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Income Tax - Case Laws
Showing 421 to 440 of 8298 Records
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2023 (12) TMI 349
Disallowance u/s 14A r.w.r. 8D - assessee had made a suo motu disallowance - HELD THAT:- In a series of judgments it has been held that the disallowance u/s 14A r.w.r. 8D of the Rules cannot exceed the exempt income.
Therefore, to our minds, the addition made by the AO, which was sustained by the CIT(A), was wholly unsustainable and thus, according to us, the Tribunal correctly deleted the addition.
Disallowance of interest expenses - Utilization of loan for purchase of shares - ITAT deleted the additions - Counsel for respondent / assessee contended that, Revenue, at the fag end of the proceedings came up with the argument that the CIT(A) had taken recourse to an alternate rationale based on the provisions of Section 36(1)(iii) - Revenue contention that although the AO was right in holding that in the balance sheet for FY in issue i.e., FY 2007-08, a part of the shares bought concerning Reliance Industries Ltd. (RIL) was shown as long term investment, they were sold and the profit earned therefrom was offered for imposition of tax. Mr Jain, thus, went on to state that the profit on the sale of all the shares mentioned in Table- II above, which included shares of RIL (except Reliance Liquid Fund) was Rs. 7,10,34,493/-, which as indicated above, was offered for levy of tax. Therefore, the argument advanced by Mr Jain was that notwithstanding the depictions in the balance sheet, once the appellant/revenue has accepted the transaction as one concerning the sale of shares held as stock-in-trade, neither the CIT(A) nor the AO could have made an addition qua interest paid on loan availed by the respondent/assessee.
We tend to agree revenue. The borrowings were for the purpose of business. The shares bought from borrowed funds were sold and this profit earned was offered for levy of tax, which was accepted by the appellant/revenue. It is perhaps for this reason that the question proposed by the appellant/revenue does not raise the issue concerning the application of borrowed funds for long-term investment, and hence unavailability of deductions qua interest accrued on it [See Section 36(1)(iii)]. The question, as proposed, is confined to the disallowance made under Section 14A of the Act read with Rule 8D of the Rules. In any event, the well-established principle is that the manner of treatment of an item concerning expenditure and income in the books of accounts or financial statement does not determine its liability under the Act [See Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income Tax, (Central), Calcutta [1971 (8) TMI 10 - SUPREME COURT]
At this juncture, the appellant/revenue cannot spring upon the respondent/assessee a new case which is not articulated in the appeal preferred before us.
Thus as the exempt income was only Rs. 35,347/-, the disallowance ordered by the AO amounting to Rs. 5,06,73,874/- could not have been made in view of the position in law
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2023 (12) TMI 348
Allowable business expenses - Supervisory and risk management expenses - addition made expenses were not incurred by the respondent/assessee for its business purposes - CIT(A) deleted addition - HELD THAT:- The record shows that the assessee is in the insurance brokerage business concerning both life and non-life products offered by various insurance companies.
Assessee is said to have incurred, according to the stand taken before the AO, the aforementioned amount vis-à-vis prospective clients. Concededly the said amount was paid by the respondent/assessee to its sister concerns, namely M.M. Carpets & Industries Ltd. and Trinity Global Enterprises Ltd. The fact that the expenses were incurred for prospective clients should be good enough for the respondent/assessee to claim deduction qua the same, as every expense does not necessarily translate into corresponding income.
Since, as noticed above, the appellant/revenue has treated the amount expended by the respondent/assessee as revenue receipt in the hands of its sister concerns, in our opinion, the same transaction cannot be treated differently in the hands of payer i.e., respondent/assessee.
Besides, as noted above, in AY 2010-11, the AO had allowed deduction vis-à-vis amounts expended towards supervisory and risk management charges. CIT(A), in AY 2013-14, as noticed above, had deleted the addition made by the AO.
Thus, we are not inclined to interfere with the impugned order, since, according to us, no substantial question of law arises for our consideration.
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2023 (12) TMI 347
Deduction u/s 80IA - assessee claimed tax holiday u/s 80IA at the rate of 100% of the profits earned up until AY 2011-12 and, thereafter, at the rate of 30% between AY 2012-13 and AY 2016-17 - Whether expansion of services amounted to setting up a new and independent undertaking? - AO disallowed the tax holiday claimed for the AY in issue, albeit, on a proportionate basis (i.e., in proportion to the contribution of each segment) pivoted on the rationale that a new and separate undertaking had come into existence with respondent/assessee having acquired, in 2008, NLD and ILD Licenses - According to the Tribunal, in 2002-03, assessee had commenced its business by providing data transmission and internet services, which continued even after it acquired, in 2008, NLD and ILD licenses - HELD THAT:- We find that the Tribunal has noted that there was no material brought on record by the appellant/revenue to back its claim that a separate undertaking had been established to provide the NLD and ILD services offered by the respondent/assessee.
