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Income Tax - Case Laws
Showing 501 to 520 of 173396 Records
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2025 (4) TMI 918
Disallowance of interest u/s 36(1)(iii) - borrowed funds are utilized by paying huge interest and the assessee had advanced the loans to third parties without any commercial exigency - as alleged assessee has diverted the interest bearing funds without charging any interest - HELD THAT:- It is an admitted fact that the two concerns to whom advances made were not related parties. It is also an admitted fact that the assessee was charging interest from the above concerns from assessment year 2013-14 till assessment year 2015-16 and was offering the same to tax although the above two concerns have failed to pay any interest to the assessee company. It is also an admitted fact that the assessee, during the assessment year 2016-17, did not charge any interest from the said companies on the ground that when the recovery of the principal is in doubt, there is no point in charging any interest from the said companies.
We find merit in the arguments of assessee that the assessee could have charged interest and could have claimed the same as bad debt. However, as a prudent businessman, the assessee has not recognized the interest on such doubtful debts. In our opinion, merely because the assessee has not recognized the interest income in respect of the outstanding amount from these two concerns, it cannot change the colour of such advance which is a commercial transaction.
Since the impugned loans / advances were given in the course of business and are commercial transactions for which the assessee was charging interest from assessment year 2013-14 till 2015-16 and only because of non-payment of interest from the said parties, the assessee stopped charging interest for the impugned assessment year and to recover the principal and interest, the assessee has entered into a Joint Venture Agreement with the said concerns, therefore, such commercial transactions cannot be termed as diversion of interest bearing funds. Provisions of section 36(1)(iii) of the Act are not applicable to the facts of the present case. Decided in favour of assessee.
Addition on account of melting charges - Addition by estimating the melting gain at 4% of metal issued as against 1.70% shown by the assessee - HELD THAT:- Since, admittedly the assessee in the instant case has maintained books of account which were not rejected by the Assessing Officer, therefore, respectfully following the decision of the Tribunal in assessee’s own case for assessment year 2017-18 [2023 (3) TMI 1569 - ITAT PUNE] and in absence of any contrary material brought to our notice, we set aside the order of the CIT(A) / NFAC and direct the Assessing Officer to delete the addition on account of melting charges - Decided in favour of assessee.
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2025 (4) TMI 917
Income deemed to accrue or arise in India - Addition on account of sale of logistic services treating the same as FTS under the Act as well as India-USA DTAA - HELD THAT:- The Hon’ble Delhi High Court deciding the appeals [2025 (2) TMI 712 - DELHI HIGH COURT] and others, filed by the Department in the assessee’s own case held as we had explained in International Management Group, FTS is firstly concerned with rendition of specialized knowledge, skill, expertise and know-how. It is principally concerned with a transfer of knowledge, skill and expertise. Those three attributes must be those which are possessed by the service provider and are distinctive and special qualities that it possesses,
Second facet of FTS is the "make available" condition and which envisions an enablement or transfer of specialized knowledge and skill. As was explained in International Management Group, the mere furnishing of service would not be sufficient to categorise the service as FTS. It would have to be necessarily accompanied by a transfer of expertise and which would consequently enable the recipient of service becoming skilled in its own right and empowered to perform those functions independently.
When tested on those precepts we firstly find that rules and regulations pertaining to clearance of customs frontiers was clearly not specialized skill or knowledge acquired or possessed by the assessee. These rules are in the public domain and have been framed by competent authorities operating in different jurisdictions. A fortiori, imparting instructions in respect of those statutory regulations would also not qualify FTS. Similarly, we fail to appreciate how the creation of a global of a global ethos or a workforce which is expected to follow a common code could he said to constitute FTS.
Development of software - We need not render any independent observations except to remind the appellant of the principles which the Supreme Court had come to authoritatively lay down in Engineering Analysis Centre of Excellence (P) Ltd. [2021 (3) TMI 138 - SUPREME COURT]
No ground to interfere with the view as expressed above. Appeal filed by the assessee is allowed.
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2025 (4) TMI 916
Disallowance on account of the claim of bad debts - HELD THAT:- Even though the assessee has not proved to have carried out the business of money lending business/loans and advances on interest but even if it is considered that the expenditure which has been wrongly claimed for the impugned assessment year but then we cannot ignore the fact that the income of Rs. 10.00 lakh has been offered out of the alleged claim of bad debts in the return for A.Y. 2005-06.
Therefore, to this extent, the assessee deserves relief since it has been taxed in A.Y. 2005-06 because the facts are of mixed nature, not giving the clear cut picture of the actual nature of business carried out by the assessee as well as the observation of the AO for the one taken for A.Y. 2002-03 and for the one taken for A.Y. 2005-06 accepting the recovery of bad debts. We therefore partly allow the grounds of appeal raised by the assessee and affirm the disallowance of bad debts of Rs. 11.20 lakh and delete the addition of Rs. 10.00 lakh solely on the ground that the same has been offered to tax in A.Y. 2005-06. Effective grounds of appeal raised by the assessee are partly allowed.
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2025 (4) TMI 915
Denial of Exemption u/s 11 - addition received on rent a violation of 13(1)(c)/13(1)(d) of the I.T. Act. - Sole reason that in charging of rent in reduced rate, AO has opined that the assessee trust has applied income of the trust for the benefit of assessee trustee - whether entire income of trust will be stripped of entire exemption u/s 11 of exemption will be denied only to the extent of the violation of provisions of section 13(1)(c)(ii) ? - HELD THAT:- The section 164(2) is statute provides application of Maximum Marginal rate only on the relevant income and not on the entire income. The computation section clearly stated that the denial of exemption under section 11 should be limited only to the amount which was connected in violation of section 13. Therefore, the statute has unambiguously stated that only relevant income which is not exempt under section 11 can be brought to tax, as the income of an AOP and the balance income of the charitable trust, will be entitled to exemption.
