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Income Tax - Case Laws
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2024 (5) TMI 859 - ITAT DELHI
Admission of additional evidence by CIT(A) - Exemption u/s 11 - Poof of investment of accumulated income of the assessee trust in instruments prescribed under section 11(5) - Whether action of the CIT(A) is in violation of Rule 46A of the Income Tax Rules, 1962? - HELD THAT:- As observed that in the case before the Hon’ble Delhi High Court MANISH BUILD WELL PVT. LTD. [2011 (11) TMI 35 - DELHI HIGH COURT] CIT(A) had admitted the additional evidence as the case of the assessee fell within the ambit of clause (c) of sub- rule (1) of Rule 46A and the requirement of sub-rule (2) i.e. recording of reason for admittance of additional evidence was also met.
In the case before us requirement of clause (a) or (b) or (c) of sub-rule (1) and sub rule (2) have not been complied with. Further in the case despite the requirement of sub-rule (1) and (2) having been satisfied the Hon’ble Delhi High Court held that the action of CIT(A) was vitiated as he violated the mandate of sub–rule (3) of Rule 46A which is an indispensable requirement. Sub-rule (3) specifically prohibits the CIT(A) from taking into account any evidence produced for the first time before him unless the AO has been given reasonable opportunity of examining the evidence and rebut the same. This has not been complied with by the Ld. CIT(A) in the case of the assessee under consideration by us.
For the reasons set out above, we deem it fit to restore the matter back to the file of the Ld. AO to verify the additional evidence filed by the assessee before the Ld. CIT(A) and decide the matter afresh
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2024 (5) TMI 856 - ITAT AHMEDABAD
Rectification u/s 154 - Substitution of addition u/s 269SS with 69A - unsecured loans - assessee engaged in banking business - Enhancement of tax liability u/s 115BBE - Initiation of penalty proceedings u/s. 270A of the Act in respect of the addition made u/s. 69A - HELD THAT:- While rectifying the order, the AO should have confronted the assessee in consonance with the application of 69A in respect of unsecured loans which the AO has failed to do so.
The rectification order is simply making it a typographical mistake but the assessee has made clear in application u/s.154 of the Act that it is a typographical mistake but the very applicability of section 269SS in assessee’s case will not/should not have been applied.
Thus, the rectification while giving the scope of 69A has not taken into any evidences as regards credibility of the loan, the source of the fund of the loan, identity of the parties for which the details are required and merely on the basis of PAN, voter card, form no. 16 and Addhaar card of the details of depositors will not suffice the said addition. These inquiries and verifications have not been done by the AO while making the said single line observation in the rectification order. These aspects were totally ignored by the CIT(A).
Thus, it will be appropriate that whether the applicability of section 69A is justifiable or not in assessee’s case and whether the assessee proves the nomenclature of unsecured loan and its proper demarcation in his profit and loss account, we are directing the AO to verify the same after calling upon the evidences to that effect. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. Thus, is partly allowed for statistical purposes.
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2024 (5) TMI 854 - ITAT PUNE
Grant of approval u/s. 80G(5) - denial of approval as application was not filed within six months from the date of grant of provisional approval - as per DR in the absence of power to condone the delay the statutory authority cannot condone the delay - HELD THAT:- Tribunal constituted under the provisions of Income Tax Act, 1961 is not a Court but a Tribunal unless there is express power conferred by the said Act to condone the delay or exclude any period of limitation, the Tribunal would not be clothed with the power to condone the delay. It is trite law that in the absence of any conferment of power by the statute, the Tribunal cannot condone the delay in filing the application in Form 10AB.
Thus, the ld. CIT, Exemption had rightly denied the grant of approval u/s. 80G(5) by placing reliance on the judgment in the case of State of UP Vs. Harish Chandra [1996 (4) TMI 519 - SUPREME COURT OF INDIA] as well as Union of India Vs. Kirloskar Pneumatic Co. Ltd. [1996 (5) TMI 87 - SUPREME COURT]
In view of the above legal position, the ld. CIT, Exemption, Pune is justified in denying grant of approval u/s. 80G(5) - Assessee appeal dismissed.
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2024 (5) TMI 853 - ITAT PUNE
STCG - Addition u/s 50C - taxing the difference between govt. valuation and actual sale consideration - contention of assessee that due to the location of the property the assessee was compelled to sell the property below the guide line value - as argued impugned land located near river bank was vulnerable to floods, it was situated near cremation ground and did not have any approach road and hence, its fair market value was only around Rs. 8,00,000 therefore, the addition made u/s 50C was not justified - HELD THAT:- We find that the appellant assessee requested to allow the deduction of cost of the land sold & also disputed the determination of fair market value of the land sold on the basis of guide line value of stamp duty before LD CIT(A)/NFAC, but he has not bothered to refer the matter to the valuation officer in the light of section 50C(2) of the IT Act, but only directed the AO to allow the cost of the land sold for the purposes of calculation of short term capital gain. It was the
We find force in the contention of assessee that to overcome such situation in section 50C, an option is given to the assessee to object determination of fair market value on the basis of guide line value of stamp duty for the purposes of registration of the property & in such a case the AO is bound to refer the matter to the DVO. In the instant case the AO passed ex-parte order & therefore the request was made before LD CIT(A)/NFAC which was wrongly denied.
