, but while rendering such services, the assessee had made available technical knowledge, know-how, skill etc. as the services rendered include training of personnel, thus receipts would qualify as FIS under Article 12(4)(b) of the tax treaty -whether the receipts from provision of support services would qualify as FIS under Article 12(4)(b) of India – USA DTAA? - HELD THAT:- To qualify as FIS under Article 12(4)(b) of India – USA DTAA, two conditions have to be satisfied. Firstly, the nature of services must be technical or consultancy and, secondly, in course of rendition of such services, there must be transfer of technology from the service provider to the service recipient, through which, the service provider makes available technical knowledge, know- how, skill etc. to the service recipient.
In the present case as noted it is patent and obvious that from the year 2010 onwards, the assessee is providing support services to Bain India on regular basis. Had it been a case of transfer of technology from the assessee to Bain India by making available technical knowledge, know-how, skill etc. qua the services performed, it would certainly have enabled Bain India to employ such technical knowledge, know-how, skill etc. in performing such services independently without seeking aid and assistance of the assessee. There would have been no necessity for Bain India to continuously avail such services from the assessee since the year 2010 till the current assessment year. Had it been a case of transfer of technology in such a long duration Bain India certainly would have acquired the technical knowledge, know-how, skill etc. to perform such services on its own, without requiring the assessee to provide them. The very fact that Bain India is still dependent upon the assessee for the support services, establishes the fact that the assessee has not made available technical, know-how, skill etc. relating to such services to Bain India, the service recipient.
At the time of hearing, assessee has made a statement at bar that prior to the impugned assessment year, in no other assessment year the AO has treated the receipts from support services as FIS and brought it to tax. Thus, on overall consideration of facts and materials on record, we are of the view that the Revenue has not brought on record any materials to establish the fulfillment of make available condition of Article 12(4)(b) of India – USA DTAA.
Thus services rendered are not in relation to any manufacturing activity. In this view of the matter, the receipts cannot be treated as FIS under Article 12(4)(b) of the tax treaty. The Assessing Officer is directed to delete the addition.
As per AO assessee had settled the dispute under the Vivad Se Vishwas Scheme, 2020, thereby tacitly accepting the additions - This observations of the Assessing Officer is not, at all, relevant for deciding the issue, as, settlement of dispute under the Vivad Se Vishwas Scheme, 2020 cannot be construed to mean a tacit acceptability of the additions, in fact, the aforesaid position stands clarified by the CBDT Circular no. 09/2020, dated 22nd April, 2020. Assessee appeal allowed.
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2023 (12) TMI 801
Disallowance u/s 14A r.w.r. 8D - Calculation by taking into consideration only the investments which have yielded exempt income - as argued CIT(A), instead of adopting the average value of investment of which income is not part of the total income i.e., the value of tax- exempt investment, chose to factor in the total investment itself - Assessee argued investments which are not capable of yielding the dividend income need to be excluded while calculating the exact disallowance under section 14A - HELD THAT:- As it is an admitted fact that assessee has earned exempt income of Rs. 3.90 crores. As such, as rightly pointed out by the ld. D.R., the ld. AO has to apply Rule 8D(2)(iii) of the I.T. Rules to compute the disallowance u/s 14A of the Act. However, the investment yielding non-taxable income has to be considered and not all the investment. This proposition has been held correct in the case of ACB India Ltd [2015 (4) TMI 224 - DELHI HIGH COURT] had held that for the purpose of section 14A, instead of taking into account total investment, the investment attributable to dividend (exempt income) was only required to be adopted and thereafter the disallowance was to be arrived.
Thus we hold that while calculating disallowance under section 14A of the Act, only investment that have generated exempt income should be taken into consideration.
Accordingly, we remit the issue to the file of ld. AO for limited purpose of re- computation of disallowance u/s 14A of the Act r.w. Rule 8D(2)(iii) of the I.T. Rules. It is needless to make it clear that while applying Rule 8D(2)(iii), an amount equal to one half percent of the average of the value of the investment that have generated exempted income should be taken into consideration and not the total investment. Appeal of the assessee is partly allowed for statistical purposes.
