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Showing 301 to 320 of 1125 Records
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2020 (11) TMI 825
Allowable business expenses OR capital expenditure - payment of forfeited amount earlier received by the assessee - HELD THAT:- The above claim of the assessee on account of repayment of forfeited amount earlier received by the assessee, taxed duly in AY 15-16, subsequently, those persons received forfeited amount from assessee, booked the real estate during the year and therefore, forfeited amount was returned by the assessee is definitely an expenditure which springs from the business of the assessee of the real estate.
The above expenditure has been incurred by the assessee wholly and exclusively for the purpose of booking of a real estate, cannot be held to be a capital expenditure. Same forfeited amount received from the same person has already been taxed for AY 2015-16, when the same is returned during the current year on booking of the flat, cannot be held to be capital expenditure.
When the said sum was received, the revenue taxed as revenue receipt and when the same sum is refunded the revenue treated it as a capital expenditure. Thus blowing hot and cold in the same breath by revenue is not acceptable. Accordingly, reversing the order of the lower authorities the ld AO is directed to delete the disallowance expenditure incurred by the assessee is wholly and exclusively incurred for the purpose of the business and it is not a capital expenditure.
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2020 (11) TMI 824
Direct Tax Vivad Se Vishwas Scheme - assessee has opted to settle the dispute relating to the tax arrears for the assessment year under consideration- HELD THAT:- We have seen the letter dated 17.11.2020 along with Form 1 and 2 filed with income tax department. Considering the aforesaid situation, the present appeal is dismissed. However, this dismissal of appeal is subject to a caveat that in case the dispute relating to tax arrears for the present assessment year is not ultimately resolved in terms of the aforesaid Scheme, the assessee shall be at liberty to approach the Tribunal for reinstitution of the appeal and the Tribunal shall consider such application as per law. The Revenue has no objection with regard to the aforesaid caveat. Appeal of the assessee is dismissed.
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2020 (11) TMI 823
Reopening of assessment u/s 147 - No proper recording of satisfaction by Principal CIT - eligibility of reasons to believe - HELD THAT:- It is difficult to make out as to what were the “reasons for belief that income has escaped assessment” with the AO on the basis of which Principal CIT has accorded sanction by merely writing “I am satisfied.”
From the approval recorded and words used that "Yes. I am satisfied.", it is proved on record that the sanction is accorded in mechanical manner and Pr.CIT has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/ss 147/148 of the Act.
Even the AO has not applied his judicial mind independently while recording the reasons for initiating proceedings u/s 147/148 - Bare perusal of the reasons recorded shows that the entire emphasis is placed on the report of the Investigation Wing, which has otherwise been based upon the statements of Pradeep Kumar Jindal, Shri Subodh Kumar Khandelwal, Ms. Seema Khandelwal & Ms. Meera Mishra who have furnished the list of companies stated to be not doing any business but engaged in providing accommodation entries. Before issuing the notice, the AO has not examined the profile of the said companies to arrive at the logical conclusion so as to issue notice u/s 148
Neither any reason has been recorded which is sufficient to believe that income to the tune of ₹ 15,00,000/- received from M/s. Hajima Resorts Ltd. has escaped assessment nor any such notice has been given to the assessee. All these facts goes to prove that the AO has not applied his judicial mind before recording the “reasons to believe” that such and such income has escaped assessment rather proceeded to initiate the proceedings u/s 147/148 of the Act by blindly following the report of the Investigation Wing.
Coordinate Bench of the Tribunal in case cited as ITO, Ward 17 (4), New Delhi vs. M/s. Virat Credit & Holdings Pvt. Ltd. [2018 (2) TMI 871 - ITAT DELHI] dealt with the identical issue arising out of the search and seizure operation conducted by the Investigation Wing on 18.11.2015 on Pradeep Kumar Jindal Group of companies who were allegedly engaged into providing accommodation entries, quashed the reassessment on the ground that AO has not applied his judicial mind independently and that ld. Principal CIT has accorded mechanical approval by merely writing words that “Yes, I am satisfied.” without applying his judicial mind.
According sanction is not a supervisory role rather it is a quasi-judicial function to be performed by the Principal CIT/CIT, as the case may be, as required u/s 151 of the Act. - Decided in favour of assessee.
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2020 (11) TMI 822
Revision u/s 263 - transaction of cash deposit in the saving bank account by the respective assessee(s) - transaction arising out of family partition - CIT while initiating proceedings u/s 263 of the Act mentioned that “ no details and documents are found on record which could establish that the dates on which the amount was received by the assessee from his father and also the Ld. A.O did not examined the assessee on oath in connection with the veracity of the transaction” - HELD THAT:- A.O vide his notice dated 3.10.2016 issued u/s 143(2) of the Act enclosed a Annexure and through point No.13, the assessee was required to explain the source of cash deposit in his saving bank account.
Along with this reply the assessee enclosed copy of bank pass book, copy of agreement of sale of agriculture land, copy of memorandum of family settlement and copy of death certificate of father Ramcharan Das. On the basis of above details the explanation of the assessee were accepted by the Ld. A.O and the alleged amount being the amount received on family partition, the transaction was treated as explained by the Ld. A.O.
