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Income Tax - Case Laws
Showing 41 to 60 of 8298 Records
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2023 (12) TMI 1329
Levy of penalty u/s 272A(2)(e) - delay of 851 days in filing the return of income for the assessment year 2014-15 - main contention of the ld. A.R. is that as per section 275(1)(c) order u/s 272A(2)(e) of the Act is to be passed before the expiry of financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or 6 months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later
HELD THAT:- The assessee has filed return of income for the assessment year 2014-15 on 31.3.2017. There was no regular assessment and the return of income has been accepted as it is. In our opinion, copy of the return of income itself serve as an assessment order for all practical purposes. So the penalty proceedings has been initiated vide notice dated 21.12.2020, which is approximately after lapse of 45 months. Therefore, the penalty order passed by ld. AO u/s 272A(2)(e) of the Act is not within reasonable time.
As considering Hon’ble Delhi High Court in the case of JKD Capital & Finlease Ltd. [2015 (10) TMI 1281 - DELHI HIGH COURT] we are of the opinion that penalty order has not been passed within reasonable time. Accordingly, we quash the penalty order on this reason. Decided in favour of assessee.
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2023 (12) TMI 1327
Disallowance u/s 80P - assessee violated the principle of mutuality by dealing with non-members and not deducting tax at source on interest payments to nominal members - HELD THAT:- We direct the AO to examine whether the interest income received on investment with Central Co-operative Bank is out of compulsions under the Karnataka Co-operative Societies Act, 1959, and the relevant Rules. If it is so, the same may be considered as ‘business income’ and entitled to deduction u/s 80P(2)(a)(i). If assessee society does not comply with the relevant provisions of the Act, and the Rules of Karnataka Co-operative Societies Act, 1959, it cannot carry on its cooperative activities, namely carry on the business of banking or providing credit facilities to its members. Therefore, if the investments are out of compulsion under the Act and relevant Rules, necessarily it is part of assessee’s business activity entailing the benefit of section 80P(2)(a)(i) of the Act.
Entitlement to cost of funds with respect to interest income that is assessed as income from other sources - HELD THAT:- We find that this contention of the assessee is also covered by the order of case of M/s. Deepa Credit Cooperative Society Ltd [2023 (12) TMI 1326 - ITAT BANGALORE] The Bangalore Bench of the Tribunal had followed the dictum laid down by the Hon’ble jurisdictional High Court in the case of Totgars Co-operative Sale Society Ltd., [2015 (4) TMI 829 - KARNATAKA HIGH COURT] - we restore the matter to the AO. AO is directed to follow the dictum laid down in judicial pronouncements cited supra and take a decision in accordance with law. AO is also directed to afford a reasonable opportunity of hearing to the assessee, before a decision is taken in the matter. It is ordered accordingly. Appeal filed by the assessee is allowed for statistical purposes.
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2023 (12) TMI 1326
Deduction u/s 80P - interest income received from co-operative banks / scheduled banks - limited prayer of the assessee before the Tribunal is to allow the interest cost as a deduction u/s 57 for earning interest income which is to be assessed under the head ‘income from other sources’ - HELD THAT:- Hon’ble Karnataka High Court in the case of Totgars Co-operative Sale Society Ltd.[2015 (4) TMI 829 - KARNATAKA HIGH COURT] had categorically held that where an assessee, a co-operative society, earns interest on deposits kept with scheduled banks; only the net interest income can be taxed u/s 56 of the Act (i.e., the interest income reduced by the administrative expenses and other proportionate expenses to earn the said income).
We restore the matter to the AO. AO is directed to calculate the cost of funds for earning the interest income which has to be assessed u/s 56 of the Act and allow the same as deduction u/s 57 of the Act. Appeal filed by the assessee is allowed for statistical purposes.
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2023 (12) TMI 1325
Addition u/s 69A r.w.s.115BBE - excess cash found from the business premises of the assessee during the survey - HELD THAT:- During statement recorded in survey the assessee clearly declared that the assessee had not made any investment in immovable property within 6 years and the entire amount of the excess cash was generated from undeclared sale of medicine. So, the source of excess cash is from business. Therefore, we are setting aside the impugned appeal order. Accordingly, the application of section 115BBE is bad in law. Hence, the assessee will be assessed related to excess cash under normal rate of tax not U/s 115BBE of the Act. Appeal of assessee allowed.