Therefore, now we deem it proper to set-a-side the order passed by both the subordinate authorities & remand the matter back to the file of the AO to refer the matter to the valuation officer for the purposes of section 50C of the IT Act - AO will refer the matter to the DVO for determining the fair market value of the land sold & pass the order as per law in the light of report of the DVO after providing reasonable opportunity of being heard to the assessee. We order accordingly. Ground of appeal raised by the assessee is allowed for statistical purpose.
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2024 (5) TMI 851 - ITAT BANGALORE
Exemption u/s. 80P(2)(a)(i) - deduction was claimed in respect of the amount of profits attributable to the activity of providing credit facilities to its members - AO disallowed the entire claim as the assessee had not earned investments from its members of the society but also from general public and in respect of the interest income of co-operative society, the disallowance was made by holding that the claim is not found to be eligible for deduction u/s. 80P(2)(d) and therefore treated the same as income from other sources.
HELD THAT:- We note that the disallowance has been made in the hands of the assessee as assessee was also having nominal members from whom deposits were taken and credit facilities were provided. In respect of associate/nominal members, in the case of Mavilayi Service Cooperative Bank Ltd [2021 (1) TMI 488 - SUPREME COURT] has held that the expression "Members" is not defined in the Income-tax Act. Hence, it is necessary to construe the expression "Members" in section 80P(2)(a)(i) of the Act in the light of definition of that expression as contained in the concerned co- operative societies Act.
As held in UP CO-OPERATIVE CANE UNION FEDERATION LIMITED [1997 (1) TMI 7 - SUPREME COURT] definition of 'member' under the Kerala Act, loans given to such nominal members would qualify for the purpose of deduction u/s 80P(2)(a)(i) - Grounds raised by the assessee stands allowed.
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2024 (5) TMI 850 - ITAT INDORE
Addition on the basis of declaration made by assessee during a search action u/s 132 - Addition on account of difference in amount declared u/s 132(4) and amount shown in returns of income - declaration basically related to unaccounted sales, which has already declared by the assessee and some part separately added in income - HELD THAT:- We find no merit in the arguments of revenue because of the simple reason that there appears no evidence for the impugned addition made by AO except the assessee’s statement during search forming basis of the impugned addition.
Perusal of statements recorded u/s 132(4) duly extracted by AO in assessment-order itself that the assessee surrendered a figure of Rs. 5,00,00,000/- and that too in his own hands as well as family member’s hands while agreeing to give year-wise/assessee-wise chart subsequently. Thus, the figure of Rs. 5,00,00,000/- cannot be said to be a final figure, it is in the nature of lump sum, an ad hoc figure. The assessee is very much entitled and justified to do homework after search and arrive at a correct figure for offer in return. Had the correct figure been higher than surrender, the AO would have been entitled to assess more and if it is lower, the AO must assess only lesser amount. This is for the reason that under the scheme of Income-tax, only correct income has to be taxed.
We find that the CBDT instruction dated 10.03.2003 is clearly placing restrictions in stricter terms at both levels, namely (i) while recording statements during the course of search/survey, no attempt should be made by search/survey authorities to obtain confession as to the undisclosed income, and (ii) while framing assessment, the AO should rely only upon the evidence/material gathered during the course of search/survey. Further, various judicial rulings of different courts, as filed by Ld. AR in Case Law Paper-Book, also carry a view that no addition can be made on the basis of mere surrender made during survey/search unless the same is corroborated by some tangible evidence.
We thus find no merit in the addition made by revenue authorities after appreciation of the factual matrix of present case in the light of CBDT Instruction as well as judicial rulings quoted at the behest of assessee. Resultantly, we are inclined to delete the addition made/ upheld by lower-authorities - Decided in favour of assessee.
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2024 (5) TMI 848 - ITAT DELHI
Assessment u/s 153A - Unexplained money u/s 69A - HELD THAT:- As decided in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] that in case where the assessment of an assessment year stood concluded at the time of search and remains unabated, the additions and disallowances are permissible in Section 153A proceedings only qua incriminating material found in the course of search.