All necessary evidences which could explain the source of cash deposits in the bank account by the respective assessee(s) is established and in the family partition deed the name of three assessee(s) named S/Shri Ram Swarrop Bairagi, Sriram Vaishnav and Shailendra Vashav who are in appeal before us are appearing.
The nexus of cash deposit is proved with copy of sale deed, partition deed and bank pass book. We therefore in the given facts and circumstances of the case are of the considered view that specific information was called by Ld. A.O about the alleged cash deposits and the assessee has satisfied the Ld. A.O with complete details giving the source of cash deposit in the bank account. Therefore it is neither a case of no enquiry or inadequate enquiry - PCIT has wrongly assumed jurisdiction u/s 263 of the Act and the impugned order deserves to be quashed - Decided in favour of assessee.
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2020 (11) TMI 821
Levying late fees u/s 234E - Late filing of TDS returns / statement - statement processed u/s 200A - delay in filing return for the period before 01.06.2015 - HELD THAT:- As decided in case of Executive Engineer & others [2019 (7) TMI 1678 - ITAT INDORE] Assessee is eligible for relief for deletion of fee levied u/s 234E of the Act as the returns are processed before 1.6.2015. - Appeal of assessee allowed.
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2020 (11) TMI 820
Revision u/s 263 - addition on account of suppression of GP on accommodation entries - AO T axing only profit by estimating GP on alleged bogus purchase - Reopening of assessment on the basis of information received by Investigation Wing after search on Bhanwarlal Jain group - HELD THAT:- The Hon'ble Jurisdictional High court in the case of Mohommad Haji Adam & Co. [2019 (2) TMI 1632 - BOMBAY HIGH COURT] and Paramshakti Distributors Pvt. Ltd. [2019 (7) TMI 838 - BOMBAY HIGH COURT] has held that in case of bogus purchases, purchases cannot be rejected without distrusting the sales in case of a trader. The addition can be restricted to the extent of GP rate on such purchases to bring it at par with genuine purchases. In other words, it is only the profit element embedded in the bogus purchase bills that is to be brought to tax and the entire bogus purchases cannot be added. AO was right in taxing only profit by estimating GP on alleged bogus purchases.
As regards invoking of jurisdiction under section 263 by PCIT, we are of considered view that the PCIT has over stepped while exercising his revisional powers - AO has passed the order by estimating GP after examining the documents on record and considering various judicial pronouncements - AO has taken one of the possible views by making reasonable assumption that the assessee might have procured the goods from grey market. This assumption has been accepted by the Tribunal in various decisions where the revenue has accepted the sales/ turnover corresponding to alleged bogus purchases.
The Hon’ble Supreme Court of India in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income-tax [2000 (2) TMI 10 - SUPREME COURT] in an unambiguous manner has held that where two views are possible and the Assessing Officer has taken one of the possible views to which CIT does not agree, this would not make the assessment order erroneous.
In the instant case the assessment order may be prejudicial to the interest of revenue but it cannot be said to be erroneous. Since, both the conditions to trigger Sec 263 are not satisfied, the PCIT has erred in invoking his revisional power. - Decided in favour of assessee.
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2020 (11) TMI 819
Denial of claim of deduction u/s 10AA on transfer pricing adjustment made by the assessee voluntarily - HELD THAT:- We notice that an identical issue has been examined by the Bengaluru bench of Tribunal in the assessee’s own case in assessment year 2010-11 [2020 (5) TMI 548 - ITAT BANGALORE] and it has been decided in favour of the assessee by following the decision rendered by the Pune Bench of Tribunal in the case of Apoorva Systems Pvt. Ltd. [2018 (3) TMI 1031 - ITAT PUNE] - Decided against revenue.
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2020 (11) TMI 818
Grant of recognition u/s. 80G rejected - assessee trust obtained registration under section 12AA - HELD THAT:- Impugned order of ld. CIT(E) is a non-speaking order. As rightly contended by the ld. counsel for the assessee, the generation of surplus and the fact that majority of receipts are by way of fees collection cannot be a ground to refuse recognition u/s. 80G - The assessee is admittedly existing for a charitable purpose of providing education. As rightly contended by the ld. DR, the impugned order is a non-speaking order and therefore it would be in the fitness of things to set aside the order of CIT(E) and remand back to him the issue of grant of recognition u/s. 80G of the Act to the assessee for fresh consideration. The CIT(E) will afford opportunity of being heard to the assessee before deciding the issue. Appeal of the assessee is treated as allowed.
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2020 (11) TMI 817
Income from other sources u/s 56(2)(vii)(b)(ii) - difference between the market value and purchase consideration on the date of registration of sale - HELD THAT:- In the instant case the Proviso to sub clause (b) of section 56(2)(vii) of the Act gets attracted and the Stamp Duty value as on the date of booking the flat wherein the consideration was mutually agreed between the parties was fixed shall be taken for the purpose of sub clause (b). The assessee has also filed a report from the registered valuer, according to which the stamp duty value of the flat in August, 2012 has been determined at ₹ 98,68,000/.