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2023 (12) TMI 1320
Levy of penalty u/s 271(1)(c) - estimation of income on bogus purchases - HELD THAT:- It is admitted position that in the present case, penalty notice was issued u/s 274 r/w 271 of the Act without deleting or striking off the inapplicable part. Thus, the statutory notice issued to the Appellant does not inform the Appellant about the charge against the Appellant – whether penalty u/s 271(c) of the Act was sought to be levied for concealment of particulars of income or furnishing inaccurate particulars of income.
Therefore, penalty levied u/s 271(1)(c) cannot be sustained as per the judgment of Mohammed Farhan A Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] Further, we note that in the quantum proceedings, the AO made addition of the entire alleged bogus purchases. CIT(A) and thereafter, the Tribunal restricted the addition to 12.5% of the alleged bogus purchases. The addition has been made in the hands of the Appellant on account of bogus purchase was on estimation basis and therefore, we hold that CIT(A) was not correct in rejecting the contention of the Appellant that no penalty u/s 271(1)(c) of the Act can be levied in the present case as the additions in the quantum proceedings were made/sustained on estimate basis.
Our view draws strength from the decision of the Mumbai Bench of the Tribunal has, in the case of Orient Fabritech Pvt. Ltd. [2022 (6) TMI 829 - ITAT MUMBAI] wherein in identical facts and circumstances, penalty levied under Section 271(1)(c) of the Act was deleted.
Thus we delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
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2023 (12) TMI 1319
Addition u/s 14A - Expenditure incurred on exempt income - whether expenditure can exceed the exempt income earned by the respondent/assessee? - HELD THAT:- There is no dispute that the issue raised, hereinabove, is covered by the following judgments in Cheminvest Limited [2015 (9) TMI 238 - DELHI HIGH COURT] and Chettinad Logistics (P.) Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT] also confirmed by SC [2018 (7) TMI 567 - SC ORDER] as held that Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. No substantial question of law arises.
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2023 (12) TMI 1315
Deduction u/s 80P(2)(a)(i) - interest earned by the co-operative society - Assessee is a cooperative society engaged in the business of extending credit facility and accepting deposits from its members, registered under Karnataka Cooperative Societies Act and has been assessed to Income-tax from year to year - HELD THAT:- We have considered the judgment passed by the coordinate bench in the case of M/s Kammavari Credit Cooperative Society Ltd [2023 (9) TMI 1468 - ITAT BANGALORE] fixed deposits were made out of the money not required by the society immediately for lending. Further that this was also not out of the money due to the members. In that view of the matter, the interest earned from such investment was attributable to the carrying out of the business of the appellant society and the judgment mentioned hereinabove in case of M/s. Guttigedarara Credit Co-operative Ltd. [2015 (7) TMI 874 - KARNATAKA HIGH COURT] squarely applies to the facts of the present case. The ultimate prayer was to allow the income earned by the assessee.
Thus, it appears that this issue is squarely covered in favour of the assessee and assessee is rightly allowed the deduction u/s 80P(2)(a)(i) of the Act by the ld.CIT(A). No reason to interfere with the orders passed by the ld.CIT(A) in granting relief to the assessee. Appeal of the Revenue is dismissed.
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2023 (12) TMI 1314
Unexplained money u/s 69 r.w.s. 115BBE - Deposits in bank account by using demonetized currency notes - According to the ld. AO, the assessee has not explained the nature and source of above deposit to assessee’s bank account - HELD THAT:- Similar issue came for consideration before this Tribunal in the case of Bhoopalam Marketing Services Pvt. Ltd. [2022 (11) TMI 331 - ITAT BANGALORE] instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.
Thus we inclined to remit the issue in dispute to the file of ld. AO for fresh consideration to examine in the light of above order of the Tribunal. Appeal of the assessee is partly allowed for statistical purposes.