In the instant case, no incriminating material was found during the search and referred in the assessment order and hence the AO is not entitled to make additions in such completed/unabated assessments. We declined to interfere with the findings of the CIT(A). The appeal by the Revenue is dismissed
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2024 (5) TMI 845 - ITAT CHENNAI
Assessment u/s 144C - Period of limitation - whether assessment proceedings are barred by limitation? - verification, if any, had to be conducted by AO, he has to do so within the time line given [viz within one month from the end of the month of receipt of the DRP direction] - HELD THAT:- As per sub-section (13) of section 144C of the Act, upon receipt of the directions under sub-section (5) from DRP, the AO shall inconformity with the directions of the DRP, complete the assessment without providing any further opportunity of being heard to the assessee within one month from the end of the month in which such direction is received.
As relying on M/s.Taeyang Metal India Pvt. Ltd [2024 (3) TMI 153 - MADRAS HIGH COURT] we hold that the final assessment order passed by the AO/DCIT, Corporate Circle-1(2), Chennai, dated 21.11.2017 for AY 2013-14 in the case of the assessee was barred by limitation and therefore, passed wholly without jurisdiction and therefore, null in the eyes of law andtherefore, we quash the impugned assessment order. Assessee appeal allowed.
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2024 (5) TMI 843 - ITAT DELHI
Nature of expenses - Business Promotion Expenses & Advertisement - revenue or capital expenditure - AO considered 50% of the expenditure claimed as capital in nature - HELD THAT:- As decided in M/s. Jasper Infotech Pvt. Ltd. [2021 (12) TMI 443 - ITAT DELHI] the impugned expenses claimed by the assessee are purely revenue in nature and disallowance of 50% thereof holding it to be of capital in nature is not justified. Appeal of the Revenue is dismissed.
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2024 (5) TMI 842 - ITAT AHMEDABAD
LTCG - Addition u/s 50C - property sold by the assessee company was litigated property - difference between the valuation adopted by the Stamp Valuation Authority or that declared by the appellant - assessee in the details filed in Income Tax Return did not consider the Jantri Value in computation of gain - HELD THAT:- Issue decided in favour of assessee as relying on Bhojison Infrastructure Pvt. Ltd. [2023 (3) TMI 116 - ITAT AHMEDABAD] wherein on perusal of the records it can be seen that in the return of income in respect of land and the value as determined by the DVO is approximately 8.95% higher but less than 10%. This was never disputed or controverted by the Revenue at any point of time. As per third proviso to Section 50C brought on statute w.e.f. 01.04.2019, the Tribunal on various occasions has applied the said proviso retrospectively as the difference is less than 10% in the actual value taken than the DVO’s value. Assessee ground is allowed.
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2024 (5) TMI 840 - ITAT DELHI
Assessment made u/s 144 r.w.s. 142(1) OR 153C - recording of a satisfaction that the assets/documents seized belong to a person other than the person searched - HELD THAT:-As relying on Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] and RRJ Securities Ltd [2015 (11) TMI 19 - DELHI HIGH COURT] assessments made for A.Y. 2012-13 u/s 144 r.w.s. 142(1), consequent to the satisfaction note recorded ought to have been made u/s 153C of the Income Tax Act, 1961. Since, the provisions of Section 153C have not been invoked and since, the proceedings u/s 153C have not been initiated, the assessment made u/s 144 r.w.s. 142(1) is treated as void ab initio.
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2024 (5) TMI 839 - PUNJAB AND HARYANA HIGH COURT
Validity of Assessment u/s 153A - no search conducted u/s 132 and 132A as against the petitioner - authorisation issued to conduct search and seizure relating to the petitioner or not? - relevancy of panchnama as document - HELD THAT:- In the present case, we find that challenge is to the very initiation of proceedings at the initial stage; search under Section 132 of the Act and jurisdiction of the assessing officer by initiating proceedings u/s 153A of the Act which needs to be examined. The validity of initiating search proceedings cannot be examined by the Appellate Authority as is already held in Chandra Kishor Jha. [1999 (9) TMI 948 - SUPREME COURT], OPTO Circuit India Limited [2021 (2) TMI 117 - SUPREME COURT], M/s. J. M. Trading Corporation [2009 (6) TMI 988 - BOMBAY HIGH COURT] and Sarvmangalam Builders’ cases[2015 (12) TMI 1882 - DELHI HIGH COURT]
The petitioner has challenged the panchnama where its name has been entered and submits that it has already suffered search and seizure earlier resulting in an order passed under Section 153A of the Act and, therefore, proceedings again initiated under Section 153A were wholly unwarranted. The exercise of power under Section 153A based on panchnama was not available.
In the present case, we find that there is no authorisation issued to conduct search and seizure relating to the petitioner. The panchnama prepared at Gurgaon office of M3M India Limited only reflects the name of the petitioner company.
The term panchnama is not defined in the Income Tax Act. A panchnama is a document prepared in the ordinary course at a site of incident - panchnama would be a document which has to be prepared recording articles, material and objects which may be seized as incriminating documents at the time of conducting search of premises. Mentioning of the name of any company in the panchnama would only reflect that documents relating to that company were found during the search at the premises. A panchnama, therefore, cannot be treated to mean authorization issued to the authorities u/s 132.