CIT(A) rightly relied on the CBDT Circular No.387, dated 06/07/1984 [152 ITR (St)1]: issued by the CBDT, under the heading "Levy of income-tax at the maximum marginal rate in the case of charitable and religious trusts which forfeit tax exemption" is relevant.
The aforesaid Circular, clarifies the stand of the CBDT as to where such a trust contravenes the provisions of section 13(1)(c) or 13(1)(d) of the Act, the maximum marginal rate of income-tax will apply only to that part of income, which has forfeited exemption under the said provisions.
If the interpretation sought by the Revenue is accepted, it would lead to grave injustice as any mistake minor or contravention of provisions will lead to complete denial of the benefit of exemption which otherwise a trust registered under section 12A is legally allowed to claim. The maximum marginal rate shall be levied to the extent of relevant income, which has contravened provisions of section 13 and in the present case as contravention is of ₹ 1,80,000 only. AO erred in denying entire claim of exemption under section 11 and 12. Therefore, we uphold the impugned order passed by the learned CIT(A) and the grounds no.1 and 2, raised by the Revenue are dismissed.
Addition of interest income as unexplained income u/s 69A - We are of the opinion that impounded documents which were found in the possession of third party, are neither signed nor authenticated by anyone cannot be simply relied to make an addition under section 69A of the Act.
Insofar the application of provisions of section 69A of the Act is concerned, the addition was based on the impounded documents marked as Annexure–B/4, which is in our opinion is not a sufficient material to make an addition in the absence of any independent corroborative evidence.
Provisions of section 69A of the Act being a special provision can be invoked only when in any financial year the assessee is found to be owner of any money, bullion, jewellery or any other such valuable articles and there is doubt about source of same and the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory. In the given case, it is the case of the Assessing Officer, that the assessee trust has received interest income. Therefore, as the source is known, provisions of section 69A cannot be invoked. Therefore, invoking provisions of section 69A of the Act is unwarranted. Even though we held that the document on the basis of which addition is made is not a speaking or dumb document and worthy of making an addition, however, the assessee has not challenged the addition by way of cross appeals, confirming the addition by the learned CIT(A) was indeed justified and it is rightly allowed as interest income to the tune of ₹ 43,50,000. Such addition shall be subject to normal rate of taxation and need not be governed by the provisions of section 115BBE of the Act. Accordingly, ground no.3, raised by the Revenue is dismissed.
Exemption under section 11 allowed.
Allowance of depreciation - submissions of the assessee trust that it only claimed depreciation as an application of income and has not claimed the capital as an application of income - HELD THAT:- The assessee trust during the year has only claimed depreciation as an application of income and the capital expenditure towards fixed assets were not claimed as an application of income. The statute provides allowance of either depreciation or application of income towards capital expenditure. Therefore, if the AO disallows depreciation, he is duty bound to allow benefit of allowance towards application of income vis-à-vis capital expenditure. CIT(A) was absolutely correct in in allowing the depreciation in holding that the assessee trust cannot be devoid of claiming at least one as an application of income, doing so will defeat the mandate of the Act, which provides either capital investment or depreciation as an application of income.
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2025 (4) TMI 914
Addition made towards Passenger System Solutions treating same as taxable in the hands of the assessee as Fees For Technical Services (FTS) u/s 9(1)(vii) of the Income Tax Act as well as under Article 12 of the DTAA between India and USA - assessee is a company incorporated in the USA and is a tax resident of USA - main contention of the AR before us is that these services are standard services rendered using the software technology and that they are not the technical services - HELD THAT:- A particular service will be considered as fees for included services only when the person acquiring the service is enabled to apply the technology. It is also clear that even if the provision of the service requires technical input by the person providing the service, it may not fall within the ambit of Article 12(4)(b) unless the technical knowledge, skills, etc., are made available to the person purchasing the service. In assessee's case from the perusal of the nature of Passenger Services, it is clear that no technology per se is made available to NACIL and that the services are rendered using the software supported by the data centre of the assessee in USA.
Accordingly there is merit in the contention of the ld AR that these services are rendered using the technology and are not in the nature of technical services. Further we notice that there are plethora of judicial pronouncements where it has been held that unless the technical knowledge, skills etc., are made available by the service provider, the same cannot be held as FTS to be taxed in India under the DTAA which specifically provides so.
We see no infirmity in the order of the CIT(A) in holding that the impugned receipts are not taxable in the hands of the assessee in India.
Since we have dismissed the ground of the revenue for the reason that the receipts towards Passenger Services are not taxable under Article 12 of the DTAA between India and USA, the contention of the revenue that the same is taxable under section 9(1)(vii) of the Act has become academic and not adjudicated separately.
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2025 (4) TMI 913
Carry forward of Short Term Capital Loss (STCL) whereas the assessee has taken the benefit of the DTAA between India and Singapore with respect to the Short Term Capital Gains (STCG) - assessee is a company incorporated in Singapore and is a tax resident of Singapore - HELD THAT:- On perusal of the computation of income we notice that the assessee during the year under consideration has not availed any Treaty benefits and has computed the net the STCL after setting off the STCG and claimed the carried forward of STCL under the Act. Hence in our view the ground raised by the revenue is based on the incorrect understanding of facts.
On perusal of the rectification order u/s 154 passed by the AO we notice that the brought forward loss was not allowed to be carried forward based on a rectification order pertaining to AY 2013-14 in which the loss of AY 2011-12 and AY 2012-13 was not allowed to be carried forward. AR during the course of hearing drew our attention to the returns filed for AY 2011-12 and AY 2012-13 to substantiate the brought forward loss was incurred during the said assessment years - DR did not controvert the submission of the ld AR that these losses were allowed to be carried forward in the respective AYs.