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2023 (12) TMI 1313
Deduction u/s. 80P(2)(d) - interest on investment derived by the appellant from scheduled bank and co-operative bank - HELD THAT:- As relying on The Totgars’ Cooperative Sale Society Ltd [2023 (9) TMI 150 - ITAT BANGALORE] we hold that the investment held with the co-operative bank would be eligible for claim of deduction u/s. 80P(2)(d) of the Act and we direct the Ld.AO to pass orders in respect of the interest earned by the assessee from commercial banks considering under the head “Income from other sources” and to grant relief to the assessee in accordance with law u/s. 57 of the Act. Assessee appeal allowed.
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2023 (12) TMI 1312
TP Adjustment - interest on advances given to associated enterprises - HELD THAT:- The assessee being one of the JV partner advanced a sum which is outstanding without charging any interest. The claim of the assessee is that the amount was given in earlier years and the joint-venture is now facing a huge cash crunch due to operational losses and therefore it is not appropriate to charge any interest. The assessee also claimed that the advance has been made to the joint-venture to meet the deficit in cash flow while executing project in South Africa. It is the advance out of matter of commercial prudence to protect the business interest of the assessee in the project of the joint-venture. Assessee has also stated that there is a difference between providing advance and loan to its associated enterprises and providing advances as a business partner. It is also claimed by the assessee that the entire advances are not recoverable and therefore substantial part of those advances are written off in the financial year 2016 – 17. Therefore, no interest could be charged. The learned transfer pricing officer held that no independent party would have given such advance to any third-party and therefore the interest is required to be charged.
We find that in KEC International Ltd. Versus DCIT-5 (1) (1) , Mumbai And (Vice-Versa) [2020 (9) TMI 1101 - ITAT MUMBAI] wherein as per ground number 1 transfer pricing adjustment were made on account of interest on business advances, the coordinate bench has deleted the adjustment as held that advances were more in the nature of capital contribution and by advancing the same, the assessee had protected its own business interest which is evident from the financial statements of JV. The advances were towards fulfilment of the assessee’s obligation of being a JV partner as any financial incapacitation of JV would adversely affect the continuation of the project and ultimately jeopardize the interest of the assessee. Therefore, the said advances could not be put in the category of loans as done by the lower authorities.
It could not be said that JV entity derived / gained certain benefits out of such advances but rather it was the assessee who would ultimately gain by continuing with the projects and taste the fruits of the success of project. Hence, not convinced with impugned adjustments as confirmed by first appellate authority, we direct Ld. AO to delete the same. Decided in favour of assessee.
Addition of corporate guarantee - HELD THAT:- As all financial guarantee and performance guarantee issued by the assessee are covered by the decision of the coordinate bench in assessee’s own case wherein the guarantee fees with respect to various guarantees where the assessee has recovered the guarantee commission at the rate of 0.6% was upheld, therefore all these guarantees are continuing guarantee from the earlier years and there is no change pointed out before us in the functions, assets and risk of the parties or any change in the economic conditions, respectfully following the decision of the coordinate bench we confirm the order of the learned CIT – A.
With respect to the financial guarantee given to ICICI bank United Kingdom on behalf of keys the transmission LLC and KC US LLC (whole owned subsidiary of the assessee), no guarantee fee was charged, the learned CIT – A following the decision of the coordinate bench in assessee’s own case has upheld the arm’s-length guarantee fees of 0.20%. As the learned departmental representative could not point out any change in the facts and circumstances of the case as well as any variation in the functions, assets and risk of the parties or change in economic conditions and further as it is a continuing guarantee from earlier years, respectfully following the decision of the coordinate bench we uphold the order of the learned CIT – A in benchmarking the guarantee fee income at the rate of 0.20%.
Addition on account of foreign exchange loss mark to market provided by the assessee - CIT(A) deleted addition - HELD THAT:- The issue is covered in assessee’s favor by the decision of this Tribunal for AY 2009-10 - In fact, the decision of learned first appellate authority for AY 2010-11 [2019 (9) TMI 437 - ITAT MUMBAI] was under challenge before this Tribunal by the revenue [2019 (9) TMI 437 - ITAT MUMBAI] wherein the co-ordinate bench followed the order for AY 2009-10 and held that MTM losses on hedging contracts would be accrued losses and hence, an allowable expenditure.