There was also, according to the Tribunal, no case set up or established by the appellant/revenue there was reconstitution of the existing business.According to the Tribunal, in 2002-03, the respondent/assessee had commenced its business by providing data transmission and internet services, which continued even after it acquired, in 2008, NLD and ILD licenses.
The only difference that was brought about, which is something that was noticed by the Tribunal, is that the respondent/assessee, with the acquisition of two new licenses, was now providing private internet services in a secure form to a closed group of users.
In our opinion, given the aforementioned findings of fact returned by the Tribunal, it cannot be said that a new undertaking had come into existence after 31.03.2005. The respondent/assessee was and continued to provide internet services. The only difference was that it expanded its business footprint by it adding to it a niche consumer base.
The legislative policy of providing deduction u/s 80IA is to give leg-up to certain undertakings, which are capital intensive. The attempt of the AO to excise a portion of the benefit, in our opinion, cannot pass muster upon perusal of the plain language of Section 80IA(4)(ii) of the Act.
Thus, according to us, no interference is called for with the impugned order passed by the Tribunal. According to us, no substantial question of law arises for our consideration.
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2023 (12) TMI 346
Additions against unexplained jewellery, paintings and wrist watches - search and seizure operation was conducted u/s 132 - source of the money concerning investment in the aforesaid articles was unexplained, additions were made qua each of these articles - ITAT deleted the additions - HELD THAT:- Insofar as the jewellery is concerned, the Tribunal noted that the entire family lived in one residential premises as a single family unit - jewellery declared/disclosed by the family as one unit in its wealth tax return was more than the jewellery found during the search action.Assessee had placed before the AO item-wise reconciliation of the articles mentioned in the wealth tax return, along with the valuation report prepared during the search
No fault can be found with the approach adopted by the Tribunal with regard to the deletion of addition made by the AO qua jewellery. Besides the above observations, the Tribunal has also taken into account the fact that there were substantial withdrawals every month and also the income declared by the respondent/assessee. It is noted (something which is not disputed before us by Mr Kumar), that the returned income for the period in issue was Rs. 14.73 crores.
Thus, as per contents of the wealth tax return, the Tribunal deleted the entire addition made in respect of jewellery.
Addition made with regard to paintings, what has emerged is that not only had the respondent/assessee placed on record a valuation report, but also the appellant/revenue had the paintings valued by two valuers. The valuation arrived at by the two valuers appointed by the appellant/revenue were Yellow Flute and Delhi Art Gallery. Evidently, Yellow Flute valued the subject six paintings at Rs. 55,85,000/-, while Delhi Art Gallery valued the said paintings at Rs. 37,50,000/-.
Valuer appointed by the respondent/assessee pegged the worth of five out of the six paintings at Rs. 19,50,000/-. Assessee had disclosed that out of five paintings, three paintings were purchased in 2004, while the remaining paintings were purchased in 2012 and 2017.
Assessee’s valuer has not estimated the worth of the sixth painting and, therefore, perhaps, has not provided the year in which it was purchased. Interestingly, insofar as the painting purchased in 2017 is concerned, the source of purchase was shown as “bank”. The remaining four paintings were claimed by the respondent/assessee as having been purchased by “drawings”.
Tribunal, while taking into account the year of purchase (at least with regard to the paintings which were purchased in 2004), noted that this aspect had not been put in issue by the valuers appointed by the appellant/revenue. Based on this, the Tribunal, inter alia, concluded that no addition qua paintings purchased in 2004 could be made in the relevant period i.e., AY 2018-19.
Tribunal noted, as indicated above, that the two valuers appointed by the appellant/revenue had estimated the worth of paintings differently and furthermore, had not pointed out any defect in the valuation report submitted by the expert appointed by the respondent/assessee.
Tribunal concluded that insofar as valuation of artwork is concerned, experts could differ in their conclusions. Furthermore, given the fact that the valuers appointed by the appellant/revenue had not expressed any reservation with regard to the report submitted by the expert appointed by the respondent/assessee, the Tribunal held that the addition made with regard to the paintings was unmerited.Tribunal’s approach, in the given facts and circumstances, cannot be faulted. Estimating the worth of an artwork can vary from expert to expert.
Four out of five paintings were purchased, according to the respondent/assessee, in 2004; an aspect which was not contested by the valuers appointed by the appellant/revenue.