Thus we find that the respondents were obliged to compulsorily follow the procedure for reassessment of the petitioner company in the manner as prescribed u/s 153C (1) alone and in no other manner. However, we find that the respondents have invoked and initiated proceedings u/s 153A of the Act, although neither there is any search initiated u/s 132 as against the petitioner nor it can be said that the search was conducted at its premises. Similar view has been taken in Hitesh Ashok Vaswani [2023 (11) TMI 347 - GUJARAT HIGH COURT] and Subhash Khattar’s cases[2017 (7) TMI 1091 - DELHI HIGH COURT] - Thus, the proceedings initiated under Section 153A are found to be vitiated.
When there was no search conducted u/s 132 and 132A as against the petitioner and only a panchnama reflects the name of the petitioner prepared at the registered office of M3M India Limited, the action of the respondents in passing second assessment order on 07.02.2024 on the basis of notice u/s 153A is held to be unjustified and without jurisdiction. Assessee appeal allowed.
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2024 (5) TMI 836 - DELHI HIGH COURT
Benefit of DTVSV Act - CIT(A) has rejected the appeal of the assessee on the ground of being barred by limitation - disputed tax demand after giving effect to the CIT(A) order - Whether appeal should be pending or the time limit for filing an appeal should not have expired as on the specified date? - HELD THAT:- As it is evident from the legislative intent as well as the Statement of Objects and Reasons, the aim of the DTVSV Act is to finally put an end to the litigation and set free the tax arrears entangled in the litigation battle. Considering the nature of the legislation to be beneficial and remedial in its form, it should be interpreted in a liberal and purposive manner.
It is crystal clear that in all the aforementioned exigencies as enshrined in Section 2 (1) (a) of the DTVSV Act, the assessee would be eligible to apply under the provisions of the DTVSV Act. It is noteworthy that as per the provisions of the DTVSV Act, inter alia, what is required is that either an appeal should be pending or the time limit for filing an appeal should not have expired as on the specified date and the disputed tax arrears should exist. The fact remains that the limitation to avail the remedy to appeal against the CIT(A) order was not exhausted as on the specified date and thus, the Revenue cannot pre-suppose that the assessee would not succeed in the appeal before ITAT under any circumstances.
It is of no significance whether the pending appeal merits consideration or is filed against an order, whereby, the dismissal was on the ground of being barred by limitation. These qualifications attached to a pending litigation have no bearing over the assessee for availing the benefits of the DTVSV Act. In the case of Medeor Hospital [2022 (11) TMI 26 - DELHI HIGH COURT] this Court also held that once the provisions of the DTVSV Act contemplate the condition of appeal being pending in order to avail the settlement benefits, then there is no requirement to add the qualifications to the pending appeal.
Designated authority cannot go beyond the purview of the DTVSV Act and attach qualifications to conditions which are already meticulously provided in the provisions of the DTVSV Act.
It cannot be gainsaid that once the CIT(A) has rejected the appeal of the assessee on the ground of being barred by limitation, the resultant effect of such an order would be confirmation of the assessment order so passed, unless and until such position is changed by the appellate forum. Therefore, upon a conjoint reading of Section 2 (1) (a) (ii) and Section 2 (1) (j) (B) of the DTVSV Act and applying the provisions in facts of the present case particularly in light of the objectives of the DTVSV Act, it is distinct to point out that the time limit for filing the appeal against the CIT(A) order dated 01.01.2020 was not expired as on specified date and the disputed tax arrears existed on the specified date as resultant effect of the CIT(A) order dated 01.01.2020 leads to confirmation of the assessment order thereby resulting in the disputed tax arrears.
After all, the DTVSV Act aspires to finally free the tax arrears locked in the litigation combat for ages and ultimately ensures timely collection of tax. In the present case, the dispute pertains to AY 2010-11, much water has already flown through the gates and a lot of time, resources and energy have already been consumed in the ongoing litigation combat. Moreover, since the assessee aspires to avail the benefits of the settlement scheme and we have the beneficial legislation in place to finally effectuate such aspirations. Therefore, under the facts of the present case, we do not find any reason to obstruct the assessee from availing the benefits of the DTVSV Act.
We confirm the liberty given to the assessee vide interim order dated 22.04.2021 and direct the Revenue to proceed with the application of the assessee in accordance with the provisions of the DTVSV Act and other applicable regulations.
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2024 (5) TMI 833 - ITAT KOLKATA
Nature of expenses - Expenditure on registration of new and existing patents - revenue or capital - HELD THAT:- The existing patents were registered in order to protect the assessee’s interest in the said patents so that there is no infringement patents from any quarters. Similarly new patents were registered by the assessee to ensure the same are not used by any third party without any authorization and therefore these expenses has also been incurred by the assessee in order to protect the business interest. In our opinion, both these expenses were wholly and exclusively incurred for the purpose of business and are allowable u/s 37 of the Act. We are unable to understand as to how the expenses were split into relating to existing and new patents. See DALMIA JAIN AND COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA [1971 (7) TMI 2 - SUPREME COURT].