Addition u/s 14 A r.w.r. 8D in computing the book profit under section 115JB - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the decision of special bench in case of ACIT versus Vireet investments private limited [2017 (6) TMI 1124 - ITAT DELHI] Even otherwise it is stated that assessee has not received any exempt income during the year and therefore there is no question of making any disallowance under section 14 A of the income tax act even in the normal computation of total income and therefore the same also cannot be imputed while computing the book profit u/s 115JB of the act.
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2023 (12) TMI 1308
Rectification u/s 154 - contribution towards the EPF and ESIC disallowed - Tribunal instead of deciding the case on merits has simply adjudicated the issue on the ground that the rectification application was not maintainable - HELD THAT:- After going through the order it appears that though the application was filed under the nomenclature of rectification but if certain amount on which the tax is imposed is not legally recoverable then it also touches upon the merit. Consequently, in order to advance the cause on merits about the issue, we set aside the order of the ITAT and remit back the same to the Income Tax Appellate Tribunal to adjudicate the same on merits.
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2023 (12) TMI 1307
Foreign tax credit u/s 90 - belated filling of Form No. 67, i.e. within the due date of filing of return of income prescribed under section 139(1) - claim made with revised return of income - HELD THAT:- As decided in Sonkashi Sinha [2022 (10) TMI 107 - ITAT MUMBAI] here it is not the case of violation of any of the provisions of the act but of the rule, which does not provide for any consequence, if not complied with. Therefore, we hold the assessee is eligible for foreign tax credit, as she has filed form number 67 before completion of the assessment, though not in accordance with rule 128 (9) of The Income-tax Rules, which provided that such form shall be filed on or before the due date of filing of the return of income.
Thus Appellant would be eligible to foreign tax credit where Form No. 67 is filed before the completion of assessment for the relevant assessment year.
Thus we remand the issue raised in present appeal relating to claim of foreign tax credit back to the file of Assessing Officer with the direction to grant foreign tax credit to the Appellant - Ground No. 1 raised by the Appellant is allowed for statistical purposes.
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2023 (12) TMI 1304
Validity of assessment proceedings u/s 153C - absence of a valid satisfaction note prior to initiation - HELD THAT:- There is no dispute the satisfaction note u/s 153C has been recorded by the AO. It is well settled law that the Assessing Officer need to make only one satisfaction note, if the AO is same for the 'person searched' and 'other person' u/s 153C of the Act. Thus, we find no merit in ground of the assessee, accordingly, dismissed.
Addition u/s 69 - documents were found from the premises of the searched person in search and seizure operation - validity of Dumb documents seized - assessee submitted that the addition has been made based on the dumb document and the said document does not bear date or signature - HELD THAT:- Papers found during the search are neither dated nor signed/stamped, there is no head note on the paper which could suggest the purpose for which it was created, the loose paper contained list of many other property transaction which were related neither to the assessee nor to Sh. Buti Singh (seller) which demonstrates that neither the assessee nor the seller was the author of the document. The loose paper did not belong to the assessee or to the seller, there is no description or comment explaining the hand written jottings-whether it represented a proposal for purchase or construction by the builder or payment between assessee and right seller, there is no date of receipt or payment mentioned against any figure, the content of the paper was incorrect as the total sales consideration did not match to the sales consideration as per the agreement. Further, the sales consideration as per the loose paper did not even match to the handwritten jottings which raise serious doubts on its validity and accuracy.
Thus, the above said loose paper was not speaking document and it is a dumb document which can be used as a basis for making the addition u/s 69 of the Act in the absence of any substantive enquiry to validate the content of the paper with any supportive and corroborative material and evidence.
The evidentiary value of loose paper which is unsigned, undated and unverified has been held to be highly questionable and has not been accepted by the Hon'ble Supreme Court and various High Courts. Thus in absence of any supportive and corroborative material and evidence, a loose paper found during search containing rough notings of proposals/offers could not be a basis for making addition u/s 69 of the Act. See SHRI SHARAD CHAUDHARY [2014 (8) TMI 309 - ITAT DELHI]
AO did not consider the need to summon the seller or the person searched, or to record the statement of the author/searched person/seller by giving an opportunity to assessee to cross examine the said person. The AO has not even made any enquiry about the value of the property purchased by the assessee. Thus we delete the addition made u/s 69.