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2023 (12) TMI 800
Assessment u/s 153A/153C - addition on account of income from undisclosed sources, disallowance made u/s 37(1) of additional payment and disallowance u/s 40A(3) - HELD THAT:- Since the addition made by the AO is based on the incriminating documents seized during the course of search carried out on BPTP on 15.11.2007 and the documents seized relates to the assessee company, the AO has rightly invoked the provisions of Section 153C. Thus, the judgments relied upon by the assessee in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT and others judgment are not applicable to the facts of the case.
Also found in the order of the coordinate Bench in respect of other related companies relied by the Ld. AR, the Tribunal has specifically observed the finding of CIT(A) that the ‘assessment order also nowhere records any finding that any of the documents seized belong to the assessee’. However, in the present case, CIT(A) has given a categorical finding that the seized material belonged to the assessee company which is incriminating nature, in the case in hand the additions have been made based on the incriminating materials found during the search, therefore, the orders relied by the assessee are not applicable and we find no merit in Ground No. 1 of the Assessee, accordingly, Ground No. 1 of the Assessee is dismissed.
Interest paid on post dated cheques - AO made addition regarding the interest paid on post dated cheques outside the books of accounts in cash - CIT(A) partly confirming the addition - HELD THAT:- Since, we have already upheld action of the A.O. in invoking the provisions of Section 153C of the Act, we find no merit in the submission of the Assessee. Further, considering the fact that the Ld. CIT(A) has elaborately considered the seized material and gave a factual finding which has not been controverted by the assessee even on merits, we find no error or infirmity in the order of CIT(A).
Disallowance of additional payment - AO disallowed u/s 37 on account of additional payment for purchase of land - CIT(A) gave a direction to quantify the disallowance made by the A.O. and as per the directions while giving appeal effect, confirmed part addition - HELD THAT:-Jurisdictional High Court in the case of Group Company of the Assessee i.e. M/s Vasundrha Promoters Pvt. Ltd. [2018 (6) TMI 74 - DELHI HIGH COURT] as opined broad interpretation of the Explanation to Section 37(1) given by the Revenue is in the circumstances of this case not well founded. The other submission is that the such amount has to be taken as falling within the mischief of the said provision, in our opinion, is an incorrect premise. It is not every alleged violation of law, but such violation as results in a penal consequence, determined by that law, which is attracted by Section 37(1). The other interpretation would confer jurisdiction on matters beyond the Income Tax Act. The revenue authorities do not have such powers. Revenue Authority argued that this is to decide what constitutes infraction of other provisions of law.
Disallowance u/s 40A(3) - cash payment made for purchase of land - assessee had received imbursement of all amounts paid related to transaction of purchase of land - It is the case of the Assessee that the amount paid on account of purchase of land was neither debited to profit and loss account nor claimed through computation of taxable income - HELD THAT:- By respectfully following the ratio laid down by the Co-ordinate Bench in the case of M/s. Westland Developers Pvt. Ltd. [2014 (12) TMI 254 - ITAT DELHI] and considering the fact that the Assessee has neither debited the amount of cost of land in P & L account nor claimed any deduction in respect of cost of land through computation and finding the parity, we allow the Ground by deleting the disallowance.
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2023 (12) TMI 777
Reopening of assessment against agent of the State Government - as argued Petitioner is only an agent of the State Government and as the State Government itself cannot be taxed, Petitioner also cannot be taxed - as argued in any event the income of Petitioner is restricted to Rs. 5,00,000/-, which has been offered to tax and an assessment order dated 31st March 2016 has been passed accepting the same etc, therefore, the question of any tax escaping assessment also would not arise - HELD THAT:- When the matter was carried in appeal, the Division Bench of this Court in [2013 (3) TMI 826 - BOMBAY HIGH COURT] came to a categorical finding that from bare reading of Sub-section 3(A) of Section 113 of the MRTP Act, it is crystal clear that Petitioner is declared as an agent of the State Government and this statutory status bestowed on Petitioner cannot be whittled down, nor can be elevated to any other position by an administrative decision. The Division Bench also came to a finding that Petitioner is getting only Rs. 5,00,000/- per annum towards administrative expenses and Petitioner on its own has pleaded before the ITAT that it was acting as an agent of the State Government and nothing more.