We find merit in the contentions raised by the assessee.The provision of Section 56(2)(vii)(b) of the Act does not envisage transfer of ownership for determination of stamp duty value. The determination of stamp duty value hinges on the date of agreement fixing the amount of consideration for transfer of immovable property. In the present case, the date is August 2, 2012. i.e. the date of booking the flat. At the time of booking flat the total amount of consideration was fixed between the parties. The date of transfer of title in immovable property has no significance under the provisions of Section 56(2)(vii)(b). - Appeal of assessee allowed.
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2020 (11) TMI 816
Addition u/s 68 - unverified/non-existent /bogus sundry creditors in respect of six creditors on the ground that the assessee could not substantiate the identity and credit worthiness of the creditors and the genuineness of the transaction - HELD THAT:- Payments have been made by the assessee to the creditors in subsequent years and there is nothing on record to show that such payments made to the above parties have come back to the assessee in some form or the other.
Books of account of the assessee has not been rejected and the addition u/s 68 of the Act has been made in respect of six creditors from whom the assessee has purchased goods, but, no payments have been made to those parties during the impugned assessment year and the assessee was unable to produce the above six parties before the AO during remand proceedings although three of them were produced before the AO during assessment proceedings. Under these circumstances, it is to be seen as to whether addition can be made of the whole of the amount or profit embedded in these purchases can be added to the total income of the assessee.
In the instant case, the sales made by the assessee has been accepted and the books of account have not been rejected and the assessee has made the payments to the sundry creditors in the subsequent years and there is nothing on record to suggest that the money so paid has come back to the assessee directly or indirectly in any form, therefore, making addition of the entire amount payable to the six sundry creditors in the instant case in our opinion is highly unjustified.
Assessee also cannot get scot free by not producing the sundry creditors and making purchases from parties who are not maintaining proper records or who have made adverse statements and, therefore, the assessee cannot be equated with another assessee who is maintaining records meticulously and not making purchase from grey market. Since the assessee in the instant case is showing GP rate of less than 4%, therefore, considering the totality of the facts of the case, we are of the considered opinion that adoption of GP rate of 16% on such unsubstantiated purchases from the six creditors will meet the ends of justice. We, therefore, direct the AO to adopt GP rate of 16% on such purchases of ₹ 3,05,34,283/- from the six creditors which comes to ₹ 48,85,485/- as against the addition of the entire amount payable to the six parties u/s 68 - we direct the AO to restrict the addition - Decided partly in favour of assessee.
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2020 (11) TMI 815
Addition under the head Railways Punitive charges - Whether compensatory in nature and allowable u/s 37 - observation of the A.O that punitive charges for overloading was penal in nature - HELD THAT:- Since the identical issue has been decided by the Coordinate bench in favour of the assessee by allowing the claim of damages in own case [2018 (10) TMI 672 - ITAT KOLKATA], respectfully relying upon the same we find no infirmity in the order passed by the Ld CIT(A) so as to warrant interference. Hence in the absence of any merit found in the appeal preferred by the revenue, the same is hereby dismissed.
Addition u/s 14A r.w.r 8D - HELD THAT:- As in own case [2018 (10) TMI 672 - ITAT KOLKATA] not all investments become the subject-matter of consideration when computing disallowance under section 14A read with rule 8D. The disallowance under section 14A read with rule 8D is to be in relation to the income which does not form part of the total income and this can be done only by taking into consideration the investment which has given rise to this income which does not form part of the total income. Under the circumstances, the computation of the disallowance under section 14A read with rule 8D(2)(iii), which is issue in the assessee's appeal, is restored to the file of the AO for recomputation in line with the direction given above. No disallowance under section 14A read with rule 8D(2)(i) and (ii) can be made in this case.
Hon’ble Jurisdictional High Court in CIT vs. M/s Ashika Global Securities Ltd [2018 (7) TMI 1425 - CALCUTTA HIGH COURT] and also the judgement passed by the Coordinate Bench and respectfully relying upon the same we find no infirmity in the order passed by the Ld CIT(A) in deleting the addition made under section 14A r.w.r.8D so as to warrant interference. Appeal of the Revenue is dismissed.
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2020 (11) TMI 814
Reopening of assessment - legality of issuance of notice u/s. 148 - Period of limitation - CIT(A) was of the opinion that issuance / serving of notice for reopening u/s 148 of the Act and subsequent framing of re-assessment order was not as per Section 149 and 153 - Time limit prescribed for completion of assessment / re-assessment / re-computation after re-opening - HELD THAT:- in the present case, we note that the limitation period for issuing notice of reopening u/s. 148 of the Act as prescribed in Section149 of the Act gives the outer limit of six years from the end of the relevant assessment year which in this case for AY 2009-10 is admittedly on 31.03.2016.
So by issuing notice even though on the last day as prescribed by Section 149 of the Act, the AO gets the jurisdiction to reopen the assessment of the assessee for AY 2009-10.
Further, it can be noted that section 153 prescribes the “Time Limit for completion of assessment, re-assessment and re-computation”. Therefore, in the case of reopening of assessment u/s 147 of the Act, the time limit to frame the assessment or reassessment starts only after serving of notice u/s 148 of the Act i.e. nine (9) months from the end of financial year in which the notice u/s 148 of the Act was served upon the assessee.