Addition on account of audit objection and passing the order u/s 154 before the proceedings u/s 153C of the Act were completed - assessee submitted that the Ld. AO was wrong to make addition on account of audit objection and passing order u/s 154 of the Act, before the proceedings u/s 153C were completed and the rectification proceedings are limited to correction of mistake apparent from record only - HELD THAT:- The issue raised by the assessee in this Ground is not emanating from the impugned order of the Ld. CIT(A) which is under challenge before us, therefore, the Ground No. 3 is dismissed as devoid of merit.
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2023 (12) TMI 1302
Addition u/s 56(2)(viib) - FMV determination of the shares issued to the assessee - AO rejecting the DCF method adopted by the assessee - As per AO assessee could not substantiate the FMV adopted as per DCM method to the satisfaction of the AO - HELD THAT:- Once the assessee applied particular method of valuation, (in the present case DCF method), then it is the duty of the AO / CIT(A) to scrutinize the valuation report within the four corners or parameters laid down while making the valuation report under DCF method only. It is not permissible for the AO to reject the method opted by the assessee and apply a different method of valuation and the AO can definitely reject the valuation report but not the method. In case, the AO rejected the valuation report, then the AO has to carry out a fresh valuation report by applying the same valuation method and determine the fair market value of the unquoted shares.
Therefore, in our view, the AO was incorrect in concluding that the DCF method is “quite unrealistic and inapplicable” to the terms of the Income Tax Act. On the contrary, the DCF method is quite applicable and was required to be applied by the Assessing Officer to determine the FMV of the unquoted shares. Our above conclusion is based on the bare reading of the provisions reproduced hereinabove and also on account of the decision referred by the Tribunal in the case of Innoviti Payment Solutions Pvt. Ltd. [2019 (1) TMI 688 - ITAT BANGALORE] as held that AO can scrutinize the valuation report and the if the AO is not satisfied with the explanation of the assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the assessee and only thereafter, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the assessee. But the basis has to be DCF method and he cannot change the method of valuation which has been opted by the assessee.For scrutinizing the valuation report, the facts and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections.The primary onus to prove the correctness of the valuation Report is on the assessee as he has special knowledge and he is privy to the facts of the company and only he has opted for this method.
Thus AO was incorrect in rejecting the DCF method adopted by the assessee.
Whether the valuation report based on which the valuation was arrived by the assessee was in accordance with law or not? - CIT(A) instead of examining the valuation report and the fair market value of the shares by applying the DCF method, had resorted to examining the functionality and working of the NAV method and thereafter, came to the conclusion that FMV has to be determined by the NAV method based on the CBDT Circular dt.12.07.2017 whereby it was envisaged that the value of the shares shall be determined by the Assessing Officer by taking into account the value of the intangible asset for the purpose of working of the net value.
This approach of the ld.CIT(A) was not in accordance with law. As we have held hereinabove that the option is not available to the Assessing Officer, then the exercise carried out by ld.CIT(A) became futile and of no consequence. Further, the determination of FMV on the basis of NAV by the Ld. CIT(A) was otherwise not sustainable and is bad in law as per Rule 11U(j), which defined valuation date and Rule 11U(b), which defined Balance Sheet. The conjoint reading of the above-mentioned Rules make it clear that the valuation of the asset as per the NAV method is required to be determined while making a valuation of the assets mentioned in the balance sheet.
In any case, the CBDT Circular dt.12.07.2016 cannot be made available and applied retrospectively to the facts of the case as the valuation report in the present case was prepared on 01.07.2016, i.e., one year prior to the issuance of the CBDT Circular. The valuation report is dated 01.07.2016. In that view, the NAV method adopted by the ld.CIT(A) is of no help to the assessee. In light of the above, the approach of the Assessing Officer as well as the ld.CIT(A) cannot be sustained.
Having held that both the approach of the AO as well as the ld.CIT(A) were incorrect, hence, we deem it appropriate to remand back the matter to the file of the Assessing Officer with a direction to determine the FMV after exercising the power conferred under the Act and after applying DCF method on the valuation date dt.01.07.2016 based on the balance sheet or any other material as available on that day, after granting due opportunity of hearing to the assessee. Accordingly, appeal of the Revenue is allowed for statistical purposes.