Thus the registration expenses incurred on the existing as well as new patents are wholly and exclusively incurred for the purpose of business and are revenue in nature. Decided in favour of assessee.
TDS u/s 195 - non-deduction of tax at source u/s 40(a)(i) - payment made to the foreign parties for procurement and marketing of export orders - HELD THAT:- Commission in the hands of foreign agents are not liable to tax in India as the same was paid in India in respect of services rendered abroad to non-resident commission agents. The case of the assessee finds support from the decision of Hon’ble Apex Court in the case of GE India Technology Cen. Pvt. Ltd. [2010 (9) TMI 7 - SUPREME COURT] as held that if the sum payable to the non-resident is not chargeable to tax in India , the payer is not liable to deduct tax at source as per Section 195 of the Act at the time of making the payment and therefore there is no question of invoking the provisions of Section 40a(i) of the Act.
As perused the provisions of Section 9(1)(i) of the Act which deals with the income accruing or arising through or from any business connection in India which shall be deemed to accrue and arise in India. Further explanation (i) to Section9(1)(i) provides for income deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. But in the present case, it is not in dispute that non-resident commission agents did not carry out any activity in India and the entire services by such agents were provided abroad
Thus provisions of section 195 are not applicable to the assessee and therefore there no need for deduction of tax at source from payments made to foreign commission agents. Ground no. 2 accordingly is allowed.
Addition u/s 40(a)(ia) on payments made to foreign parties for various services rendered - HELD THAT:- We find that the assessee has not furnished the details/evidences before the authorities below and has harped on the issue that TDS Wing of International Taxation Department has examined these remittances in the light of various evidences furnished by the assessee and also relevant DTAA and having satisfied as to non deduction of TDS has not initiated any action u/s 201 of the Act. Therefore according to the assessee there is no default u/s 195 of the Act and no disallowance u/s 40a(i) could be made.
We note that the assessee has made remittances to 8 foreign parties which need to be examined at the level of the AO in the light of DTAAs and ascertain whether the assessee is covered under the Treaties. Needless to mention that if the AO can also find out about the examination by the TDS Wing of International taxation Department to the effect of non applicability of TDS u/s 195 of the Act then all these expenses are to be allowed. Accordingly we restore this issue to the file of AO to examine and decide accordingly. The ground no. 3 is allowed for statistical purpose.
Nature of receipt - liquidated damages - as per assessee these liquidate damages received by way of compensation for delay in the delivery and installation of plant and machineries/construction of building and they are to be treated as capital receipts and not liable to tax - AO held that these damages received has no nexus with the cost of fixed assets and cannot be said to have any relation to capital asset owned by the assessee and thus constitute a regular nature of business income - HELD THAT:- The liquidated damages does not fall within the ambit of cost of assets met by any other person as these were not intended to the subsidize the cost of assets but on account of failure of the suppliers for delay in delivery/installation /completing construction of capital asset within the stipulated time. Besides the written down value is defined u/s 43(6)(c ) of the Act as the value to be computed only in the manner provided thereunder i.e. value computed by adding actual cost of assets falling within the block of assets acquired during the previous year or deducting the money payable in respect of any asset within the block which is sold, discarded or demolished or destroyed during the previous year together with the amount of the scrap value.
The Act does not contemplate any other adjustment for computing the written down value such as liquidated damages of the block of assets. See Alpha Lab vs. ITO [2016 (6) TMI 560 - GUJARAT HIGH COURT] wherein as affirmed the view taken by the tribunal, we are inclined to hold that liquidated damages are capital receipts not to be reduced from the cost of fixed assets. Accordingly ground no. 4 by the assessee is allowed.
Disallowance u/s 14A r.w.r. 8D(2)(iii) - suo-motto disallowance made by assessee - assessee invested surplus fund generated from business activities in shares and securities and thus derived income by way of dividend and tax free interest - HELD THAT:- Non-maintenance of separate books of account evidencing expenditure incurred in relation to non-taxable income cannot be a ground to reject the assessee apportionment of expenditure incurred in relation to exempt income.
In the present case before us we are quite convinced with the calculation furnished by the assessee which worked out the expenditure u/s 14A read with Rule 8D(2)(iii) at Rs. 45,14,500/- and is a reasonable disallowance u/s 14A read with Rule 8D(2)(iii). This is line with the decision of the Coordinate bench in the case of M/S Ultratech Cement Ltd [2017 (12) TMI 1134 - ITAT MUMBAI]. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to restrict the disallowance of Rs. 45,14,500/-. Needless to say that the above disallowance come down based upon the stocks/securities yielding dividend income and hence the amount calculated of Rs. 45,14,500/- is less than the suo-motto disallowance in which the assessee has considered the securities yielded exempt income as well as those securities not yielding any income during the year.