Therefore, admittedly in this case, the notice u/s. 148 of the Act was served upon the assessee by e-mail on 22.09.2016, so the limitation time of nine months starts from the end of financial year, so in this case the end of financial year after serving notice is 31.03.2017, so as per Section 153 of the Act, the Assessing Officer should frame the assessment before the expiry of nine months from the end of the financial year in which the notice u/s. 148 of the Act was served, therefore, in this case, the Assessing Officer has time to frame the assessment till 31.12.2017 and the Assessing Officer in the instant case has framed the assessment on 11.12.2017 that is well within the time prescribed by section 153(2) of the Act and, therefore, his framing of assessment after reopening is legal as per the statute.
We reverse the order of ld. CIT(A) and we hold that Assessing Officer after issuing the notice u/s 148 for AY 2009-10 within the limitation period on 31.03.2016, had got jurisdiction to re-open the assessment for AY 2009-10 and after having served the assessee notice u/s 148 on 22.09.2016 has passed the assessment order within the prescribed time u/s. 153(2) of the Act on 11.12.2017, so these actions of Assessing Officer are legal and valid in the eyes of law.
Validity of reopening of assessment - reason to believe - information given by Investigation Wing - whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment? - unaccounted cash - HELD THAT:- Reasons recorded by AO it is evident that other than the general information given by Investigation Wing there is no other material the AO collected himself after preliminary enquiry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that “income of the assessee has escaped assessment”. According to us, the information given by the Investigation Wing can only be at the best be a basis to ignite/trigger [ though we have our reservation on it ] and be the starting point to enquire; and at that stage the information of Investigation Wing can be termed as a foundation only to form “reason to suspect” and not reason to believe escapement of income which is the jurisdictional fact & law required to enable the AO to successfully assume jurisdiction to reopen as envisaged u/s. 147.
And the reason to suspect cannot be the basis for usurping jurisdiction to reopen u/s. 147 of the Act, for conducting roving/further examination cannot be resorted by him in order to strengthen the suspicion to an extent which can later transform the suspicion to create the belief in his mind that income chargeable to tax has escaped assessment.
Merely on a study by Investigation Wing ,as in this case explaining the general modus operandi carried out by un-scrupulous persons in suspected transactions to convert the unaccounted cash of beneficiaries which were transferred to the bank accounts of the beneficiaries through the dubious bank accounts of fake entities can only raise suspicion in the mind of the AO (which fact we have pointed out earlier) which is not sufficient/requirement of law for unscrupulous persons in suspected transactions to convert the unaccounted cash of beneficiaries which were transferred to the bank accounts of the beneficiaries through the dubious bank accounts of fake entities can only raise suspicion in the mind of the AO (which fact we have pointed out earlier) which is not sufficient/requirement of law for reopening of assessment.
We find that the reasons recorded by the AO to justify reopening the assessment u/s. 147 fails and, therefore, the very assumption of jurisdiction to reassess the assessee falls. - Decided in favour of assessee.
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2020 (11) TMI 813
Revision u/s 263 - Bogus LTCG - Suspicious sale transaction in shares and exempt long term capital gains shown in return (Penny Stock Tab in ITS) - HELD THAT:- We find that the coordinate Bench of this Tribunal in the case of ITO vs. Shri Narayan Tatu Rane [2016 (5) TMI 1162 - ITAT MUMBAI], M/s. Arun Kumar Garg, HUF, [2019 (4) TMI 400 - ITAT DELHI] have ruled that the Pr. CIT can not pass the order u/s 263 of the Act on the ground that thorough enquiry should have been made by the Assessing Officer. See DG HOUSING PROJECTS LTD [2012 (3) TMI 227 - DELHI HIGH COURT]
In the present case AO had given a specific notice regarding the disputed transactions and the assesseee also gave specific reply to the show cause notice issued by the assessing officer. Therefore, it is not a case where the assessing officer has not made any enquiry regarding impugned transactions but the Ld. Pr. CIT invoked the provisions of section 263 of the Act on the ground that the enquiry was not made in the manner, it ought to have been done.
Ld. Pr. CIT himself ought to have made some enquiry regarding the impugned transactions before setting aside to the file of the assessing officer. Hence, the action of the Ld. Pr. CIT is contrary to the ratio laid down by the binding precedence. We, therefore, hold accordingly, impugned order is quashed. - Decided in favour of assessee.
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2020 (11) TMI 812
Reopening of assessment u/s 147 - whether there was prima facie some material on the basis of which the department could reopen the case? - HELD THAT:- The “reasons to believe” would mean “cause or justification” - at the stage of initiating the proceedings for reopening of assessment by issuing notice, the only question which should bear in mind is as to whether there was relevant material on which a reasonable person could have formed a requisite believe and in our view, the A.O. was well within his right to reopen the assessment on the basis of information received from I&CI Wing of the department that the assessee had purchased property in the year under consideration and during the course of enquiries made by I&CI Wing of the department, the assessee could not explain the source of investment. In view of the above facts and circumstances, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, accordingly, we uphold the same.
Addition u/s 68 - treating the loan taken by the assessee from Smt. Kamla Tahaliyani as bogus - HELD THAT:- Cash deposited in the bank account is totally sourced by the cash withdrawals made earlier. Hence, adverse inference drawn by the revenue authorities under these peculiar facts and circumstances is unwarranted. Therefore, in our view, the CIT(A) erred in sustaining the addition without considering this fact that the cash deposited in the bank account was fully sourced from the earlier cash withdrawals from the same bank account, therefore, the findings of the ld. CIT(A) that immediate source of advancing money is unverifiable, are factually incorrect and are perverse. Therefore, keeping in view our above discussion, we direct the A.O. to delete the addition made u/s 68.