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2023 (12) TMI 1300
Accrual of income in India - Addition of receipts from sale of software & support services as Royalty income - HELD THAT:- Similar issue came for consideration before this Tribunal in assessee’s own case for the assessment year 2006-07 [2021 (11) TMI 1023 - ITAT BANGALORE] by virtue of Article 12(3) of the DTAA, royalties are payments of any kind received as a consideration for "the use of, or the right to use, any copyright "of a literary work includes a computer program or software. It was held that the regarding the expression "use of or the right to use", the position would be the same under explanation 2(v) of section 9(1)(vi) because there must be, under the licence granted or sales made, a transfer of any rights contained in sections 14(a) or 14(b) of the Copyright Act. Since the end-user only gets the right to use computer software under a non-exclusive licence, ensuring the owner continues to retain ownership under section 14(b) of the Copyright Act read with sub-section 14(a) (i)-(vii), payments for computer software sold/licenced on a CD/other physical media cannot be classed as a royalty.
The terms of the licence in the present case does not grant any proprietory interest on the licencee and there is no parting of any copy right in favour of the licencee. It is non-exclusive non-tranferrable licence merely enabling the use of the copy righted product and does not create any interest in copy right and therefore the payment for such licence would not be in the nature of royalty as defined in DTAA. We therefore hold that the sum in question cannot be brought to tax as royalty.
Recharacterizing the maintenance & support services income as fee for technical services - HELD THAT:- As discussed earlier, similar issue came for consideration before this Tribunal in assessee’s own case in assessment year 2006-07[2021 (11) TMI 1023 - ITAT BANGALORE] on the question whether the sums in question can be taxed as FTS, we agree with the submissions made by the learned counsel for the Assessee set out in paragraph-18 & 19 of this order and hold that the sums in question cannot be brought to tax as FTS.
Assessee appeal allowed.
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2023 (12) TMI 1299
TP Adjustment - Corporate guarantee fee - HELD THAT:- Corporate guarantee given by the assessee on behalf of its AE for availing loan facility is for the purpose of reducing the interest rate charged by the banks and while determining the ALP of the said transaction the same has to be considered on the perspective of the benefit received by the AE as per the interest saving approach by reason of the corporate guarantee given by the assessee and to compare the same as to what would be the interest rate charged by the bank for the loan availed by the AEs if the corporate guarantee is not given by the assessee for availing the said loan
Reliance placed on the decision of Everest Kento Cylinders [2015 (5) TMI 395 - BOMBAY HIGH COURT] cannot be the basis for holding the corporate guarantee commission to be 0.5% which was held to be an appropriate rate by the Hon'ble High Court in case of that assessee and for that particular year under consideration. It is evident that 0.5% cannot be a standard rate for charging corporate guarantee commission and the same has to be determined in each case and for each year based on the credit rating of AE, comparable loan transactions where guarantees are issued and non guaranteed loans by working out interest saving and then sharing it between transacting parties.
We, therefore, direct the ld. A.O./TPO to determine the ALP on corporate guarantee commission on the basis of the interest saving approach of the said transaction. The assessee is also directed to bench mark the said transaction where it has already been held to be an international transaction and on the basis of which the ld. A.O./TPO has to determine the ALP of the corporate guarantee commission as per the provisions of section 92CA of the Act which makes it compulsory to benchmark the international transactions every year - We, therefore, remand this issue back to the ld. A.O. Assesee ground allowed for statistical purpose.
Disallowance u/s. 14A r.w.r. 8D - assessee contended that the investments made in the subsidiary companies are strategic investments which should not be considered for computing the disallowance under Rule 8D(2)(iii) - HELD THAT:- We deem it fit to direct the ld. A.O. to restrict the disallowance to the extent of investment which has yielded in earning of the exempt income and not those investments where the assessee has not earned any exempt income for the purpose of computing the disallowance u/s. 14A read with Rule 8D. See Vireet Investments Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] - We, therefore, remand this issue back to the file of the ld. A.O. for recomputing the disallowance u/s. 14A read with Rule 8D to the extent of the investments made by the assessee which has resulted in earning of the exempt income.