The Court has also observed that the ITAT has accepted that contention of Petitioner and held that Petitioner was not liable to pay income tax on the income derived from the development activities. In another [2019 (7) TMI 2009 - BOMBAY HIGH COURT] heard by the Aurangabad Bench of this Court, the Court has accepted that the conjoint reading of the provisions under Sections 40(1)(b) & 113 of the MRTP Act and the notification dated 1st June 1973 issued by the State Government, Petitioner would be acting as Special Planning Authority and as an agent of the State Government.
ITAT in its order [2012 (9) TMI 331 - ITAT MUMBAI] while considering the issue whether Petitioner should be held to be “an agent” of the State or an “arm” of the State, working solely under the authority and guidelines issued through various notifications by the State, i.e., the Government of Maharashtra has come to a finding that the resolutions taking back to 1970 make it clear that Petitioner is an agent and functions as an arm of the State Government because Petitioner can only work under the control and supervision of the State Government meaning thereby Petitioner cannot make/take any decisions suo-motu.
ITAT has also held Petitioner to be an agent of the State. ITAT has also recorded that it was aware that there is an income to Petitioner by way of remuneration received from the State Government at Rs. 5,00,000/- per annum, which has to be assessed in the hands of Petitioner. The ITAT set aside the order passed by the Commissioner of Income Tax (Appeal) and directed the Assessing Officer to decide the case on merits with regard to income of Rs. 5,00,000/- received by Petitioner after allowing deduction for any expenses incurred wholly and exclusively for the purpose of earning the said income.
Even in the assessment order for Assessment Year 2013-2014, i.e., the case at hand, passed under Section 143(3) of the Act, the Assessing Officer has accepted the returned income of Petitioner to be a fixed amount of Rs. 5,00,000/- only.
Thus the question of any income escaping assessment in the case of Petitioner does not and cannot arise.
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2023 (12) TMI 776
Extension of the time for submission of audit report - extension of time under the proviso to Section 142(2C) - Whether the power of extension of time under the proviso to Section 142(2C) is procedural/administrative in nature and can be exercised by an authority superior to the Assessing Officer? - Whether the extension given to the Chartered Accountant appointed under the provisions of Section 142(2A) for submission of the audit report was in consonance with the proviso appended to Section 142(2C) of the Act?”
HELD THAT:- As per The relevant parts of the judgment [2023 (12) TMI 740 - DELHI HIGH COURT] as has been correctly submitted on behalf of the respondent/assessee, the decision taken to get an audit conducted under Section 142(2A) of the Act is a step in the process of assessment proceedings and, therefore, is clearly not an administrative power; as the appointment of a special auditor entails civil consequences
Given that the initial exercise of the power has been explicated as one that is not administrative, the CIT(A) could not have extended the time based on the recommendation of the AO. However, the enunciation of this legal principle does not derogate from our observation above that since the discretionary power was vested in the AO (which was non-delegable), it could not have been exercised by the CIT, irrespective of the nature of the power.
Thus, for the preceding reasons, the question of law, as framed, is answered against the revenue and in favour of the assessee.
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2023 (12) TMI 775
Validity of assessment order against appellant/foreign company without issuing a draft assessment order as mandated u/s 144C - Scope of term “eligible assessee”- Reference to dispute resolution panel - HELD THAT:- It is an admitted fact that the assessee-company is a Foreign Company within the meaning of the provisions of section 144C(15)(b)(ii) of the Act. Further, the assessee-company is also an “eligible assessee” as defined in section 144C(15) of the Act. It is the case of the Ld. AO that the Place of Effective Management [POEM] lies in India and hence the assessee shall be subjected to tax in India as per the Indian Income Tax provisions. However, while making the assessment, the Ld. AO has not followed the procedure mandated u/s. 144C of the Act in the case of the assessee.
It is a fact that the assessee is a foreign company. Therefore, as per section 144C(1) of the Act, the Ld. AO is duty bound to pass the Draft or Proposed Assessment Order and shall forward the same to the ‘eligible assessee’ to enable the assessee to file the objections, if any, before the Dispute Resolution Panel. However, in the instant case, the Ld. AO has not passed the Draft Assessment Order, as mandated u/s. 144C(1) of the Act, before making the assessment and passed the Final Assessment Order.