Addition of advance payment by the assessee against the sale of property from Shri Ram Swaroop Mali - admission of additional evidence - HELD THAT:- During the course of argument, the assessee had also placed on record an application dated 21/09/2020 to accept an affidavit as additional evidence under the provisions of Income Tax Appellate Rules, 1963 (in short, the Rules). In the said application, the assessee wants to place on record an affidavit of Shri Chhitar Mali, S/o- Shri Ramswaroop Mali as additional evidence, however, the ld AR has failed to demonstrate as to how the present application filed by the assessee is meeting with the ingredients contained in Rule 29 of the Rules. Therefore, in our view, the present application for accepting the affidavit as additional evidence moved by the assessee deserves to be dismissed and the same is accordingly dismissed.
A.O. had believed the source of ₹ 4,89,000/- from the agricultural income of Shri Ramswaroop Mali but in respect of the amount of ₹ 5.11 lacs, the assessee has not placed on record any document in respect of purchase and sale of truck by son of Shri Ramswaroop Mali. The assessee has not placed on record any corroborative evidence, such as, Registration, transfer certificate or any other documents to demonstrate for acquiring and sale of truck by son of Shri Ramswaroop Mali and absolutely no evidence to prove that the said son had given amount to Shri Ramswaroop Mali. In view of the above facts and circumstances, we find no reason to interfere in the order of the ld. CIT(A) qua this issue, accordingly, we uphold the same.
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2020 (11) TMI 811
Procedure prescribed u/s 144C - validity of draft assessment order where AO did not attach the notice of demand - Whether the whole assessment proceedings is liable to be quashed as illegal - whether the action of the AO in issuing Notice of Demand along with the draft assessment order would vitiate the assessment proceedings - HELD THAT:- In the instant case, there is no dispute that the assessing officer has consciously passed the draft assessment order by correctly mentioning that the same is passed u/s 143(3) r.w.s 144C of the Act. The assessee has also understood the same as draft assessment order and accordingly filed its objections before Ld DRP. The Ld DRP has also passed its directions in pursuance of objections filed by the assessee. In our view, the question of applicability of sec.292B of the Act does not require consideration in the instant case.
Earlier that the assessing officer, in the instant case, has passed the draft assessment order u/s 143(3) r.w.s. 144C of the Act. The assessee has also, in terms of sec.144C of the Act, filed its objections before the Ld DRP. After the receipt of the directions from Ld. DRP, the assessing officer has passed the final assessment order. Except for attaching a notice of demand along with the draft assessment order, everything has been done in accordance with the law.
Whether the notice of demand attached with the draft assessment order would make the said draft assessment order as final order and consequently, the whole assessment proceedings is liable to be quashed as illegal. In our view, the answer should be negative. As rightly pointed by Ld D.R, the notice of demand issued along with the draft assessment order is a legal nullity and does not exist in the eyes of law, since no valid demand could be raised under the draft assessment order. In our considered view, a document, which is held to be a legal nullity, cannot vitiate the assessment proceeding and the assessment order. - Decided against assessee.
TP Adjustment - goods sold to Associated Enterprises (AEs) - NP Determination - HELD THAT:-There should not be any dispute that the methodology consistently followed to work out net profit year after year should be followed in this year also. It should not be tinkered with, unless proper reasons are given.
The TPO has not given any reason as to why he did not consider above said two expenses while working out net profit margin of “Domestic – Personal care division”. Hence the workings made by TPO is liable to rejected. We have noticed that the net profit margin worked out by the assessee in “Domestic – Personal care division” was 10.70%. The net profit margin worked out for “Exports to AEs” was 12.01%. Hence the net profit margin earned in the exports to AEs division is higher than its comparable “Domestic – Personal care division”. Hence it has to be held that the international transactions of making exports to AEs are at arms length and hence no T.P adjustment is called for. Accordingly, we direct deletion of Transfer pricing adjustment made in respect of Exports to AEs.
TP adjustment made in respect of Advertisement and Marketing expenses - TPO took the view that the assessee is incurring huge amount towards Selling and Marketing Expenditure with a view that these expenses go to increase the brand name owned by the Parent company - HELD THAT:- It is admitted that the legal ownership was transferred to HGH due to business necessity/compulsion. Hence the transfer of legal ownership is an internal arrangement between related parties, which was made on account of business necessities. The right to exploit the brand name, logo, trademarks etc., continue with the assessee only. Hence, the assessee is also beneficiary of AMP expenses or the promotion of brand. In this view of the matter also, the question of making T.P adjustment in respect of AMP expenses on account of “brand promotion” does not arise. Hence, on this reasoning also, the impugned TP adjustment on AMP expenses is liable to be quashed
Following the decision rendered by the Tribunal in AY 2013-14 and 2011-12, [2018 (7) TMI 1964 - ITAT BANGALORE] we direct the AO to delete the transfer pricing adjustment made in respect of Selling and Marketing expenses.