In our view the revenue cannot deny the benefit of carry forward of loss under the head capital gains pertaining to earlier years by an order passed in the subsequent year and that the right to carry forward can be denied only in the year in which the loss is first incurred. This is so for the reason that the section 74 of the Act has a restriction eight years during which the loss under the head capital gains can be carried forward and for this purpose the loss pertaining to each AY are to be determined in the assessment year in which the loss is first computed. Therefore in our view the CIT(A) has correctly held that the right to carry forward the loss of AY 2011-12 and AY 2012-13 cannot be denied by a rectification order passed in AY 2013-14. Decided against revenue.
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2025 (4) TMI 912
Ex parte orders passed u/s 144 - applications for condonation of delay of 1716 days in filing appeals against assessment and penalty orders - income under presumptive taxation provisions (Section 44AD of the Act) at 8% of total incomes for the relevant assessment years - HELD THAT:- It is crystal clear that appellant/assessee had failed to comply with the several notices during the assessment proceedings. CIT(A) vide order dismissed the applications for condonation of delay of 1716 days in filing appeals.
Appellant/assessee claims that due to custody and mental illness, he could not file appeals within period of limitation. In applications dated 24.03.2024, appellant/assessee requested condonation of delay in filing appeals due to custody and mental health, setting aside ex parte order under Section 144 of the Act and reassessment income as per section 44AD of the Act and to compute total income at 8% of Rs. 43,00,550/- and Rs. 17,86,580/- for AYs 2016-17 and 2017-18 respectively.
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2025 (4) TMI 911
Disallowance of claim of write off of security receipts - assessee had written off Security receipts during the year under consideration and claimed the same as deduction - When questioned about the same by the AO, the assessee submitted that, as per RBI guidelines, the unrealised security receipts have to be written off within a maximum period of 8 years. Hence the assessee claimed deduction of amount so written off as business loss - HELD THAT:- It appears that the assessing officer has not correctly appreciated the business model and the manner of functioning of the assessee company. The assessee herein is a “Asset reconstruction Company” registered under SARFAESI Act. We notice that section 7 of SARFAESI Act permits the assessee to issue “security receipts” for raising funds.
The concerned trusts have made provision for bad debts in order to determine the quantum of its income. Hence, the provision for bad debts, if any, created by the Trusts is for the purpose of determining the income of the trusts as per the accounting principles and hence, it is nothing to do with the accounting methodology followed by the assessee. So far as the assessee is concerned, it has treated the investment made in Security Receipts as a separate investment and the income generated there from is offered to tax. Unrealised Security receipts were written off after the expiry of eight years. If any amount is realised after it was so written off, such realisation is offered to tax.
As noticed earlier, the AO has misdirected himself in understanding the concept of forming trusts, the accounting system followed by the trusts and assessee. There is no dispute with regard to the fact that the assessee has to follow the guidelines issued by the RBI for accounting the Security Receipts and it has to treat the Security receipts as “Loss assets” if it is not realised within five years.
Accordingly, the assessee has chosen to write it off the unrealised portion of the security receipts after expiry of eight years. There should not be any dispute that, if any security receipts was not realised within a period of eight years, then its recovery is doubtful. Accordingly, we do not find any infirmity in the claim made for deduction of Security receipts written off by the assessee. Accordingly, we confirm the order passed by Ld CIT(A) on this issue.
Addition of upside income not offered to tax by the assessee - A.R submitted that the upside income would consist of “Income by way of management fees/incentive” and “income from investments” - HELD THAT:- The assessee cannot be considered as the owner of the entire investments made in the Trusts or the financial assets acquired through trusts. In view of the above said position, and also as per the requirements of the SARFAESI Act, the Trusts are required to be considered as separate entities notionally for accounting purposes. Hence, the realisation of NPAs made by the trusts cannot be considered to be the income of the assessee. We notice that the tax authorities have misdirected themselves in understanding the manner of functioning of the assessee and the trusts.
We are of the view that the assessee was right in comparing the investments made by it in Security receipts with the investments made by general public in Mutual fund investments. The investors of mutual funds are not concerned with the financial activities carried on by the mutual fund and the incidence of tax shall arise in the hands of investors, only when they receive any money from the Mutual fund. In our view, the position of the assessee in respect of Security receipts is akin to the investment made in the mutual funds for the purpose of accounting and taxation, in view of the requirements provided under SARFAESI Act. AO was not right in assessing any realisation made by the concerned trusts as income of the assessee and the Ld.CIT(A) was not justified in partially confirming a part of the said additions. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to upside income recovery.
Protective addition in respect of upside income relating to other Security receipt holders, viz., the other beneficiaries of the Trust - The reasoning given by us for deleting the addition of upside income of Rs. 153.77 crores would equally apply to this addition also. The realisation made by the trusts cannot be considered as income of either the assessee or other investors. In any case, any income pertaining to other investors cannot be considered as income of the assessee. Hence, we are of the view that the AO was not justified in making protective addition of upside income relatable to the other investors in the hands of the assessee, since the realisations made by the Trusts cannot be considered as income of either the assessee or other investors, unless they are distributed between the security receipts holders. Accordingly, we affirm the decision rendered by the Ld.CIT(A) on this issue on the above said reasoning also.