Therefore, AO has not followed the procedure laid down u/s. 144C(1) of the Act and passed the final assessment order. It was incumbent on the part of the Ld. AO to have passed a Draft Assessment Order to adhere to the mandatory requirement of section 144C(1) of the Act otherwise it would result in invalidation of the final assessment order and the consequent demand and penalty also. Failure on the part of the Ld. AO to pass a draft assessment order u/s. 144C(1) of the Act would vitiate the final assessment order as one without jurisdiction.
Assessment order passed by the Ld. AO in the case of the assessee is without jurisdiction and in violation of the mandatory provisions of section 144C(1) of the Act and therefore the assessment order passed u/s. 153C of the Act is null and void and unsustainable in law. Decided in favour of assessee.
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2023 (12) TMI 774
Penalty u/s 271(1)(c) - Addition of process loss and profit on sale of land/flats considered as “business income” instead of capital gain as claimed by the assessee in its Return of Income - HELD THAT:- Regarding the first issue of penalty namely process loss of Rs. 32,14,385/- the above disallowance is based on estimate basis. In assessee’s own case for the Assessment Year 2013-14 [2021 (9) TMI 1526 - ITAT AHMEDABAD] deleted the penalty levied in respect of process loss charges as held that such claim in the return of income cannot amount to inaccurate particulars of income - mere making of the claim which is not sustainable in law by itself will not amount to furnishing of inaccurate particulars regarding the income of the assessee. In the light of the above facts and findings, we consider that only on the basis of not accepting the claim made by the assessee, the levy of penalty u/s. 271(1)(c) is not appropriate.
Treatment of profit on sale of land/flats as “business income” instead of “capital gains” - Because of change of head of income, no penalty u/s. 271(1)(c) of the Act can be levied, the claim made by the assessee with necessary evidences, thus the assessee has not furnished inaccurate particulars of income. There is no finding by the AO that the details furnished by the assessee in the Return of Income found to be incorrect or erroneous or false, whereby invoking penalty u/s. 271(1)(c) of the Act. Mere making of a claim, which is not sustainable in law by itself will not amount to furnishing inaccurate particulars of income by the assessee. Therefore following the case of Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT] the levy of penalty on this issue is liable to be deleted. Thus we do not find any merits in the grounds raised by the Revenue.
Disallowance u/s. 40A(2)(b) - assessee company had paid interest on Unsecured loans and advances taken from Directors and relatives - CIT(A) deleted addition as no loss of Revenue is caused by payment of interest @ 15% p.a. on loans and advances paid to the Chairman and Director of the company - assessee explained the Chairman and Director of the company provided personal guarantee to various banks for the loans borrowed by the assessee company, for which they did not charge any guarantee commission and loans borrowed from them are also not secured against any assets of the company, therefore both the persons bear the risk for the amounts lended to the assessee company - HELD THAT:- The assessee produced before us copy of the Returns filed by the Chairman and Director of the company disclosing the above interest paid @ 18% in their respective Returns of Income and paid taxes. Considering the fact, the above two parties were stood for the personal guarantee of the loans availed by the assessee company which is a business exigency. It is further seen that for the present Assessment Year 2015-16 the assessee claimed set off of brought forward losses of Rs. 13.75 crores and claiming Nil assessed income. Whereas the two other persons offered the interest income in their respective hands. Therefore there is Revenue neutrality and question of disallowance does not required. For the above reasons, the addition made by the Assessing Officer is hereby deleted. Decided in favour of assessee.
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2023 (12) TMI 773
Income taxable in India - subscription, professional and training services rendered by the assessee - taxability of the amount as fee for technical services - HELD THAT:- We find that identical ground was taken by the assessee in A.Y. 2019-20 [2023 (8) TMI 1391 - ITAT DELHI] we find that the assessee had merely granted only access to software and there is no transfer of technology by the assessee. Hence we have no hesitation to hold that the services rendered by the assessee does not fall within the definition of FTS as per the Treaty. In any case, we find that the since assessee had merely granted access to software, it does not fall within the definition of FTS even as per the Act.