Insofar as the painting which was purchased in 2017, the investment had been made, evidently, through banking channels - Thus, on the whole, the Tribunal, in our view, correctly deleted the addition.
Addition made qua wrist watches - Having regard to the declared income and the fact that there were substantial withdrawals, the Tribunal deleted the additions made on account of investment in wrist watches.Once again, we are of the view that the Tribunal has, broadly, come to the correct conclusion.
This is a case of wherein the Tribunal has returned the findings of fact after appreciating the material placed on record by the respondent/assessee.
We are of the opinion that none of the findings of fact are perverse. We also notice that no question concerning perversity has been proposed by the appellant/revenue.
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2023 (12) TMI 345
Reopening of assessment u/s 147 - Reason to believe - as alleged accommodation entry said to have been received by the petitioner from Mr S.K. Jain [accomodation entry provider] - HELD THAT:- The notice issued to the petitioner was accompanied by two (2) sheets of paper, which, inter alia referred to the accommodation entries made available to the petitioner. The assessment order was thereafter framed in the first round, i.e., on 30.03.2015. Therefore, according to us, the material that was examined by the AO in the second round was no different from that which was examined when the assessment order dated 30.03.2015 was passed.
As indicated above, the allegation with regard to the source of the accommodation entry and the amount was also similar, both when the assessment order dated 30.03.2015 was passed and when the 2018 notice was issued. Therefore, according to us, it is a clear case of change of opinion.
Revenue’s submission that the assessment order did not deal with the query raised with regard to the accommodation entry and the material furnished, in our opinion, is misconceived, as the aspect concerning accommodation entries was the focus of the assessment order, which is evident upon perusal of the said assessment order itself.
AO adverts to the notices issued to the petitioner, to which we had made a reference above, and the material (i.e., two sheets of paper) which were alluded to the accommodation entry received by the petitioner.
It is well-established that an AO need not write a detailed order, as long as the assessment record is indicative of the fact that a query was raised and it was answered; if such an exercise has been undertaken, it would not be open to the AO to reopen the same, unless fresh material comes to light which was not available when the matter was examined in the first instance.
Thus principle that once a query is raised and answered, the AO would have formed an opinion, notwithstanding the fact that no reasons are recorded in the assessment order. In such circumstances, the reassessment proceedings, if initiated, would be construed as being invalid in law. This principle is founded on the rationale that the assessee has no control over the manner in which the AO chooses to frame the assessment order. One needs to remember that the AO wears two hats, that of an inquisitor and adjudicator. Decided in favour of assessee.
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2023 (12) TMI 344
Reopening of assessment u/s 147 - reassessment order was quashed, concerns the applicability of the third proviso appended to Section 147 - HELD THAT:- A careful perusal of the third proviso appended to Section 147 of the Act reveals that the AO is free to assess or reassess such income which is chargeable to tax, provided he has reason to believe that income has escaped assessment, other than income which is the subject matter of any appeal, reference or revision.
Therefore, in order to appreciate as to which is the income that the AO cannot subject to assessment or reassessment, one would have to examine the grounds incorporated in the appeal [i.e., for AY 2010-11] which the appellant/revenue had preferred with the Tribunal.
We may note that identical grounds were raised qua AY 2011-12, except for the difference in the amount that was added to the respondent’s/assessee’s income u/s 68 of the Act.
Clearly, a perusal of the grounds of appeal would show that the appellant/revenue had directed its appeal towards the additions made under Section 68 of the Act. The reassessment proceedings, concededly, also dealt with the additions made under Section 68 of the Act.
According to us, while the appeals preferred were pending adjudication with the Tribunal, the AO could not have triggered reassessment proceedings against the additions which were the subject matter of the appeal. The dicta of the two judgments cited by Mr Aggarwal [i.e., Commissioner of Income Tax, New Delhi (Central) vs. Edward Keventer (Successors) P. Ltd. [1979 (11) TMI 73 - DELHI HIGH COURT] and Alcatel Lucent France vs. ADIT [2016 (6) TMI 301 - DELHI HIGH COURT]] is squarely applicable.
Both judgments enunciate the principle that for zeroing down on matters which the AO cannot subject to assessment or reassessment proceedings under the third proviso to Section 147 of the Act the best way would be to examine the grounds of appeal.
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2023 (12) TMI 343
Revision u/s 263 against assessee as an agent of the non-resident Monet Ltd.- Validity of order passed u/s 163 whereby the respondent/assessee was treated as an agent of the non-resident company - whether the CIT could have exercised powers against the respondent/assessee i.e., Cairnhill CIPEF Ltd. when the principal had ceased to exist? - HELD THAT:- As noticed by us, Monnet Ltd. ceased to exist on 19.12.2018, whereas, the CIT exercised its revisionary power much later i.e., on 31.03.2021.