Appeal filed by the Revenue is dismissed
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2025 (4) TMI 910
Entitlement for deduction u/s. 11 and 12 - charitable activity or not? - HELD THAT:- We have perused the order passed by the Coordinate Bench of this Tribunal in [2025 (2) TMI 863 - ITAT BANGALORE] in which a similar dispute arose in respect of the A.Ys. 2014-15, 2016-17 and 2017-18 which were decided by the Coordinate Bench by following the earlier order passed in the case of Bangalore Development Authority [2019 (6) TMI 429 - ITAT BANGALORE] hold that the denial of exemptions under Sections 11 and 12 of the Act is unjustified. The assessee's activities are undeniably charitable, and the provisions of the Act support its exemption claim. The addition made by the AO and upheld by the CIT(A) is, therefore, quashed. Thus, assessee is entitled for deduction u/s. 11 and 12 of the Act.
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2025 (4) TMI 909
TDS u/s 194C - non-deduction of tax on contract manufacturing of goods/products as per terms of agreements - interest levied by the AO u/s 201(1) and u/s 201(1A) - HELD THAT:- During the course of hearing the revenue did not bring anything on record to controvert the above findings of the coordinate bench in assessee's own case for AY 2017-18 [2023 (7) TMI 1075 - ITAT MUMBAI] holding that the payments made under the SOR agreements did not fall within the ambit of Section 194C of the Act and therefore the assessee did not have any liability to deduct tax at source on such payments u/s 194C of the Act. Accordingly, all the grounds raised by the Revenue stands dismissed
Accordingly, respectfully following the decision of the coordinate bench, we hold that there is no infirmity in the decision of the CIT(A) in deleting the tax under section 201(1) and interest under section 201(1A) levied by the AO. The grounds raised by the revenue are thus dismissed.
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2025 (4) TMI 908
Denial of Tonnage Tax Benefit - whether the conditions of "qualifying ship" is satisfied in the case of the assessee according to the provision of the Act? - HELD THAT:- For computing income, audit report has to be filed u/s.115VW which provides for filing of Form No.65 duly certified by the Auditor, which here in this case, auditor has duly filed and certified the tax tonnage income. Nowhere, it has been disputed or brought on record that assessee’s income is not from time charter. In fact there is a categorical finding by the ld. CIT (A) wherein hiring income from time charter of vessels given on hire to M/s. USCL and other companies have been given. Such hiring income from time charter falls in the category of core activities. It is not necessary that only carrying any cargo passengers alone is to qualify for the TTS. What is to be required to be seen before giving benefit of TTS is that, it should be a "qualifying ship" and Section 115VI defines the relevant shipping income to compute the tax tonnage for which Auditor has to certify the relevant shipping income under the head "tax tonnage" whether it is qualified as a tax tonnage or does not qualify. Here in this case, assessee has also offered its income partly under TTS and also under non-TTS which is duly certified by the auditor in Enclosure B( 2) in Form 66. Accordingly, we hold that the claim of the assessee qua the income for tax tonnage scheme has to be allowed and to that extent finding of the ld. AO is reversed and order of the ld. CIT (A) is confirmed. Thus this issue is decided in favour of the assessee.
Victualling expenses which AO had added - These payments are made for man day at fixed amount to meet the victualling cost. The purchase of victualling materials are made directly from the vendors and delivered on board to the vessels and the funds are transferred to the bank accounts of the agencies appointed for marine base office activities. The agents were appointed to withdraw the amount from the bank account and cash advances to the base Managers / vessel masters to use cash for purchasing victualling material from the vendors. It is also seen that assessee has furnished vessel-wise monthly summary of material details. It is also seen that before the ld. AO, detailed submissions in respect of said expenses were also made vide letter dated 30/11/2019 for the A.Y. 2016-17 which is also impugned before us. The said submission also contained the attendant sheet of the crew on board and the amounts paid to them alongwith documentary evidences. Once these expenses are part of a normal business activity and is prevalent in the shipping industry where the company provides food, snacks and beverages to the crew members on board, it cannot be held that it is for non-business purpose. Accordingly, we upheld the order of the ld. CIT(A) in deleting the said addition.
Disallowance of sundry and sales promotion expenses - AO noted that assessee has debited sundry expenses and sales promotion expenses for which assessee has not filed any submissions - assessee had suomoto disallowed 50% and the ld. Counsel sated that disallowance has to be restricted only to that part of income, which not eligible to the part under TTS - HELD THAT:- We do not find any infirmity in the order of the ld. CIT (A) because even if the disallowance has to be made then, the same has to be restricted to the part of income which is completed under those incomes which is not eligible to be taxed under TTS. Thus, any way disallowance has been confirmed albeit, it has been restricted to be disallowed from the income from non-TTS income. Accordingly, the ground raised by the Revenue is dismissed.
Interest of FD margin not allowed as tonnage income - AO while passing the order u/s 153A of the Act did not provide netting off of the interest expenses which was part of tonnage income calculation - HELD THAT:- Though there is a nexus of fund deployed for the business purpose, i.e., for acquiring ships and for placing performance guarantee margin vis-a-vis each contract with the banking and financial institutions. Since these margin deposits are integral part of core activities of operating qualifying ships and it is the part of the business requirement to provide the bank guarantees. However the part of the assessee’s income is chargeable to tax under tonnage tax and where tax is levied under presumptive rate, accordingly, it presume that all the expenses has been subsumed in the calculation and will have no impact on calculating the taxable income.
Thus, any interest claimed for the calculation for tonnage tax scheme cannot be allowed because once the presumptive tax is applicable on tonnage tax then, no separate interest expenses can be allowed. The interest income has to taxed separately under the head income from other sources and any interest expenses which is directly related to interest income has to be netted and accordingly, we direct the ld. AO to net off interest income from interest expenses and balance should be taxed as income from other sources. In the result, ground No.3 raised by the assessee is partly allowed.
Disallowance made for deemed dividend u/s. 2(22) (d) - HELD THAT:- Cost of shares invested was USD 300 and money received was USD 300 thereby being no income or gain in the hands of the assessee and hence, no capital gain. There is no income arising out of reduction in the share capital up to the value of principal invested.