In this regard, analogy could be drawn from the decision of Hon’ble Supreme Court in the case of CIT vs Kotak Securities Ltd [2016 (3) TMI 1026 - SUPREME COURT] wherein it was held that service made available by Bombay Stock Exchange [BSE Online Trading (BOLT) System] for which transaction charges are paid by members of BSE are common services that every member of Stock Exchange is necessarily required to avail of to carry out trading in securities in Stock Exchange; such services do not amount to 'technical services' provided by Stock Exchange, not being services specifically sought for by user or consumer and, therefore, no TDS would be deductible under section 194J on payments made for such services.
We hold that the subscription, professional and training services rendered by the assessee does not fall within the definition of FTS both under the Act as well as under the DTAA and accordingly the same cannot be taxed in India. Accordingly, the Grounds 1 to 3 raised by the assessee are allowed.
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2023 (12) TMI 772
Attribution of profits earned from Indian operations - whether the view taken by CIT(A) that 15 percent of the profits earned from Indian operations could be attributed to the respondent/assessee was sustainable? - HELD THAT:- The coordinate bench in AY 2006-07 while dealing with [2021 (10) TMI 1004 - ITAT DELHI] has sustained the said conclusion and gone on to hold that no substantial question of law arose for its consideration. It is this decision which was affirmed by the Supreme Court Travelport L.P. USA [2023 (7) TMI 700 - SC ORDER] considered and held against the Revenue.
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2023 (12) TMI 771
TP adjustment - Advertising, Marketing and Promotion (AMP expenses) by applying the Bright Line Test was sustainable - international transaction or not? - HELD THAT:- Tribunal ruled in AY 2008-09 that the excessive AMP expenditure did not fall in the category of an international transaction and, therefore, the adjustment made qua the same was unsustainable in the eyes of law. This conclusion was based on a finding of fact that the respondent/assessee was primarily engaged in manufacturing operations and that AMP expenditure had been incurred to benefit its own operation, and not for promoting an associated enterprise (AE).
Tribunal also disapproved the TPO’s approach of applying the Bright Line Test in benchmarking the AMP expenses. This view was based on a judgment rendered in Sony Ericsson India Pvt. Ltd. V. CIT [2015 (3) TMI 580 - DELHI HIGH COURT] and Maruti Suzuki India Ltd. v. CIT [2015 (12) TMI 634 - DELHI HIGH COURT]
Tribunal also highlighted the fact that before ascertaining the arms’ length price on an international transaction concerning AMP expenditure, the appellant/revenue would have to discharge the onus that an international transaction had occurred between the assessee and the associated enterprise. This view was also founded on the decision of the coordinate benches of this court rendered in Bausch & Lamb Eye Care (India) Pvt. Ltd. [2015 (12) TMI 1332 - DELHI HIGH COURT] and Honda Siel Power Products Ltd. v. Dy. CIT [2015 (12) TMI 1333 - DELHI HIGH COURT]
Tribunal both in the period in issue i.e., AYs 2010-11, and in 2008-09, has remitted the matter to the file of the Assessing Officer (AO).We are also informed that the appellant/revenue has lodged an appeal against the decision rendered by this court in Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT]
Therefore, this appeal is closed as according to us, a substantial question of law arises for consideration by this court.
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2023 (12) TMI 770
Reopening of assessment - Foreign currency transactions - Exchange differences arising on foreign exchange transactions settled during the year are recognised in the profit and loss account for the year - HELD THAT:- There is disclosure in the Statement, Profit and Loss Account for the year ended 31.03.2014. The report of the Independent Auditor under Section 227(3) of the Companies Act, 1956, states that the petitioner company does not have any accumulated losses at the end of the financial year and also has not incurred any cash losses in the financial year and in the immediately preceding financial year.
Thus, there is no case made out for reopening the Assessment that was completed earlier. Reopening of the Assessment was inspired from a review and a change of opinion by the subsequent officer. Such practice has been deprecated and frowned upon by the Courts.
Although the petitioner has resorted to window dressing of the statement of actual of statements filed along with the Statement of Profit and Loss for the year ended 31st March 2014, it cannot be said that the petitioner has not disclosed material. There is a complete disclosure by the petitioner along with the regular returns filed under Section 139 of the Income Tax Act, 1961 on 28.11.2014. The petitioner has also uploaded the hard copy of the same in response to a notice issued under Section 143(2) of the Income Tax Act, 1961 on 28.08.2015.