Transfer pricing adjustment made in respect of royalty - TPO noticed that the assessee has got “Research and Development” unit - assessee has obtained product registration in foreign countries - HELD THAT:- As relying on own case it cannot be taken that the AEs have exploited the product registration/license obtained by the assessee from various Governments. Hence the question of payment of royalty does not arise. Accordingly, we set aside the order passed by AO/TPO on this issue and direct the AO to delete this T.P adjustment
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2020 (11) TMI 810
Interest disallowance u/s 36(1)(iii) - assessee did not file any fund flow statements in support of the submissions that own funds were used to make the investments in certain premises, against which the disallowance has been computed by lower authorities - HELD THAT:- The perusal of assessee’s financial statements would show that the assessee has own funds in the shape of share capital & reserves aggregating to ₹ 225.28 Crores at year end as against opening funds of ₹ 153.15 Crores. Besides the above funds, the assessee has interest free unsecured loans of ₹ 58.72 Crores at its disposal at year end. As against this, the capital advances at year end stood at ₹ 20.23 Crores as against opening balance of ₹ 19.83 Crores which would show that there was only a marginal increase of ₹ 40 Lacs during the year. Further, the interest-bearing secured loans obtained by the assessee were meant only for specific purposes i.e. packing credit or post-shipment credit.
It could very well be concluded that there was no nexus of borrowed funds with the capital advances made by the assessee and the assessee had sufficient own funds to make the aforesaid investments. Without establishing any direct nexus of borrowed funds vis-à-vis capital advances, no such disallowance could have been made by revenue authorities. Thus interest disallowance is not sustainable in law. By deleting the same, we allow the appeal of assessee.
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2020 (11) TMI 809
Disallowance of depreciation on intangible assets i.e. non-compete fees - HELD THAT:- As decided in own case [2018 (8) TMI 1999 - ITAT MUMBAI] assessee acquired 78% of the interest in the partnership firm, we are of the firm view that any payment which is made for not competing with the firm for the period of five years is evidently falls within the ambit of non compete fee as the payment was made to protect the business interest of the assessee as the assessee’s cost of investment in the said firm was ₹ 91.51 crores which was made by way of capital contribution to the tune of ₹ 3.9 crores and ₹ 87.61 for acquiring the rights in the said partnership.
Thus finding of the Ld. CIT(A) is fallacious and wrong and can not be sustained. In this case, the assessee has made payment of non compete fee and rightly treated and classified under intangible assets and claimed depreciation thereon @25%. We set aside the order of Ld. CIT(A) and direct the AO to allow the depreciation - Decided in favour of assessee.
Disallowance made u/s. 14A - AO rejected the working of the assessee and by invoking provisions of Rule 8D worked out disallowance - HELD THAT:- Since the revenue accepted the decision of the Ld.CIT(A) that the working of the assessee is more scientific than the adhoc estimation made by the Assessing Officer and such working of the assessee since made on scientific basis we do not see any reason to reject the computation of disallowance made by the assessee for the year under appeal. Thus, we direct the Assessing Officer to accept the working made for disallowance u/s. 14A by the assessee and restrict the disallowance u/s. 14A to the amount as adopted by the assessee. However, since the assessee had already made suomoto disallowance we direct the Assessing Officer to delete the disallowance made u/s. 14A r.w. Rule 8D of I.T. Rules. This ground is allowed.
Disallowance u/s. 35D - expenses towards issue of shares to promoters and also for conversion of warrants and the expenses incurred for issue of shares/warrants - HELD THAT:- In the facts and circumstances of the assessee’s case which is engaged in the business of retailing of readymade garments, other accessories and household items through a chain of retail stores across the country and part of the garments sold are manufactured on job-work basis indicates that the assessee is doing business through all these departmental stores can be held to be an industry where a systematic economic activity is being carried on by the assessee - we direct the Assessing Officer to allow the claim for deduction u/s. 35D of the Act to the assessee. The decision relied by the Assessing Officer in the case of Vita (P.) Ltd. [1994 (11) TMI 117 - BOMBAY HIGH COURT] is not applicable to the facts of the assessee’s case as the same is not dealing with the provisions of section 35D of the Act and distinguishable even on facts.
Disallowance towards Employees Stock Option Scheme [ESOP] expenses u/s. 37(1) - HELD THAT:- In this case the assessee has amortized the expenses in connection with Employee Stock Options Scheme as per SEBI guidelines and claimed the same as revenue expenditure which according to the AO was not correct and he disallowed the same by holding that same is of capital in nature which was also affirmed by the CIT(A). We are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue that the amortization of expenditure claimed by the assessee is not admissible as revenue in nature and the issue is settled by the various judicial forums. As decided in own case [2018 (8) TMI 1999 - ITAT MUMBAI] we allow the claim of the assessee for the year under appeal. This ground is allowed.
Determination of Annual Letting Value (ALV) of the premises at Taj Building u/s. 23(1)(a) - HELD THAT:- As decided in own case [2018 (8) TMI 1999 - ITAT MUMBAI] we not in agreement with the conclusion drawn by the Ld. CIT(A) holding that the ALV determined on the basis of so called comparable cases which are not at all comparable due to the fact that there is no comparability between the two buildings at all and the locations and also in view of the fact that annual let out value is much lower than the actual rate received. The order of Ld. CIT(A) is set aside and AO is directed to accept the rent as shown by the assessee from the said property.