Adjustment of interest payment on income tax dues against the interest received on income tax refund - HELD THAT:- As decided in the assessee’s own case [2018 (11) TMI 1611 - ITAT KOLKATA] wherein the decision of Bank of America [2014 (12) TMI 551 - BOMBAY HIGH COURT] as followed, thus held the interest received on income tax refund and the interest paid on delayed payment of income tax both have the same character and as such if the interest received from the tax department exceeds the interest paid, then only net amount could be taxed. Accordingly ground no. 8 raised by the assessee is allowed.
Issue raised for the first time before the Tribunal - Deduction of employees compensation cost on account of Employee Stock Option Plan (ESOP) - HELD THAT:- As in assessee’s own case in AY 2009-10 [2018 (11) TMI 1611 - ITAT KOLKATA] to hold that if a claim which is available in law is not raised either inadvertently or an account of erroneous plea of complex legal position, such a relief cannot be shut up for all the times to come merely because it is raised for the first time in appellate proceedings in absence of a revised return filed before the AO. We therefore accept assessee’s instant additional ground in principle and leave it open for the AO to verify all the relevant facts as per law after affording adequate opportunity of hearing in consequential proceedings - Thus we admit the issue which is admittedly and undoubtedly allowable to the assessee and restore the same for adjudication before the AO after doing verification of the facts.
Unexpired discounts on forward contract - assessee entered into forward exchange contract for hedging currency related risk in connection with various foreign currency exposure like import of raw materials, export of finished products etc - CIT(A) deleted addition - HELD THAT:- We find that the assessee has been regularly following these contracts accounting standard 11 (AS-11) qua the premium/discount on forward exchange contracts over the period of contract in line with the principles of accrual and mercantile system of accounting and in line with the requirement of AS-11. The unexpired discount in respect of the period /of the forward contracts which fell in the subsequent year was not accounted for in the books in FY 2009-10 but was recognized /credited in the profit and loss account in the subsequent year i.e. FY 2010-11 and similar accounting as regards forward contracts was followed in the subsequent assessment years and the amount offered as premium/claimed as discount have been duly considered while assessing the income of the assessee.
As decided in Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] wherein it has been held that in absence of any provision to the contrary, the accounting standard have to be followed for ensuring that books are prepared in accordance with accounting standard/ principles Thus. we are inclined to uphold the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly ground no. 1 raised by the revenue is dismissed.
Addition on account of marked to market loss on forward contracts - AO while relying upon CBDT’s Instruction No. 3/2010 dated 28.09.2010 disallowed the loss on account of market to market revaluation on the ground that the said loss is notional and contingent in nature - CIT(A) deleted addition - HELD THAT:- we observe that the claim of marked to market loss is allowable business expenditure and a settled issue the Hon’ble Supreme Court in the case of CIT vs. Woodward Governor India (P) Ltd. [2009 (4) TMI 4 - SUPREME COURT] and ONGC Ltd [2010 (3) TMI 81 - SUPREME COURT] - AO has simply made the disallowance by following CBDT Instruction No. 3/ 2010 dated 28.09.2010 which in our opinion is not binding on appellate authorities particularly in case the deduction is allowable in line with the provisions of the Act and in view of the decisions of judicial forum - Decided against revenue.
Nature of expenses - design charges - revenue or capital - HELD THAT:- We find that in the remand report the AO has not objected the nature of expenses but simply stated that the expenses has resulted into in the benefit of capital in nature. We note that the Ld. CIT(A) has allowed the appeal by recognizing the fact that expenses has been charged to profit and loss account based on the existing accounting standard and by recording a finding that similar expenses have been allowed in preceding assessment years - Decided against revenue.
Nature of expenses - revenue or capital - information technology expenses - HELD THAT:- These expenses were incurred to maintain the information technology assets and related consumables and were paid to various parties. Case of the assessee finds support from the decision of Hon’ble Apex Court in the case of Empire Jute Co. Ltd. [1980 (5) TMI 1 - SUPREME COURT] wherein as held that if the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more efficiently or more profitably, while leaving the fixed capital untouched, the expenditure would be of revenue account, even though the advantage may endure for an indefinite future. Decided against revenue.
Addition of advances written off - CIT(A) deleted addition - HELD THAT:- We note undisputedly these advances were given to the farmers against supply of materials/crops which could not be adjusted due to failure of crop or quality issues. In our opinion these advances were undoubtedly given in the ordinary course of business and has rightly been allowed by the CIT(A). Accordingly we dismiss ground no. 6 raised by the revenue by upholding the order of Ld. CIT(A).