We find that this issue has neen discussed in the decision of Tata Sons Limited [2024 (1) TMI 1036 - ITAT MUMBAI] wherein assessee’s shareholding in Tata Telecom Services Ltd. was reduced pursuant to the scheme of arrangement and restructuring and no consideration was paid by TTSL to the assessee and long term capital loss arising to the assessee on account of deduction of capital was allowed to the set off against the other long term capital gain. Since the facts have not been discussed properly by the ld. AO or by CIT (A) accordingly, this matter is restored back to the file of the ld. AO and to decide afresh in line with the principle laid down in the decision of Tata Sons Ltd., (supra) wherein, it was held that reduction of share capital is to be treated as "capital loss". Accordingly, the ground is partly allowed for statistical purposes.
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2025 (4) TMI 907
Addition invoking the provisions of section 41(1) adding the sundry creditors - AR sought admission of additional evidence - HELD THAT:- This is a fit case for admission of additional evidence filed by the assessee. Since it is evident from the record that these evidences were not considered by any of the lower authorities, therefore, we deem it appropriate to restore the matter to the file of the jurisdictional AO for de novo consideration after due examination and verification of the details/evidences furnished before us by the assessee.
Accordingly, the impugned order is set aside and the matter is restored to the file of the AO for consideration afresh. Grounds raised by the assessee are allowed for statistical purposes.
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2025 (4) TMI 906
Revision u/s 263 - AO, while framing the reassessment, had failed to properly verify the assessee’s claim for exemption u/s 54F - HELD THAT:- Admittedly, it is a matter of fact that the AO, while framing the reassessment, had failed to verify the assessee's claim of exemption u/s 54F of the Act by making enquiries or verifications which should have been made. We, say so, for the reason that as observed by Pr. CIT that though it was the claim of the assessee that he had purchased Villa No.48 vide an ”agreement to purchase”, dated 18-04-2016, but thereafter, he had in the course of the revisional proceedings come up with a new claim, i.e due to certain internal problems he was allotted Villa No.4.
Also, it transpires that Villa No.4 that was allotted to the assessee and claimed to be in his possession was not backed by any registered deed/agreement. Although it was, inter alia, the assessee's claim that as pursuant to the “agreement to purchase”, dated 18-04-2016, he was put into possession of the subject property i.e Villa No. 4, therefore, the said purchase transaction would fall within the meaning of “transfer” as contemplated u/s 2(47) of the Act, but we concur with the Pr. CIT that the same is not supported by the mandate of law.
Although Section 2(47)(v) of the Act, contemplates that any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882, (Act No. IV OF 1882) will fall within the meaning of “transfer”, but the same, we are afraid, does not come to the rescue of the assessee before us. We, say so, for the reason that, as per the post-amended Section 17(1-A) of the Registration Act, 1908, any document containing contracts to transfer for consideration, any immovable property for the purpose of Section 53A of the Transfer of Property Act, 1882, shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001, and if such documents are not registered on or after such commencement, they shall have no effect for the purpose of Section 53A of the Act.
As the “agreement to purchase”, dated 18-04-2016 is an unregistered document, therefore, as observed by the Pr. CIT, and rightly so, the assessee cannot claim to have purchased the subject property i.e Villa No. 4 as required per the mandate of law.
AO had failed to carry out necessary verifications, which he was required to make while framing the reassessment vide his order passed under Section 147 r.w.s. 144B of the Act, dated 22-03-2022, therefore, we are of a firm conviction that no infirmity emerges from the order of Pr. CIT, who in exercise of his revisionary jurisdiction under Section 263 of the Act had rightly held the order so passed by the AO as erroneous in so far it is prejudicial to the interest of the revenue,.
Accordingly, finding no reason to dislodge the well-reasoned order passed by the Pr. CIT u/s 263 we herein approve the same. Decided against assessee.
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2025 (4) TMI 905
Addition towards Foreign dividend income - assessee offered to tax the net dividend i.e. the amount received after deducting TDS while filing the return of income - AO held that the dividend income has to be offered on gross basis and accordingly made the addition - HELD THAT:- The impugned issue is already considered by the coordinate bench in assessee's own case [2015 (2) TMI 1323 - ITAT MUMBAI] for AY 2006-07 where it is decided against the assessee because taxed paid do not qualify as expenditure for the purpose of business and entire gross dividend should have accounted for in the P&L account. Decided against assessee.
Disallowance of payment made to auto dealers - AO has received information from Addl. DG of Central Excise Intelligence that the General Insurance companies are selling insurance policies through auto dealers and that the commission towards soliciting the insurance is paid in the guise of payment towards infrastructure, placement of banners, advertisement etc which are not genuine - HELD THAT:- We see merit in the submission of the ld AR that disallowance cannot be made on the ground that the impugned payments are against the IRDA regulation. Further we notice that findings of the Central Excise authority alleging that the insurance companies are paying commission in the guise of reimbursement of expenses is reversed by different benches of CESSTAT and Hon'ble Madras High Court in the case of other insurance companies and therefore the disallowance by placing reliance on the findings of the Central Excise is no longer applicable.
Section 44 r.w. Schedule I of the Act, provides that the insurance companies are required to prepare the profit and loss account in accordance with the provisions of the Insurance Act, 1938 (4 of 1938) or the rules made there under or the provisions of the Insurance Regulatory and Development Authority Act, 1999 (4 of 1999) or the regulations made there under. In assessee's case we notice that the accounts are prepared as per the provisions as mentioned herein above and the same is approved by the Controller and Auditor General of India. The contention of the revenue that the payments made to auto dealers are not genuine and that the same is actually commission paid in the guise of reimbursement is solely based on findings of Central Excise which is subsequently reversed by the higher judicial forums. Accordingly the disallowance cannot be sustained on that ground. Further the submissions of the assessee that the payments are towards outsourced activities as per the IRDA guidelines which gets periodically reported is well substantiated. Therefore expenses claimed towards reimbursement of expenses for the outsourced activities as per the IRDA guidelines, cannot be disallowed. Accordingly we direct the AO to delete the disallowance made in this regard. The ground raised by the assessee is allowed.