The reasons given for re-opening of the Assessment along with a notice issued u/s 143(2) r.w.s.147 of the Income Tax Act, 1961 on 05.05.2021 is also based on the Profit and Loss Account. Thus, there is no scope for re-opening of the assessment which was completed on 28.09.2018 under Section 143(3) read with section 92CA(3) and Section 144C(8) of the Act. Clearly, the reasons given for re-opening of the assessment is inspired from change of opinion. Decided in favour of assessee.
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2023 (12) TMI 769
Validity of Revision u/s 263 - Allowing Exemption u/s 54 instead of 54F - Source of LTCG is not from residential house and since the assessee had earned capital gain on transfer of plot of land - Solitary contention raised by assessee was that there was no prejudice caused to the Revenue by allowing assessee’s claim of exemption u/s. 54 since even in terms of section 54F assessee was eligible to the same quantum of exemption if not higher than that claimed u/s. 54 - DR contended that the calculation of exemption u/s. 54F of the Act was not as simple as contended by the assessee and needed verification by the AO
HELD THAT:- We are in agreement with the DR. The contentions raised by the assessee against the order passed by the Ld.PCIT u/s. 263 of the Act, of no prejudice being caused to the Revenue by the allowance of claim of exemption u/s. 54 of the Act by the Assessing Officer, is a fresh contention raised for the first time before us. The assessee had never raised such contention before the Ld.PCIT. Besides, the said contention is subject to verification. Therefore this contention cannot be appreciated by us for arriving at any finding regarding the revisionary order passed by the Ld.PCIT. The Ld.PCIT has himself directed the AO to examine assesses eligibity to claim of exemption u/s 54F of the Act.
On the basis of the facts before him and the position of law as appreciated by him correctly, the Ld. PCIT has arrived a finding error in the assessment order on account of incorrect allowance of claim of exemption u/s. 54 of the Act, which the assessee also does not deny / dispute. There is therefore no infirmity in the order of the Ld. PCIT holding the assessment order erroneous for having granted exemption u/s 54 to the assessee against the provisions of law in this regard. In the absence of any other argument made by the Ld. Counsel for the assessee before us we do not find any reason to interfere in the order of the Ld.PCIT and uphold the same.
Appeal of the Assessee is dismissed.
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2023 (12) TMI 768
Default for Non-collecting of TCS u/s 206C - assessee claimed that the assessee is not dealing with “tendu leaf” as per provision of section 206C (1) - applicability of TCS on the forest product - assessee has claimed that the assessee is the dealer of minor forest product - HELD THAT:- The categorically the ‘minor forest product’ and ‘forest product’ has difference in their nature. Such as, Minor Forest products (MFPs) are all the products obtainable from the forests other than wood and timber. They comprise products of vegetable and animal origin, such as grasses, bamboos, canes, tans, dyes, oils, gums, resins, fibres, flosses, leaves, drugs, spices, poisons, edible products, and animal products. On the other hand, forest products include both timber and non-timber products. The major forest products comprise pulpwood, sandalwood, social forestry that includes fuel and timber. The minor forest products include items such as tamarind, curry leaf, tendu patta, gallnut, cane, soapnut, tree moss, and now bamboo as well.
AO had relied on the State Notification on 27.10.2014. But there is no ambiguity that the seller of forest product is required to collect tax on forest produce. But the “Minor Forest Product” are the product are not covered under the Income Tax Act u/s 206C (1), sl no-(v)which is not liable to collect tax at source. We find that there is no ambiguity in the “Minor Forest Product” which are not at all liable to collect tax u/s 206C. In our considered view, we set aside the appeal order and the addition made by the ld.AO is quashed. Appeal of the assessee is allowed.
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2023 (12) TMI 767
Revision u/s 263 - deduction u/s 80GGC as allowed without making adequate inquiry by AO - CIT noted that assessee has claimed deduction under Section 80GGC for donation made to one political party "Apna Desh Party" which in the facts of the instant case, was found to be bogus - HELD THAT:- There was an evident lack of enquiry by the assessing officer, while accepting the claim of deduction of donation by the assessee, while framing the assessment order.