Double deduction claimed in respect of excise duty on closing stock - As per AO when the excise duty included in closing stock is already profit neutral then the additional claim of deduction in respect of excise duty on closing stock amounts to double deduction - HELD THAT:- As we find that the issue has been decided by the Hon’ble Calcutta High Court in the assessee’s own case [2021 (7) TMI 1453 - CALCUTTA HIGH COURT] and [2019 (6) TMI 1723 - CALCUTTA HIGH COURT] we are inclined to dismiss the ground raised by the revenue by upholding the order of Ld. CIT(A).
Bogus purchases - CIT(A) deleted addition - HELD THAT:- As assessee has purchased petty gift items such as key chain-cum- torch from Heta Sales Pvt. Ltd. and duly furnished the details comprising number of goods received, copies of invoices and delivery challans, photograph of the products purchased which were given as free along with Food products, copies of bank statements reflecting the payment made. Similarly the assessee has purchased Rangoli powder for internal use from M/s Sambhav Traders of Rs. 731/- qua which the receipt was produced before the AO - considering the volume of operation and the documents placed on record, the addition with reference to Investigation Wing report without carrying on any further investigation by the AO is unreasonable and was rightly deleted by the Ld. CIT(A) - Decide against revenue.
Deduction u/s 80IA - captive power plant - AO denied claim as units in respect of which deduction had been claimed by the assessee were not separate undertakings and that the notional profit from such undertakings had not been included in the profit and loss account of the assessee - CIT(A) allowed the appeal of the assessee - HELD THAT:- We note that the issue has been settled in assessee’s own case for AY 2007-08 [2016 (3) TMI 1005 - ITAT KOLKATA] by the Hon’ble Calcutta High Court as well as by the Co-ordinate Bench in AY 2007-08, 2008-09 and 2009-10. Now the issue of CCP has been finally settled by the Hon’ble Apex Court in the case of CIT Vs M/S Jindal Steel & Power Ltd [2023 (12) TMI 417 - SUPREME COURT]. Accordingly the issue is squarely covered in favour of the assessee and the ground raised by the revenue is dismissed by upholding the order of ld. CIT(A).
Characterization of receipts - Income from sale of carbon credit units - capital receipt or regular business income -HELD THAT:- Considering the decision of the Hon’ble High Courts My home Power Limited [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT], Subhash Kabini Power Corporation Ltd [2016 (5) TMI 793 - KARNATAKA HIGH COURT] and Co-ordinate Bench in assessee’s own case [2018 (11) TMI 1611 - ITAT KOLKATA] we are inclined to hold that the sale of carbon credit units is a capital receipt and is not taxable.
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2024 (5) TMI 829 - MADRAS HIGH COURT
Reassessment u/s 148/148A - escaped income is less than Rs. 50 lakhs or more? - petitioner submits that the respondents only took into consideration the credits in the bank account and did not take into account the debits therefrom and if such debits had been taken into account, she submits that the escaped amount would be much less than Rs. 50 lakhs - HELD THAT:- On perusal of the impugned orders, it is evident that the respondents proceeded ex-parte because the petitioner did not reply or otherwise participate in proceedings. It is also evident that the aggregate deposits were taken into consideration. The petitioner contends that the debits from the bank account were not taken into consideration and that if such debits were considered, the alleged escaped income would be less than the prescribed minimum threshold of Rs. 50,00,000/-. Since the petitioner could not contest the matter on merits earlier, the interest of justice warrants that an opportunity be provided to the petitioner. Since we propose to remand the matter, we do not intend to record any findings with regard to the legal arguments raised with regard to the scope of Section 149(1)(b) of the I-T Act.
The impugned orders are set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice dated 27.02.2023 within 15 days from the date of receipt of a copy of this order.
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2024 (5) TMI 828 - MADRAS HIGH COURT
Validity of computation sheet and the consequential notice of demand - petitioner pointed out that no addition was proposed in relation to the return of income filed by the petitioner - HELD THAT:- By referring to the computation sheet and the notice of demand, he points out that patent errors were committed while demanding a sum of Rs. 5,04,29,383/-.
Accepts notice for the respondents. She submits that there appears to be a discrepancy when the assessment order and the impugned communications are compared.
On perusal of the assessment order, it is clear that it was concluded therein that no addition is being made in relation to the issues mentioned in paragraph 1 thereof. In those circumstances, the demand made in the computation sheet and the demand notice cannot be sustained. Therefore, this writ petition is allowed by quashing the impugned computation sheet and the consequential notice of demand.
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2024 (5) TMI 823 - ITAT HYDERABAD
Estimation of Net profit - assessee failed to prove the source of cash deposits and that such deposits are only from the business, confirmed the addition - HELD THAT:- The figures establish that at no point of time, the net profit from the line of business of the assessee is as high as 10%. The accepted figures show that it is from 0.5% to 8%. In these circumstances, estimate of net profit at 10% is too high and on the face of the figures disclosed by the assessee, net profit at 0.5% is too low. Taking a pragmatic view, we consider the net profit at 5% is reasonable and will meet the ends of justice and, therefore, accept the contention raised by AR. AO is accordingly directed to estimate the net profit at 5% of the total sales. Appeal of the assessee is allowed in part.