Profit on Sale of Investment exempt u/s 10(38) - AO denied exemption u/s 10(38) on the ground that the assessee's income is computed u/s 44 of the Act read with First Schedule which is special regime applicable to the insurance companies for computation of total income and that entire income earned by insurance companies, including income taxable under House property, capital gains and income from other sources are taxed as business income - AO further held that the exemption under section 10(38) is available only to income which chargeable under the head "capital gains" - HELD THAT:- Impugned issue stands decided in favour of the assessee by the decision of Bombay High Court in assessee's own case for AY 2006-07 [2018 (3) TMI 589 - BOMBAY HIGH COURT] wherein the Bombay High Court while deciding the issue had relied on clarificatory letter bearing F No. 153/24/2006-TPL dated 21 February 2006 issued by the CBDT to IRDAI regarding exemption under section 10(38) available to all General Insurance Companies. Exemption available to any other assessee under clause 10(38) relating to long term capital would also be available to a person carrying on non-life Insurance business.
Disallowance u/s 14A - AR contended that section 14A is not applicable in the case of insurance companies which are governed by section 44 - HELD THAT:- Identical issue for AY 2012-13 [2020 (12) TMI 434 - ITAT MUMBAI] held that it has been consistently held that, provision of section 14A is not applicable in the cases of Insurance company which are governed by section 44, because it is non obstante provision wherein the income is to be computed as per P&L account prepared under the Insurance Act 1938 Section 14A contemplates exception for deduction allowable under the act, whereas section 44 creates special application of provision of computation of profit as per the Insurance Act. Thus, no disallowance u/s 14A can be made and accordingly, ground allowed in favour of the assessee.
Amortization of Premium on Securities - AO disallowed the same stating that the same is in the nature of capital expenditure - HELD THAT:- We notice that the coordinate bench while considering identical issue in the case of AIG General Insurance Co. Ltd. [2010 (10) TMI 764 - ITAT, MUMBAI] wherein the issue of Amortization of Premium on Securities has been explained by way of example. Even if the debit for amortization is considered as an expenditure or allowance, there being so specific prohibition against the expenditure or allowance in section 30 to 43B, the departmental authorities were not justified in adding back the amount of the balance of the profits. The judgment of the Supreme Court in the case of General Insurance Corporation of India [1999 (9) TMI 3 - SUPREME COURT] takes care of all the arguments advanced on behalf of the Revenue. We, therefore, delete the addition.
Applicability of provisions of Section 115JB on disallowance u/s 14A - We notice that the ground of the revenue is not factually correct. We further notice that the AO has added the disallowance made u/s 14A to the book profits while completing the assessment and that the CIT(A) has held the issue in favour of the assessee by holding that the AO is not correct in adding the disallowance to the book profits. It is a settled legal position that the disallowance under section 14A cannot be added to the book profit under section 115JB of the Act. Therefore we see no infirmity in the order of CIT(A). Accordingly the ground of the revenue is dismissed.
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2025 (4) TMI 904
Deduction claimed u/s 36(1)(iii) - interest expenses on borrowed capital - AO disallowing the expenditure claimed on the ground that assessee allegedly did not carry out any business activity during the year under consideration - whether actual receipt of revenue from the principal business activity could be considered as indication or a barometer to suggest the continuity of business which in turn would qualify the assessee to claim expenditure in its return of income? - CIT(A) allowed claim - HELD THAT:- Stance adopted by AO is not justifiable as assessee had been into the business which includes costs which are fixed in nature and other wise. Merely not having revenue receipts cannot be the yard stick to decide allowability of the expenditure. Section 36(1)(iii) states that the amount of interest paid in respect of capital borrowed for the purpose of business or profession would be allowable as a deduction. Proviso to the said section provides that any amount of interest paid in respect of capital borrowed for acquisition of an asset or extension of existing business or profession or any period beginning from the date on which the capital was borrowed for acquisition of the asset, till the date on which such asset was put to use, shall not be allowed as deduction.
In the present case, before us, the proviso to the said section does not apply since, assessee has undertaken a project which forms part of its stock in trade and not a fixed asset. On these facts, the questions which were considered by the Hon'ble Court was on the allowability cost of interest paid on the loans borrowed by the assessee and whether it would fall within the scope of section 36(1)(iii), as examined by the Tribunal.
We also take note of the observations and findings of ld. CIT(A), who on similar view has deleted the disallowance made by AO. No reason to interfere with the findings arrived at by CIT(A), in allowing the claim of the assessee. Accordingly, grounds raised by the Revenue are dismissed.
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2025 (4) TMI 903
Addition u/s 68 - unexplained cash credits - assessee has admitted that he has not maintained books of accounts - HELD THAT:- From a plain reading of section 68 of the Act, it is clear that the addition can be made U/s. 68 of the Act in cases where any sum is found credited in the books of account maintained by the assessee, where the assessee offers no explanation about the nature and source of such credits in the books of account or such explanation is not in the opinion of the Assessing Officer being satisfactorily explained. In the instant case, the addition has been made U/s. 68 of the Act even though it was acknowledged by the Ld. AO that the assessee has not maintained books of account. See KAMAL KUMAR MISHRA [2014 (1) TMI 71 - ITAT LUCKNOW] and SMT. MADHU RAITANI VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-3 [2010 (10) TMI 905 - ITAT GAUHATI]
It is a settled decision of law that the addition made by the Ld. AO in respect of the cash deposits by invoking the provisions of section 68 of the Act fails for the simple reason that the bank statements or bank pass books cannot be considered as books maintained by the assessee for any previous year and therefore, the addition made by the Ld. AO U/s. 68 of the Act is bad in law and deserves to be deleted. Decided in favour of assessee.