Nature of income - Interest income on temporary deposits - A.O. observed that the assessee has availed external commercial borrowings (ECB) and temporary surplus of such borrowings were deposited in bank fixed deposit out of which the assessee has earned an interest was netted of against the interest expenses which was capitalized - AO taxing the said interest income as income from other source u/s. 56 - HELD THAT:- We do not find any observation by the lower authorities as to how the borrowed fund and the surplus amount parked in the fixed deposits are not ‘inextricably linked’ to the setting up of the new unit by the assessee. In the absence of such observation and by placing reliance on the decision cited by the assessee we hold that the interest income out of the fixed deposits which is made from the ECB has to be capitalized as capital receipt and not revenue receipt.
As decided in Indian Oil Panipat Power Consortium [2009 (2) TMI 32 - DELHI HIGH COURT] funds infused in the assessee by the joint venture partner were inextricably linked with the setting up of the plant, the interest earned by the assessee could not be treated as income from other sources. In the result we answer the question as framed in favour of the assessee.
Additional depreciation u/s. 32(1)(ii) - additional depreciation for plant and machinery which was purchased and put to use for less than 180 days during the financial year - AO held additional depreciation is to be restricted as per the second proviso to section 32(1)(ii) which restricts the claim of additional depreciation to ½ the amount otherwise allowable and in the absence of the explicit provision, the balance 50% of the additional deprecation would lapse - explicit provision applies 50% of the said claim was introduced by Finance Act, 2015 which is w.e.f. 01.01.2016 vide third proviso to sub section (1) of section 32 and since the said provision is applicable prospectively, the assessee’s claim of additional deprecation was disallowed by the ld. A.O - HELD THAT:- As this issue has been squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Rashtriya Chemicals and Fertilizers Ltd. (2021 (10) TMI 1269 - BOMBAY HIGH COURT] wherein it was held that the 3rd proviso to clause (ii) of sub section (1) of section 32 of the Act being clarificatory in nature would apply to previous years also.
As seen that the Karnataka High Court in Rittal India Pvt., Ltd.,(2015 (1) TMI 1248 - KARNATAKA HIGH COURT] even without the aid of the statutory amendment held that remaining 50% unclaimed depreciation would be available to the Assessee in the succeeding Assessment Year. Now the legislation has amended the provision by adding a proviso which, specifically recognizes the said right. The Madras High Court in Shri T. P. Textiles Pvt. Ltd., (2017 (3) TMI 739 - MADRAS HIGH COURT] ruled that such proviso being clarificatory in nature, would apply to pending cases, covering past period also.
Thus we hold that the assessee is entitled to the additional depreciation claimed u/s. 32(1)(ii) of the Act and, therefore, find no infirmity in the order of the ld. CIT(A). Ground no. 1 raised by the Revenue is dismissed.
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2023 (12) TMI 1298
Registration u/s 80G - Application rejected as mistake in mentioning the proper Clause - Assessment of trust - HELD THAT:- All the facts were before ld. CIT (Exemption) when the assessee for the first time applied for the final approval u/s 80G of the Act. Merely, because the assessee out of inadvertence had mentioned another Clause, the same was not an illegality but rather the same was a rectifiable mistake. The facts were on the record that the assessee before the amendment was already approved as a charitable institution u/s 12A as well as 80G of the Act. The assessee duly applied for provisional registration in view of the amended provisions. The same was also granted to the assessee.
The next course for the assessee was to apply for the final registration u/s 80G of the Act which was also duly complied by the assessee within the time limit prescribed for the same. However, due to the mistake in mentioning the proper Clause, the assessee was told to withdraw the application and file a fresh application. The assessee filed the fresh application without any delay. However, ld. CIT (Exemption) completely ignored the events which occurred from the date of filing of the application for final approval and leading to the filing of the fresh application because of the technical mistakes. In fact, instead of getting the application withdrawn, ld. CIT (Exemption) was supposed to give opportunity to the assessee to rectify the mistake i.e. the mentioning of the appropriate Clause. Ld. CIT (Exemption) even could have suo-moto passed an order treating the said application under the relevant ‘Clause-iii’ of Section 80G(5) of the Act.