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2024 (5) TMI 821 - ITAT HYDERABAD
Addition of unexplained income - cash deposits during the demonetization period - as per assessee sources for the deposits to be of' agricultural income' - HELD THAT:- As the assessee is an agriculturist having source of income from agricultural produce and he has furnished the document showing the agriculture holding of 20 acres of land belongs to his wife and children. The assessee deposited the amount during the demonetization period, which included proceeds from the sale of agricultural produce from his agricultural land and also from the agricultural land belongs to the family and also some deposits from past savings in the bank account.
However, AO has failed to take into consideration the above facts. Revenue has not been disputed about owning agriculture land by the assessee. It is quite fair to assume that the agricultural land must have yielded some produce and during the month of November, the assessee likely received some amount from the sale of agriculture produce.
In view of the above facts and considering the other factors that allow any individual to deposit for a sum of Rs. 2 lakhs in cash during the period of demonetization, we deem it appropriate to restrict the addition to a sum of Rs. 2,00,000/-. Thus, the appeal of the assessee is partly allowed.
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2024 (5) TMI 815 - ITAT DELHI
Foreign Tax Credit (FTC) u/s 90 r.w. Article 25 India US Treaty (DTAA) - Claim denied as Assessee could not file Form 67 online along with return - HELD THAT:- Section 90 of the Act provides that Govt. of India can enter into Agreement with other countries for granting relief in respect of Income on which taxes are paid in country outside India and such income is also taxable in India. Neither Section 90 nor DTAA provides that FTC shall be disallowed for non-compliance with any procedural requirements.
FTC is Assessee’s vested right as per Article 25 of the DTAA read with Section 90 and same cannot be disallowed for non-compliance of procedural requirement that is prescribed in the Income Tax Rules. Since the Form 67 has been filed, the same could be verified by the AO and to give relief accordingly.
As decided in case of Sambhaji and others vs. Gangabai and others [2008 (11) TMI 393 - SUPREME COURT] that procedural law should not ordinarily be construed as mandatory; the procedural is always subservient to and is in aid to justice. Therefore, filing of Form 67 as per provision of Section 90 r.w. Rule 128(9) of the Act is a procedural law and should not control the claim of FTC.
Section 90(2) of Income Tax Act, where the Central Govt. of India entered into a DTAA, the provisions of the Act would apply to the extent they are more beneficial to a taxpayer. Therefore, the provisions of DTAA override the provisions of the Act, to the extent they are beneficial to the assessee. Such contentions of the assessee, however, could not be controverted seriously by the Learned DR.
We dispose of this appeal by setting aside the issue to the file of the Learned AO with a direction upon him to verify the details of Form 67 as claimed to have been filed by the assessee in regard to claim of FTC, for A.Y. 2018-19 and to give relief to the assessee in accordance with law. Assessee’s appeal is, therefore, allowed for statistical purposes.
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2024 (5) TMI 814 - ITAT DELHI
Addition u/s 68/69A r.w.s. 115BBE - HELD THAT:- CIT(A) has given a finding that the assessee did not file any documentary evidence regarding cash deposits which is a subject matter of the impugned addition. However, it is the contention of the assessee that the assessee had provided documentary evidence to the Assessing Authority. This fact is required to be verified at the end of AO if the claim of the assessee is found to be correct, the AO would delete the impugned addition. Hence, this issue is restored to the file of AO for decision afresh. Ground No.3 raised by the assessee is accordingly, allowed for statistical purposes.
Disallowance of deduction claimed under Chapter VI-A - deduction u/s 80C - AO rejected the claim on the basis that the assessee failed to furnish any supporting evidences - as contended by the assessee that the amount was deposited in PPF Account and hence, he was entitled for deduction u/s 80C - HELD THAT:- Having considering the submissions of the assessee, this contention needs verification at the end of AO and the AO would verify the correctness of the claim of the assessee that the amount was deposited in PPF Account if it was found that amount was deposited in the PPF Account of the assessee during the Financial year, the AO would delete the addition.
Adhoc disallowance of business expenditure - HELD THAT:- There is no dispute that the impugned addition is based on adhoc disallowance of the expenditure. It is seen from the assessment order that the AO had made adhoc disallowance @ 25% on the basis that no explanation was offered by the assessee. As find that there is no basis of adopting 25% expenditure being not related to the business of the assessee. Since, the impugned addition is based upon merely, surmises and without giving clear finding, the impugned addition is hereby deleted. Ground No.5 raised by the assessee is accordingly, allowed.
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