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2025 (4) TMI 902
Non-deduction of TDS u/s 194C - Demand u/s 201(1) read with Section 201(1A) - assessee, a private limited company, made payment for external development charges (EDC) to Haryana Urban Development Authority (HUDA) who had merely received payment for and on behalf of Department of Town and Country Planning (DTCP), which is admittedly a government department and as per the assessee is not liable to deduct TDS on the said EDC - HELD THAT:- It appears that by Finance Act, 2014, Sub-Section (1) of Section 2014 w.e.f. 1.10.2014 by substituting the earlier provision and earlier provision with a uniform limitation period of seven years from the end of relevant financial year wherein payments made or credit given was made applicable. It further appears from the above that while making amendment by Finance Act, 2012, the provision of Section 201(3) has been given retrospective effect from 1.4.2010. Thus, it is quite clear that in the event the legislature intended to apply the amended provision of sub-Section (3) brought in by the Finance Act 2014 w.e.f. 1.10.2014 for such retrospective effect, then they would have certainly mentioned the same a date prior to 1.10.2014 and not w.e.f. 1.10.2014, as has been specifically mentioned by the Finance Act, 2014.
Therefore, the argument advanced by the learned counsel for the assessee that the amended provision made by the Finance Act, 2014 in respect of the limitation prescribed in Section 201(3) of the Act cannot at all be made applicable to the instant case in hand as for the particular reason that the assessee’s case was much before than that of the amendment made and the assessee since filed their TDS statement under Section 200 in due time, the order under Section 201(1) read with Section 201(1A) could not have been passed on 30.03.2021 rather the same ought to have been passed within two years from the end of the financial year in which the statement was filed particularly having regard to the provisions of Section 200 of the Act, is found to be acceptable. We also note that the DR has not been able to bring on record anything contrary to the facts made available before us.
We also find that the identical issue has been considered in the case of Turner General Entertainment Net Works India Limited Mahipalpur, Delhi [2024 (11) TMI 866 - ITAT DELHI] wherein under identical facts and circumstances of the case the assessment order completed on 28.03.2018 for F.Y. 2010-11 was found to be beyond the prescribed time limit and therefore quashed.
We find no reason to deviate from the stand taken therein and respectfully relying upon the same we find that the order impugned dated 30.03.2021 for A.Y. 2014-15 is beyond limitation in view of the amended provision of Section 201(3) of the Act and the same is not found to be sustainable and thus, quashed. Assessee’s appeal is allowed.
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2025 (4) TMI 901
CIT(A) admitting additional evidence under Rule 46A of the Income-tax Rules, 1962 without giving the AO a reasonable opportunity to examine and rebut the same during remand proceedings - HELD THAT:- Not only that the evidence with the ld. CIT(A) has entertained are all those bills as AO noted that he made the disallowance merely on account of not submitting the bills. CIT(A) the bills were not submitted. CIT(A) having co-terminus power has entertained that evidence AO choose to remain silent and has not provided the remand report even after so many reminders the CIT(A) passed the order as on 12.04.2024, based on facts and records available.
As is evident that the assessee had filed the appeal before the CIT(A) on 28.08.2018 and the appeal order was passed on 12.04.2024 which means the appeal was pending before the CIT(A) for approximately six years and sufficient opportunity was granted to the ld. AO. Without prejudice to that rule 46A(4) provide that "Nothing contained in this rule shall affect the power of CIT(A) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty". As regards the filling of the audit report belatedly, AO has already considered the audited accounts and made the addition there from and there being no further grievance on that delayed filling of audit report and therefore, they contention has no effect either on merit or that of the admitting the evidence on those accounts. Thus, when the ld. CIT(A) has considered those evidence giving equal chance to ld. AO for providing his comments he has considered those evidence in furtherance to the records already on record. Therefore, we do not find any merits on the grounds of appeal of the revenue and thereby the ground of appeal 1 & 2 raised by the revenue are dismissed.
Addition on account of purchases and development expenses claimed by the assessee in profit and loss account contending that the assessee failed to submit the books of accounts, bills or vouchers etc. to substantial its claim during the assessment proceedings - HELD THAT:- We note that AO had observed that the assessee had debited purchase and internal development expenses in respect of the lands transferred to M/s M.M. Reality. As per the details furnished before the AO, the said expenses had been paid to seven parties / contractors.
The assessee had furnished the details of TDS deducted u/s 194C, copy of ITR acknowledgments and computation of income of the parties / contractors. However, the relevant books of accounts, bills and vouchers verifying the expenses were not produced before the Ld. AO as contended by him while making the addition. While in proceeding before him the AO in order to verify the genuineness of the expenses issued summons u/s 131 to the parties. None of the parties appeared, however, they sent reply by post the relevant details to the Ld. AO forwarding the details as called for. In case of M/s Flexible Machine Tools, Faridabad and Shri Arun Sharma, Faridabad the summons the summons so issued were not served and came back as unserved.