The other submission made that the revisionary power under Section 263 of the Act is directed towards the assessment order is also, in our view, an untenable submission for the reason that the assessment order is framed qua “an assessee”. In this case, the assessee was Monet Ltd. and before exercising the power under Section 263 of the Act, notice would have to be issued to Monet Ltd. and in some cases (where principal, perhaps, is not found available) to its agent by exercising powers under Section 163 of the Act.
In this particular case, the record shows that it is not the appellant’s/revenue’s assertion that Monet Ltd. was not available. The record, however, indicated, as alluded to above, that Monet Ltd. had ceased to exist, therefore, the submission that the CIT could revise the assessment order dated 12.12.2018 when Moent Ltd. was not in existence, in our view, is untenable in law.
The third submission made that the assessee i.e., Cairnhill CIPEF Ltd. would be liable only to the extent of the benefit it received i.e., by way of acquisition of shares of Mankind Ltd., is again, in our view, misconceived because it ignores the fact that under Section 163 of the Act, it is only when an entity/person is treated as an agent of a principal, which is in existence, such approach is acceptable in law.
The arguments of Appellant in sum, veers around the proposition that Section 163 of the Act recognizes a person or an entity as an agent, irrespective of whether or not the principal is in existence. In the usual and normal course, the expression “agent” suggests that there is a principal in existence, on whose behalf the agent acts. The fact that an entity or a person is treated as an agent only buttresses this point of view.
In our opinion, none of the submissions made persuade us that the impugned order requires interference. No substantial question of law.
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2023 (12) TMI 342
Unexplained investments in share capital of its group companies - addition made as nothing was produced by the assessees to prove that the investments in the shares of SBQ Steels by the assessees are out of the explained investments - HELD THAT:- The main reason given by the Tribunal in the orders dismissing the appeals is that nothing was produced by the assessees to prove that the investments in the shares of SBQ Steels by the assessees are out of the explained investments. The contention of the learned counsel for the assessees in this regard is that they were ready to submit the relevant documents, but on the date of hearing of the appeals, 15 other cases relating to the group were also listed and due to the same, the assessees were not able to provide the documents.
In view of the submission made on the side of the assessees that they are ready to submit the relevant documents, this court deems it appropriate to remand the matter to the Assessing Officer / respondent authority for fresh consideration. The learned standing counsel appearing for the respondent has no serious objection for the same.
Questions of law raised in all these appeals are left open and the matters are remanded to the respondent authority / assessing officer for fresh consideration.
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2023 (12) TMI 341
Rectification u/s 154 - applicability of section 115BBDA - Assessee earned dividend income from mutual funds which were exempt from taxation u/s 10(35) - as argued assessee having not earned dividend exempt u/s 10(34) of the Act, therefore the invocation of section 115BBDA to the dividend income earned by the assessee was a mistake needing rectification - HELD THAT:- Section 115BBDA of the Act levies special rate of tax only on dividend income earned from domestic companies if exceeding Rs. 10 lakhs. This dividend income is exempt upto Rs. 10 lakhs under section 10(34) - The assessee has claimed to have earned dividend income from mutual fund which are exempt u/s 10(35) of the Act. Evidence to this effect was also filed by way of statement of Mutual Fund. The assessee had clearly demonstrated the inapplicability of section 115BBDA of the Act to the facts of her case.
In the light of the same the Ld.CIT(A)’s order upholding the rejection of her application seeking rectification to this effect is clearly untenable more particularly since we find that the Ld.CIT(A) has not even cared to deal with the contention of the assessee before upholding the order of CPC .
Thus we hold, the rectification application filed by the assessee needs to be allowed.
In view of the above the order of the CPC/AO, rejecting the assessee’s rectification application seeking deletion of addition made to her income of dividend income earned from mutual fund and subjected to tax at 10%, is set aside. The CPC/ AO is directed to allow the rectification application of the assessee and delete the adjustment made to her income, taxed at the rate of 10%. Appeal of the assessee are allowed.