In the instant case, certain noteworthy discrepancies emanating from facts of the case ought to have been enquired by the assessing officer, while framing the assessment, and he should not have simply accepted the version offered by the assessee. In this case, an analysis of receipts issued by “Apna Desh Party” it was observed that such receipts did not contain details of cheque number, bank name, date of cheque etc. issued.
PCIT has also correctly observed that on perusal of website of “Apna Desh Party”, which provided list of donor and name-wise list, the list did not include the name of the assessee in respect of three different receipts, which also establishes the fact that the donation is bogus. It was further observed that though the assessee has given donation in cheque, same is found to be out of donation / loan received from Ranchhorbhai Tapubhai Patel.
We agree with the observations made by PCIT that it is quite unusual that assessee is taking loans for making the aforesaid donations and accordingly, the Assessing Officer should have made further enquiries to ascertain whether the aforesaid loan is genuine in the first place or not. While passing the assessment order, the AO did not enquire into the details / list of donations received by such party which is available in public domain and such list does not include the name of the assessee. While framing the assessment, the Assessing Officer simply accepted the version of the assessee and did not make any attempt to verify the genuineness of the receipts issued by “Apna Desh Party”.
Accordingly, even without considering the material which PCIT took note of pertaining to adverse material / information obtained during search proceedings, in our view the assessment order is still erroneous on account of evident lack of enquiry in respect of information available in public domain. Decided against assessee.
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2023 (12) TMI 766
Penalty u/s 271(1)(c) - defective notice u/s 274 - non strike of twin charges - as argued AO has not mentioned the specific limb in the show cause notice issued u/s 274 as to whether penalty is proposed to be levied for concealment of income or furnishing inaccurate particulars of income - HELD THAT:- From the perusal of the notice issued u/s 274 r/w section 271(1)(c) of the Act, furnished during the hearing, we find that the AO did not strike–off any of the twin charges i.e., concealment of particulars of income or furnishing of inaccurate particulars of income. The case of the assessee is squarely covered by the decision of the Hon'ble Jurisdictional High Court in Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] wherein the Larger Bench of the Hon’ble Court has held that the defect in notice by not striking off the irrelevant matter would vitiate the penalty proceedings. Accordingly, penalty order passed under section 271(1)(c) of the Act is quashed. Assessee appeal allowed.
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2023 (12) TMI 765
Rectification u/s 154 - AO rejected TDS Credit after issuance intimation U/s 143(1) - HELD THAT:- The assessee filed the return alongwith the relevant documents for executing the contract with the party which enclosed in APB. The relevant payment is also reflected in the bank account. Only for filing of TDS return and withdrawing the credit, the ld. AO has acted beyond jurisdiction to execute the withdrawal of credit and reduced the refund u/s 154.
We find that rectification is only related to intimation U/s 143(1) read with section 139(1) of the Act. We find that there is a lack of verification in the point of the ld. AO section 154 is only restricted to filing of return u/s 139 and processing of intimation u/s 143(1). So, withdrawal of TDS is a separate activity of the deductor. The mere rejection of TDS credit is not serving the purpose. The transaction, execution of works and other evidence should be considered during withdrawn of TDS credit after processing of return U/s 143(1). The execution of section 154 can not be mechanical purpose.
AO has acted beyond jurisdiction and rejection of TDS credit after issuance intimation U/s 143(1) is not come under the purview of section 154 of the Act related rectification apparent from the record. We further find that the entire demand U/s 154 is beyond jurisdiction. Therefore, considering the above, we set aside the appeal order and the demand is quashed. Assessee appeal allowed.
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2023 (12) TMI 764
Penalty u/s 271(1)(c) - non specification of clear charge - undisclosed unsold inventory - exact limb of Section 271(1)(c) not assigned - HELD THAT:- As could be seen from the above the Hon'ble Bombay High Court (Full Bench at Goa) in the case of Mr. Mohd. Farhan A. Shaikh v. ACIT [2021 (3) TMI 608 - BOMBAY HIGH COURT] while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s. 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness.
Notice issued by the Assessing Officer was bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Appeal of the assessee is allowed.
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