AO deputed his inspector for site verification and upon report of that inspector so deputed he stated that the land in questions is uneven, rugged and having no constructions except a room. There was no agriculture activity on the land. That also made reasons to disbelieve the expenditure claimed by the assessee. While arguing the case ld. DR in its submission dated 23.12.2024 has mentioned "point no. 3.1 Failure to produce books and supporting evidence that in spite of AO's specific request on 26.02.2016 for books of accounts, bill and vouchers, the assessee only provided partial reply through dak and also the assessee has failed to submit primary records substantiating the payment to seven contractors. In this matter we note that in the assessment proceeding in the very first reply of the assessee submitted on 13.07.20215, he had provided the following major documents as required by the ld. AO i.e.PAN Card, ITR Ack. and Computation of A.Y.2013-14, Audited Balance sheet and Profit & Loss of the A.Y.2013-14, Sales ledger in the book of Ascent Buildhome Developers Limited, Transfer deeds, Bank account statement of Punjab National Bank, Jaipur, Kotak Mahinda Bank, Raja Park, Jaipur and Kotak Mahindra Bank, Raja Park, Bhiwadi. The assessee also submitted the details of the payments made to the seven contractors, the assessee had provided the details in its reply dated 02.03.2016 showing details of internal development expenses, Copy of ITR & Computation of those contractors and Form 26AS of those contractors. The assessee also submitted the copy of ledgers and bills were also duly submitted at the time of appeal proceeding but the ld. AO remained silent in the remand proceedings.
DR in its submission dated 23.12.2024 has mentioned vide point no. 3.1.2 Evasions of Summons by Key Contractors and "point no. 3.2.3 Non-compliance by Outstation Contractors stating that the AO had issued summons U/s 131 to the contractor but the contactors failed to attend hearings & provided responses by post and also that some contractors did not submit their responses. On this issue as we note that the creditors of the assessee have duly filed their submission in response to the summons issued by the AO U/s 131. The creditors could not attend the hearing personally but they have duly provided letter confirming the nature and details of transaction undertaken between them and the assessee, their ITR & Computation and Copy of their PAN. This basic documents related to the creditors were submitted at the assessment proceeding but the contention of the AO was that the assessee had failed to produce the party so as to establish genuineness of the transaction. Neither these creditors were related party of the assessee nor they have completely neglected the summon. Also, subsequent payments have also been made those creditors.
AO concluded that the internal development expenses are bogus solely based on the non-appearance of the creditors/contractors which is not the correct.
The bench noted that the ld. CIT(A) while dealing with the appeal of the assessee has dealt with all the aspect of the matter and categorically held that the assessee submitted all the necessary details in respect of the expenses incurred by them. All the ledger accounts, bills and vouchers have been produced. The TDS has been paid u/s 194C, the copy of ITR acknowledgments have been provided, all the transaction have been carried out through the banking channels. Hence, the said expenses cannot be held to be bogus in nature. The appellant cannot be forced/compelled to produce its parties to prove genuineness of the transactions. By submitting the necessary documents, the appellant had discharged the onus cast upon him to prove the genuineness of the transactions quite sufficiently. Further, since all the details were available with the Ld. AO necessary inquiries could have been conducted by the Ld. AO to determine the genuineness of the expenses. Also, in respect of the report of the Patwari that no agricultural activity has taken place on the land, it is pertinent to mention that the appellant has never claimed that he has done agriculture on the said land. Since, the land was rugged that is why land filling and landscaping were required to be made for the land to be sold. Therefore, we also do not find any infirmity in the finding so recorded by the ld. CIT(A) while allowing the appeal of the assessee on its merits. Thus, we do not find any merit of the ground number three raised by the revenue and the same is dismissed.
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2025 (4) TMI 900
Addition of Expenditure by way of penalty or fine for violation of any law for the time being in force u/s. 37 - HELD THAT:- Admittedly, it is a fact on record that assessee had already added back this amount while computing its total income. Accordingly, yet another disallowance made while processing the return is not justified as it amounts to double addition. We, thus do not find any infirmity in the findings arrived at by the CIT(A) in this respect.
Liability of contingent nature - Assessee has evidently demonstrated that this amount has been reported in its financial statements as part of its disclosure requirements and does not have any bearing on the profit and loss account to arrive at total income for the year and reported in its return. CIT(A) has taken note of the inadvertent error made by the tax auditor while reporting it in column 21(g) of the tax audit report.
Based on his examination of the records, he has noted that assessee did not claim the contingent liability as an expense, neither in the profit and loss account nor in the return of income as a deduction while computing its total income. This is a verifiable fact from the records which were already available with the Department when the assessee filed its return of income on its portal. No infirmity in the fact based findings arrived at by CIT(A) in granting relief to the assessee. Accordingly, grounds raised by the Revenue are dismissed.
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2025 (4) TMI 899
Unexplained cash credit u/s 68 - share application money received by the assessee - Onus to prove - HELD THAT:- The provision of section 68 as prevailing for year under consideration the ld. AO can make addition u/s 68 only under two circumstances, (i) the assessee does not offer any explanation about nature and source of such credit or (ii) Explanation offered by Appellant is not up to the satisfaction of Ld. AO. Therefore, here we note that the assessee provided so as prove the identity, credit worthiness and genuineness of the transaction by placing all the records such as PAN, Application made for Shares, Board Resolution and Confirmations, Financial Statement and Bank statement of the investor company which were not at all doubted by ld. AO.
But all such vital evidence has been ignored solely on the basis of statements of third party recorded by some other officials during the course of search operation conducted. As argued by the ld. AR of the assessee relying on the decision of Padmavati Agrico(India) Private Limited [2024 (9) TMI 1312 - ITAT JAIPUR] it is clear that Shri Praveen Jain has retracted from his statement and as held by our jurisdictional Hon'ble Rajasthan High Court stating that on the retracted statement no addition can be made in the hands of the assessee. This has been held by our High Court in the case of PCIT Vs. M/s. Esspal International P. Ltd [2024 (9) TMI 652 - RAJASTHAN HIGH COURT] stating that the merely based on the retracted statement no addition can be made. Decided against revenue.
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