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2023 (12) TMI 340
Revision u/s 263 - as per CIT assessee has been assessed on the lower amount which is erroneous and causing prejudice to the interest of the revenue - mismatch between the income of the assessee shown in form 26AS and Audited Financial Statement and this fact has nowhere been inquired by the AO during the assessment proceedings - HELD THAT:- There is no loss to the revenue as far as income shown by the assessee from M/s Shivam Construction provided the same has been declared in two different AYs as demonstrated by the ld. AR for the assessee. As such, on aggregation of income of the assessee from M/s Shivam Construction in 2 different AYs i.e. 2012- 13 and 2013-14, it is transpired that the assessee has shown excess income as evident from the reconciliation statement filed by the assessee before the Ld. PCIT
As decided in Gujarat Engineering Co. vs CIT [2017 (3) TMI 383 - ITAT AHMEDABAD] return of income filed by the assessee in not offering the job work charges in the assessment year 2006-07 when the income has already been offered in the earlier assessment year cannot be said to be erroneous by any stretch of imagination - one of the two conditions, as noted above, is clearly not satisfied. The order u/s 263 is, therefore, liable to be struck down this on score alone.
Be that as it may be, what we find from the preceding discussion is this that the veracity of the contention raised by the assessee before the Ld. PCIT has nowhere been verified either by the AO during the assessment proceedings or by the Ld. PCIT and accordingly no finding is thereon of such contention of the ld. AR.
As referred to the reply made by the assessee in response to the notice u/s 142(1) we find that the AO has not enquired the aspect highlighted by the Ld. PCIT in his order during the assessment proceedings. Accordingly, it appears to us that the AO in the given case has not conducted any inquiry qua to difference between income shown in form 26AS vis-a-vis Financial Statement.
There remain no ambiguity that the assessment order is erroneous in so far prejudicial to the interest of revenue if it has been passed without making inquiries during the assessment proceedings. Accordingly, we do not find any reason to interfere in the finding of the Ld. PCIT. Decided against assessee.
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2023 (12) TMI 339
Assessment u/s 143(3) or u/s 153A r.w.s 153C - Bogus LTCG declared on sale of shares of a listed company through recognized stock exchange - HELD THAT:- There is no dispute that in the case in hand, the entire addition is based upon the incriminating material/information detected out of search proceedings u/s 132 conducted at the premises of the stock brokers.
On the given facts, r.w. the above mentioned observations of the AO we do not find any merit in the submissions of the ld. DR. Even if the assessments were on going, but when search took place and when information came to the knowledge of the Revenue, pending assessments get abated as per the provisions of section 153A and proceedings u/s 153C are off shoot of proceedings u/s 153A. Therefore, the impugned assessment order should have been framed as per the provisions of section 153C of the Act as held by the Hon'ble Supreme Court in the case of Vikram Singh Bhatia [2023 (4) TMI 296 - SUPREME COURT].
Thus we set aside the assessment order as bad in law.
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2023 (12) TMI 338
Penalty u/s 271E - repayment of loan made by bearer cheque and not through crossed cheque - contravention of the provisions of Section 269T in the preceding assessment year - initiation of penalty proceedings before the Ld. CIT(A) for A.Y. 2014-15 while framing assessment for A.Y 2015-16 - HELD THAT:- It is an established fact that penalty under section 271E of Act for A.Y. 2014-15 in the case of the assessee has been initiated while completing assessment proceedings for A.Y. 2015-16. This, in our view, is not legally tenable. Penalty proceedings can be initiated at any time while the Ld. AO is in seisen of the assessment proceedings of the relevant A.Y. in which the default occurred and not afterwards.
On facts similar to that of the assessee, as held in Mahonar Lal Thakral [2011 (1) TMI 538 - PUNJAB AND HARYANA HIGH COURT] that it being a case of processing the return of income, there is no finding in the assessing officer's order with regard to the applicability or otherwise of section 269T of the Act to the assessee’s case. It was within the purview of the AO to bring the assessee’s case to scrutiny and to make regular assessment under section 143(3) of the Act. It was also within the power of the AO at the appropriate stage to initiate proceedings under section 147 of the Act against the assessee. No such action was taken.
It is not in dispute that there were no proceedings pending before the Ld. AO qua the assessee for A.Y. 2014-15. We, therefore hold that initiation of penalty proceedings under section 271E of the Act on the basis of assessment order for A.Y. 2015-16 is bad in law and imposition of impugned penalty by Ld. JCIT and confirmation thereof by the Ld. CIT(A) is not sustainable. The plea of Ld. Sr. DR that penalty under section 271D and 271E can be initiated dehors any pending proceedings for relevant A.Y. is devoid of merit. Appeal of the assessee is allowed.
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2023 (12) TMI 337
Assessment u/s 153A - Unexplained cash deposit u/s 68 - Assessee argued additions are devoid of any reference to any incriminating material found at the time of search - HELD THAT:- As regards the nature and source of cash deposit in IDBI Bank account was explained that the cash deposit is out of old savings, income earned during the year and withdrawal from banks and partnership firm. Nothing has been brought on record to dismantle the explanation of the assessee by the Ld. AO/CIT(A). It is not the case of the Revenue that the IDBI bank account was not declared by the assessee. The addition in our view is not sustainable as it is not based any solid factual and/or legal footing.