Thus delay in filing the fresh application is, hereby, condoned. It is directed that the application of the assessee for final registration may be treated as filed within the time limit prescribed and the time consumed by the assessee in filing the revised application will not be taken into consideration. The matter is accordingly restored to the file of ld. CIT (Exemption) with a direction that ld. CIT (Exemption) will pass an order on merits irrespective of the delay occurred in filing the fresh application for final approval u/s 80G(5)
Application for final registration was to be filed within six months from the commencement of its activities and therefore, the application of the assessee for final registration was time barred - We note that the issue has already been discussed and adjudicated by the Coordinate Bench of the Tribunal in the case of West Bengal Welfare Society vs. CIT(Exemption), Kolkata [2023 (9) TMI 1422 - ITAT KOLKATA] wherein, it has been held that the assessee, who has been granted provisional registration, is eligible to apply for final registration irrespective of the fact that the assessee had already commenced its activity even prior to the date of grant of provisional approval.
Thus matter is restored the file of the CIT(E) for decision afresh - Appeal filed by the assessee is treated as allowed for statistical purposes.
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2023 (12) TMI 1297
Validity of the order passed u/s. 92CA(3) - period of limitation - TPO will have to pass an order in time before 60 days prior to the date on which the period of limitation referred to in section 153 of the Act expires - HELD THAT:- Though in section 92CA(3A) of the Act it states that the ld. TPO has to pass the order before 60 days of the limitation period mentioned in section 153 which though seems to be only directory and not mandatory but various courts have held that the time limit prescribed for passing of the order by the ld. TPO is mandatory which has to be adhered to strictly while passing the TP order. In the present case, the order of the TPO should have been passed on or before 31.10.2019 and the impugned order dated 01.11.2019 is beyond the time limit stipulated u/s. 92CA(3A) r.w.s. 153 of the Act. Appeal filed by the assessee is allowed.
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2023 (12) TMI 1295
Entitlement of claim of exemption u/s 11 - not filing of Form No.10 and / or 10B within due date as prescribed under the Act - procedural or mandatory lapses - assessee filed revised return of income with the higher claim of deduction under Section 11(2) - HELD THAT:- As in the instant facts, it is not a case where the assessee had not filed Form 10 in the original return of income, before the due date prescribed of filing return of income. It is only a case where the assessee observed that a certain error had crept in the original return of income, wherein the quantum of deduction claimed under Section 11(2) of the Act required correction and accordingly, the assessee filed revised return of income with the higher claim of deduction under Section 11(2) of the Act.
It has been held by various Courts that the requirement of filing Form 10 / 10B is merely directory in nature and failure to furnish Form 10 / 10B before due-date prescribed u/s 139(1) of the Act cannot be so fatal so as to deny they very claim of exemption u/s 11(2) of the Act especially when Form 10 / 10B was available on record when the intimation was passed by CPC u/s 143(1) of the Act - Decided in favour of assessee.
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2023 (12) TMI 1292
Revision u/s 263 against reassessment order passed u/s 147 - taxability of capital gain arising out of the sale of the said land - as per CIT AO has accepted the source of cash deposit but did not investigate the nature of land alleged to be sold as agricultural land - assessee stated that AO could not have gone beyond the reasons recorded for reopening the assessment -
HELD THAT:- On a perusal of the notice PCIT himself has referred to the sale deed relating to sale of agricultural land. This very document was examined by the AO as mentioned in his assessment order when he was examining the source of cash deposited in the Savings Bank account.
These facts go on to show that specific queries were raised to which specific reply was filed. Therefore, it cannot be said that the AO did not make any enquiry. Moreover, assessment was reopened with specific reasons for reopening and those specific reasons have been duly examined by the AO before completing assessment.
In our considered opinion, for exercise of power u/s 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue. A perusal of the assessment order shows that the returned income was accepted by the AO and no addition was made for reasons recorded at the time of issue of notice u/s 148 of the Act.
This is an undisputed fact that the issues which prompted the AO to reopen the assessment were duly considered and reply of the assessee was accepted and no addition was made. This fact has also not been disturbed by the PCIT in his order u/s 263 of the Act.
In our considered opinion, the AO could not have made the addition on the issues raised by the PCIT in his order as no addition was made on account of reasons recorded for reopening the assessment.
No hesitation in setting aside the order of the PCIT and restore that of the Assessing Officer - Decided against revenue.
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