Disallowance of expenditure incurred towards earning exempt income while computing its book profit taxable under section 115JB - HELD THAT:- This issue has been decided by the Hon'ble Special Bench of Delhi in the case of Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that computation under clause (f) of explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated u/s. 14A r.w. Rule 8D of the Act.
In view of the decision above the claim of disallowance as computed under Rule 8D cannot be made while computing the book profits - assessee himself disallowed an amount of ₹.37,07,020/- as expenditure incurred towards earning exempt income while computing its book profits u/s. 115JB(2) - the assessee while computing the income under normal provisions of the Act had made suomoto disallowance u/s. 14A at ₹.37,66,085/-, as this computation of suomoto disallowance was made on a scientific basis we feel it appropriated to adopt the same even while computing the book profits u/s. 115JB.
Disallowance made u/s. 36(1)(ii) - commission paid to the Directors on the ground that they hold equity shares of the company - HELD THAT:- We noticed that Assessing Officer completely ignoring and without going into the submissions of the assessee made disallowance simply relying on the decision in the case of Loyal Motor Service Co. Ltd [1946 (3) TMI 17 - BOMBAY HIGH COURT]. The decision in the case of New Silk Route Advisors Pvt. Ltd., [2018 (8) TMI 384 - BOMBAY HIGH COURT] the Hon'ble Bombay High Court had also considered the decision in the case of CIT v. Shahzada Nand and Sons [1977 (4) TMI 4 - SUPREME COURT] held that the payment made in the form of bonus to the employee Directors of the company is not a payment made in view of the dividend. Thus, following the decision of the Hon'ble Bombay High Court we direct the Assessing Officer to delete the disallowance made u/s. 36(1)(ii).
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2020 (11) TMI 808
Profit chargeable to tax under section 41 - case was selected for scrutiny under CASS - Reading of the comments of the auditor at clause no. 20 of form no.3CD, being tax audit report, with regards to computation of miscellaneous income - HELD THAT:- We notice from the record that the tax auditor has disclosed certain details of information in Clause 20 of tax audit report, but he did not elaborate what those information are.When analyzing those information, it says other deduction (income) and other information rebates and settlement. When we deduct the income and settlement amount, the difference which matches with the Miscellenous income declared by the assessee in its financial statement.
When the assessee tries to explain the tax authorities they did not believe and also not verified the same by calling for explanation from the tax auditors. In our considered view that tax authorities should have called for clarification from the tax auditor and completed assessment based on the clarification.The information matches with the submissions of the assessee therefore we are inclined to accept the submissions of the assessee therefore the addition made by the assessing officer is accordingly deleted. Hence, the ground No. 1 raised by the assessee is allowed.
Income received from letting out of property - ‘Income from house property’ and not under the head ‘Income from business’ - HELD THAT:- Even though one of the object of the assessee to give the property developed by them as on lease. But as per the above facts, it is clear that it is only an arrangement between NRPL and assessee to explore the option of finding a large multinational company and construct the commercial property and then transfer the same to NRPL as per the MOU entered with them. By the time, assessee completed the total project and received a considerable sale consideration from NRPL, which clearly indicates that assessee has carried on its main object of construction and giving the IT Park on lease, is only an arrangement and not the main objective of the assessee company.
Therefore, relying on the decision of Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd Vrs. CIT [2015 (5) TMI 46 - SUPREME COURT] is farfetched and as per this, the income received from letting out of property is the main objective of the above company of which the main objective as per the MOU of the company is to earn the rental income and maintaining the same is the main objective. In the present case, the main objective of the assessee company is only to construct and complete the turnkey projects and letting out the commercial property is only an arrangement with that party(assignor) based on the MOU.
Therefore, the rental income earned by the assessee can only be taxed under the head ‘Income from house property’ and not under the head ‘Income from business’. Accordingly, ground no. 2 raised by the assessee is dismissed.
Addition u/s 40(a)(ia) - HELD THAT:- By relying on the decision of Hon’ble Delhi High Court in the case of CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT], CIT vrs. Ansal Land Mark Township (P) Ltd, [2015 (9) TMI 79 - DELHI HIGH COURT] and various case law in this respect and also as per the confirmation received from the company that bank has already declared the income in the return of income, we are of the considered view that section 40(a)(ia) of the Act cannot be invoked in this regard. Accordingly, ground no. 4 raised by the assessee is allowed.
Short term capital gain arising on transfer of premises - appellant having transferred the building premises used for business, the consideration for sale would have to be reduced from the block of assets, as provided u/s 43(6) and computation of short term capital gams separately was not correct by law - HELD THAT:- Assessee is in the business of construction and it has constructed IT park based on the MOU with NRPL and accordingly, developed the IT park and gave the building on rent to LIPL, therefore we cannot accept the contention of the assessee and moreover, we notice that assessee has completed the construction of building during this assessment year and assessee has collected all the sale consideration based on the stages of completion of milestones of the construction from NRPL, therefore the transfer of right on the land of building is not part of the fixed assets, but it is a commercial transaction of the assessee company. Hence, the sale consideration can only be treated as transfer of lease hold rights in the land and building. Therefore, it will be assessed under the head ‘Income from capital gains’ and AO has assessed the same by following the provisions of capital gains. Accordingly, ground no. 1 raised by the assessee is dismissed.