Regarding credit received by the assessee in her IDBI Bank account, search was carried out on locker No. 474 IDBI Bank Ltd., Rajouri Garden, New Delhi and undisputedly no incriminating material was found which is evident from the Panchnama - Addition based on incorrect appreciation of facts on record is not sustainable.
We find ourselves in agreement with the contention of the assessee that if the Ld. AO wanted to make addition to the income of the assessee on the basis of material found in the case of other person he should have followed the mandatory procedure prescribed under section 153C of the Act which has not been done.
The case of the assessee on facts is covered in favour of the assessee following decisions Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT], . Meeta Gutgutia [2017 (5) TMI 1224 - DELHI HIGH COURT] and Ms. Lata Jain [2016 (5) TMI 1273 - DELHI HIGH COURT]. Also ratio decidendi of Kabul Chawla’s case [2015 (9) TMI 80 - DELHI HIGH COURT] has been affirmed by the Hon’ble Supreme Court in PCIT vs. Abhisaar Buildwell P Ltd. [2023 (4) TMI 1056 - SUPREME COURT]
We delete the additions sustained by the Ld. CIT(A) and decide ground in favour of the assessee.
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2023 (12) TMI 336
Revision u/s 263 - CIT alleging that the order u/s 143(3) is erroneous and prejudicial to the interest of revenue as the AO had not made proper verification of applicability of approval u/s 10(23C)(vi) to the trust particularly for unit of school of science - Error in the assessment order found by the ld. CIT(Exemptions) was grant of exemption u/s. 10(23C)(vi) of the Act to an institute run by the assessee-trust which was not granted approval u/s. 10(23C)(vi)
HELD THAT:- The fact that the School of Science was not included in the list of institutes run by the assessee-trust which was granted approval u/s. 10(23C)(vi) vide order dated 17.04.2012 is not disputed. Assessee had explained the non-inclusion of this institute in the list of institute which was granted approval u/s. 10(23C)(vi) as being addition of this institute in the assessee-trust subsequent to the grant of approval i.e. in the year 2014 this institute was added to the trust while the approval u/s 10(23C)(vi) of the Act was granted in the year 2012.
Argument of assessee that the approval originally granted is to be presumed to apply to this institute also considering the prevailing position of law that only one-time approval was required to be taken u/s. 10(23C)(vi) we find and hold, has been correctly rejected by the CIT(Exemptions). His finding that this relaxation provided by the legislature of seeking only one time approval does not imply that new institutions can be added by the assessee and the approval will suo moto will apply to the said institute, we hold is correct.
We are in complete agreement with the ld. CIT(Exemptions) that the approval granted to the assessee-trust in the year 2012 cannot apply to a new institution added to the trust subsequently. Therefore, the argument of assessee that the approval u/s. 10(23C)(vi) of the Act would apply to the new institute also and hence there was no error in the order granting exemption to the income of the new institute is dismissed. The findings of the ld. CIT(Exemptions) in this regard are confirmed by us.
The contention of assessee before us that the approval is granted to a trust and not a specific institute is also rejected since the certificate granting approval specifically mentions each institute which was being run by the assessee-trust at the relevant point of time. The approval obviously is specifically granted to the institutes mentioned .
CIT is required to grant approval after examining the genuineness of activities carried out and therefore specifically having examined the activities of the then existing institutes the approval letter mentions each institute of the assessee trust found by him eligible to exemption u/s 10(23C) (vi) - This institute, i.e. School of Science added to the trust subsequent to grant of approval its activities needed to be examined and the assessee ought to have applied afresh for grant of approval to this specific institute. We agree with the ld. CIT(Exemptions) that the approval could not have extended to the new institute added subsequently.
We see no reason to disagree with the ld. CIT(Exemptions). Undoubtedly, the assessee had not claimed its income exempt u/s 11 of the Act and merely because it has been granted registration u/s 12A of the Act, exemption u/s 11 of the Act is not automatic and the same needs verification.
Assessee cannot contend that since it has been granted registration u/s 12A of the Act, its entire income is exempt by virtue of Section 11 of the Act and no prejudice therefore is caused to the Revenue. We agree with the ld. CIT(Exemptions) that this claim of the assessee, that it was not liable to pay any tax on account of its income being exempt u/s 11 of the Act, needed to be verified and in the absence of the same, it cannot be said that there was no prejudice caused to the Revenue. On this account, we agree with the ld. CIT(Exemptions)’s rejection of this contention of the ld. Counsel for the assessee.