Applicability of section 50C to the transfer of leasehold rights in a plot of land with structure constructed thereon - AO rejected the contention of the assessee by invoking the provision of section 50C and brought to tax the difference between stamp duty valuation and sale consideration.- assessee was asked as to why the stamp duty valuation cannot be assessed - HELD THAT:- Coordinate Bench of ITAT in the case of ACIT vs. Greenfield Hotels and Estates Pvt. Ltd [2013 (10) TMI 1544 - ITAT MUMBAI] has passed its order in favour of the assessee by determining that the provision of section 50C are not attracted to transfer of leasehold rights. - Decided in favour of assessee.
Non-deduction of TDS on interest paid to Kotak Mahindra Prime - addition u/s 36(1)(va) r.w.s. 2(24)(x) of the I.T Act 1961 towards delayed deposit of ESIC contribution of employees - HELD THAT:- Coordinate Bench of ITAT in the case of CIT vs. Rajinder Kumar [2013 (7) TMI 454 - DELHI HIGH COURT] and CIT vs. Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] respectively, has passed its order in favour of the assessee. Therefore, respectfully following the decision of Coordinate Bench of ITAT, which is applicable mutatis mutandis to the present case - Decided in favour of assessee.
Allowable deduction during this assessment year - HELD THAT:- Since assessee has not claimed deduction in the AY 2014-15 as prior to that extent and assessee has made the above claim only in the assessment proceedings and as per the judicial proceedings we know that AO cannot allow the above said claim, however the appellate authority can only allow the said claim as per the decision of High Court in the case of CIT vs Pruthvi Brokers & Shareholders Pvt. Ltd.[2012 (7) TMI 158 - BOMBAY HIGH COURT]
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2020 (11) TMI 807
Disallowing excess purchase price - Whether effect of such excess pricing had already been neutralized in the Profit & Loss A/c by way of enhancing the closing stock value of almost same value as observed in the assessment order also? - CIT-A deleted the addition - HELD THAT:- Fact which should not be lost sight of is that the quantity of purchases was tallying with the parties accounts vis-à-vis the appellant's books in this regard. The appellant made high sea purchases of raw cashews from Kerala Port and as per the Departmental of Commercial taxes, Kerala under the Kerala VAT Rules the price was of such import was fixed at ₹ 70/- per kg. This was also mentioned in the Circular No.28/11 dated 3.12.2011 issued by the Departmental of Commercial taxes, Kerala.
The appellant irrespective of the prices of actual purchases as per the high seas agreement valued the raw cashews at 70/- per kg. under the State Rules, VAT and the Income Tax Rules and laws. It is in this manner that the appellant reflected the value of purchases of raw cashews in the audited accounts which resulted in excess value to the extent and the said fact has been properly appreciated by ld CIT(A). That being so, we decline to interfere with the order of ld. C.I T.(A) in deleting the aforesaid additions.
Addition on account of two outstanding creditors as on the last day of financial year - HELD THAT:- In view of the fact that the purchases is not disturbed and tallying and the amount is receivable by the appellant from the party which the party has passed a journal entry and nullified the same in their books would not justify additions in the books of the appellant and therefore, the AO is directed to delete the additions on account of difference of sundry creditor balance - As carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We have heard and gone through the above noted findings of ld CIT(A). We did not find any infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid addition.
Income being the peak balance with HDFC Bank - undisclosed closing bank balance - HELD THAT:- We note that ld CIT(A) has confirmed the addition made by assessing officer, which is in favour of Revenue. The Department should not have raised this ground. It seems to us that ground No.6 raised by the Revenue is wrong and therefore does not require adjudication.
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2020 (11) TMI 806
Unexplained cash credit u/s. 68 - Bogus purchases - estimation of income - HELD THAT:- AO has not rejected the books of account of the assessee, but has made the addition towards the bogus purchase. The assessee has also made the payment to the party in the subsequent year which is evident from the payment which fact has been noted by the AO. This is not the case where books of account maintained by the assessee has been rejected and the profit has been estimated - assessee has failed to produce documentary evidences in the form of lorry receipts, way bill receipts, octroi receipts etc. The assessee has failed to substantiate the movement of rice from the rice mill to the assessee. So assessee has not been able to show with the support of evidence that it has purchased the rice from M/s. Standard Rice Mills. However, it is significant to note that sales has been accepted by the AO/ department. Without purchases, there cannot be sales.
Possibility of the assessee purchasing/trading of rice from other sources and procuring bills from the accommodation entry provider cannot be ruled out. Therefore, entire alleged bogus purchase made from M/s. Satadal Rice Mill cannot be added in the hands of the assessee - estimation of profit from the sale of rice could be justified. In the rice trading G.P of 3 to 5 % is there during the AY under consideration. Therefore, GP addition of 4% would be sufficient to meet the ends of justice .Four percentage of GP would be just and proper. Therefore, direct the AO to make the GP addition of 4 % in place of the addition of ₹ 25,11,404/-. Appeal of assessee is partly allowed.
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