Contention of the assessee is not acceptable since the CBDT vide its Circular No.1/2015 dated 21.01.2015 has debarred assessees from making alternative claim of exemption u/s. 10(23C)(vi) and Section 11 - As we hold assessee is not correct. We have gone through the relevant CBDT circular and we find that what has been debarred by virtue of the said circular, which is explanatory notes to the provisions of the Finance Act, 2014, is that assessees’ claiming exemption of their income u/s. 10(23C)(vi) of the Act or Section 11 of the Act are debarred from claiming exemption of such income under any other provision of Section 10 of the Act. What has been introduced by virtue of amendment made by Finance Act, 2014 is that assessees’ claiming exemptions of their income on account of carrying out charitable activities or running educational institutions are entitled to claim exemption under the relevant sections 11 and 10(23C)(vi) of the Act only subject to fulfillment of conditions specified therein. Such assessees have been disentitled/debarred from claiming their incomes as exempt by virtue of any other provisions exempting income provided in Section 10 of the Act. Therefore, this argument of the ld. DR, we find, is incorrect that the assessee cannot alternatively seek exemption of their income u/s. 10(23C)(vi) and Section 11 of the Act.
Thus CIT(Exemptions) has rightly found the assessment order to be erroneous in granting exemption u/s. 10(23C)(vi) of the Act to the income of an institute run by assessee-trust which was not granted approval for the said purpose and finding that as a consequence prejudice has been caused to the Revenue. Assessee appeal dismissed.
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2023 (12) TMI 335
Rectification of mistake in calculation of interest chargeable u/s 234B and 234C while finalizing the assessment u/s 143(3) - HELD THAT:- The said order of the AO, to say the least, is cryptic and bereft of any reasoning. Order of CIT(A) also suffers from the same vice in as much as no reason has been advanced for dismissing the appeal of the assessee. It does not require much gain saying that the orders of the income tax authorities, which seek to fasten tax liability are in the nature of ‘quasi-judicial’ orders, which ought to set forth reasons and the decision thereof, so that the factum of due application of mind by the authority, becomes evident.
In the instant case, the orders of the authorities below, are conspicuous by absence of any reason for the decision thereof, and therefore, the same are grossly unsustainable.
Thus, considering the entirety of circumstances, we set aside the orders of the lower authorities and remit the matter back to the file of the Assessing Officer for consideration afresh. AO shall consider the calculation of interest u/s. 234B and 234C as canvassed by the assessee in his application dated 16.11.2017 and thereafter pass a speaking order, in accordance with law
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2023 (12) TMI 334
Deduction u/s. 80IA - interest on Fixed Deposit with bank - As per appellate order, interest was held to be not eligible for deduction, thus, deduction on the above interest income was denied - HELD THAT:- As decided in assessee own case [2020 (6) TMI 5 - ITAT MUMBAI] fixed deposit interest income earned by the assessee could not be said to have any nexus with the eligible business for which deduction u/s 80IA of the Act is available. Anyway, assessee has stated before LD lower authorities that bank Fixed Deposit interest is earned where surplus sum was placed with the bank in the form of Fixed Deposits.
Thus, ground no.1 of the appeal is dismissed holding that fixed deposit interest earned by the assessee cannot be said to be an income derived from the business of eligible infrastructure facility.
Denial to consider only net interest income after reducing finance cost - HELD THAT:- If blanket netting off is allowed of above bank FDR interest, it will result in lower interest expenditure for determination of eligible income for deduction to that extent, thereby assessee will get the full deduction to the extent of amount of FDR interest. Therefore, the argument of the LD AR though looks attractive. But can be decided only after examination of facts.
Before us, details of interest paid which has gone to reduce the eligible income for deduction, nor details of Interest on FDR as well as nexus of interest paid on funds is available. Thus, the alternative argument cannot be considered without ascertaining facts. Therefore , we restore this issue back to the file of AO with a direction to assessee to first show the facts about interest earned and interest paid along with nexus, and then substantiate why such netting off should be allowed and to what extent. AO may examine same, and if found in accordance with law, may recompute the deduction u/s 80 IA [4] of the Act. Accordingly, alternative ground of the appeal is allowed with above directions.
Allowability of benefit u/s 80IA - income from sale of scrap - sale of scrap was stated by AI as not derived from the business of industrial undertaking - HELD THAT:- We find that assessee has earned income from sale of scrap by selling wire ropes, Scrap and Waste oil. These are the income generated out of the maintenance and operational activity of the port. These are either left over or old and used wire ropes. Necessary evidences in form of sales bills are also produced before lower authorities. Cost of these materials has already gone into the expenditure of operation of the port activities. We find that when scrap sold by the assessee has direct nexus with the business of the infrastructure facility, such income should be eligible for deduction u/s 80IA [4] of the Act. It is not the claim of revenue that such scrap sale is of totally unrelated items to the business of assessee. Therefore, income from sale of scrap is eligible for deduction u/s 80IA of the Act.
Appeal filed by the assessee is partly allowed.
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2023 (12) TMI 333
Deduction u/s 57 while computing interest income - bringing to tax the interest income as ‘Income from Other Sources’ rejecting the assessee’s claim as business income - CIT(A) confirmed the action of the AO in reducing the cost of funds to the extent of 15% of the amount of interest income earned and balance amount was brought to tax - DR submitted that on the interest income earned out of providing credit facilities to its members, the assessee is allowed deduction u/s 80P(2)(a)(i) and that the interest paid on deposit made by members of the assessee cannot be allowed as cost of funds.
HELD THAT:- Assessee is a co-operative society primarily engaged in providing credit facilities to its members. Naturally, the cost of funds will be primary cost for any entity engaged in such business / activities. It is well accepted that banking institutions which have similar operation to that of the assessee will also operate on “net interest income” which is arrived at by subtracting the interest they have to pay out of the interest income generated.
The assessee had furnished detailed working with respect to the cost of funds which is coming to 77% of the interest income. The claim of assessee is backed by detailed workings which had not been refuted by the authorities.
AO / CIT(A) had allowed deduction by restricting the of cost of funds to the extent of 15% on ad-hoc basis of the interest income without any legal basis. The working of the cost of funds as provided by the assessee on facts of the instant case has not been refuted. Therefore, direct the AO to accept the same as cost of funds for earning the interest income which was assessed as ‘Income from Other Sources’. Appeal of assessee allowed.
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2023 (12) TMI 332
TP Adjustment - Interest on outstanding receivables due from AEs - Whether outstanding receivables is not covered in the definition of international transaction as defined u/s 92B? - HELD THAT:- In the present case, DRP has not considered the submissions of the assessee on trade receivables and it is categorically mentioned that the period granted for furnishing the details was too short and therefore, there was violation of principles of natural justice and thereafter, DRP has directed the TPO to grant one more opportunity to the assessee to explain and decide the issue.
TPO has passed the order pursuant to the direction of DRP on 22.06.2022 and thereafter, the AO has passed the order on 30.06.2022. In our view and in the light of the submissions made before us by AR that sufficient opportunity was not granted by the lower authorities, we are of the opinion that one more opportunity is required to be given to the assessee to explain its case before the TPO. We deem it appropriate to remand back the matter to the file of AO / TPO for passing a fresh order. Appeal of the assessee is allowed for statistical purposes.
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2023 (12) TMI 331
Deduction claimed u/s. 57(iii) - claim disallowed as assessee has failed to establish nexus between the interest income earned and interest expenditure which is wholly and exclusively for the purpose of making or earning such interest income - CIT(A) deleted addition - HELD THAT:- We find that AO has not disputed on the genuineness of claim of interest, which are duly supported with the audited financial statements and books of accounts maintained as per the provisions of the Act. Whereas, the assessee has demonstrated with the material evidences, the nexus between the interest income earned and interest expenditure claimed based on the Audited financial statements.
Further the interest expenditure claimed is wholly and exclusively for the purpose of earning the interest income on advances and loans based on the evidences filed before the revenue authorities.
CIT(A) has considered the facts, submissions and relied on the methodology of allocation of interest component and has passed a conclusive and reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) on the disputed issues and uphold the same and dismiss the grounds of appeal of the revenue.
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2023 (12) TMI 330
Validity of Reopening of assessment u/s 147 - reasons to believe - borrowed belief - allegation of non Independent application of mind by AO - assessee had obtained accommodation entry - HELD THAT:- As on the date of recording of reasons by the Assessing Officer of the income of the assessee having escaped assessment, the only information with the Assessing Officer was that obtained from the DCIT, Central Circle-1, Rajkot, that the assessee had obtained accommodation entry from an alleged angadiya - That except for this, there was no other information with the AO and based on this information, he formed a belief that this amount represented unaccounted sales of the assessee and income to this extent had been escaped assessment. AO had made no attempt to verify whether these amounts had actually been received by the assessee and in what manner.
Thus we completely agree with assessee that the Assessing Officer’s belief of escapement of income was not his own belief but a borrowed belief. Jurisdiction assumed in the present case by the Assessing Officer to frame assessment under Section 147 of the Act is without valid jurisdiction. Decided in favour of assessee.
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