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Showing 361 to 380 of 1445 Records
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2024 (3) TMI 1085
Power of High Court to entertain writ petition - statutory remedy of appeal - barred by limitation including extended period of limitation - challenged the determination of tax under best judgment assessment - return filed belatedly u/s 39 in Form GSTR-3B - Prayer to de-attach the bank account - violation of principles of natural justice - HELD THAT:- Present is a case where the petitioner did not even file the appeal and allowed the order passed in assessment to become final and then filed writ petition seeking to challenge the determination through best judgment assessment, mainly on the basis of incorrect determination of tax liability in the light of return belatedly filed by the petitioner. Present is not a case where from the date of notice, return was either filed within the prescribed period, or even within the extended period under notice given to the petitioner.
Even best judgment assessment was not challenged by filing an appeal and period of filing of appeal was allowed to expire. It was only thereafter that the writ petition was filed. Having not preferred an appeal, the petition in the present case, in view of the decision of Hon'ble Supreme Court in the case of Glaxo Smith Kline Consumer Health Care Limited [2020 (5) TMI 149 - SUPREME COURT], is not maintainable. When the petitioner failed to file his return, even a notice was issued to him to file return within 15 days. When no return was filed and the petitioner remained persistent defaulter, the Assessing Authority was left with no other option but to proceed to make best judgment assessment u/s 62 of the RGST Act, 2017.
Therefore, the petitioner cannot complain of violation of principles of natural justice. The challenge to the determination under best judgment assessment, based mainly on factual aspects to the extent of tax liability, is not sustainable in view of the figure stated in the return which was filed by the assessee. All these grounds, though available to be raised by availing the remedy of appeal including extended period of limitation seeking condonation of delay, the petitioner, for reasons best known to him, did not avail the remedy.
Therefore, present petition is liable to be dismissed and is accordingly dismissed.
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2024 (3) TMI 1084
Seeking grant of Bail u/s 437 - tax evasion - Offence specified in clause (a) or clause (b) or clause (c) or clause (d) of subsection (1) of 132 of Central Goods and Service Tax 2017 (‘the act’) - HELD THAT:- The accused had given password of his official laptop to the prosecution. Thus, it reveals that investigation officer was permitted to record the statement of the accused into the Judicial custody and accordingly I.O. had recorded detailed statement of accused. Moreover, it is seen that accused has co-operated to the investigation officer, as there is no any whisper of non co-operation by I.O. during custody. Hence, the contention raised by the complainant regarding the non co-operation and abscondence of the accused is washed away. Further, it appeared that accused is taken into Judicial custody. No purpose will serve by detention of the accused behind the bar as accused is in custody since 02/03/2024.
It is also observed that, investigation officer has seized official laptop, bank data and phones by panchanama. Hence there are no chances of tampering the evidence. Therefore, in view of constitutional rights and directions given in Arnesh Kumar’s [2014 (7) TMI 1143 - SUPREME COURT]), it is needless to mention that, personal liberty of accused cannot be curtailed for recovery of tax or for securing presence of accused another accused. Hence, no prejudice will be caused to the complainant, if the accused is released on imposing certain strict conditions. Moreover, if the accused has not obey his undertakings, then in that case the complainant has right to move an application for cancellation of bail for disobeying the undertaking as well as conditions. Hence, no prejudice will be caused to the complainant, if the accused person is enlarged on imposing conditions. The apprehension raised by the prosecution can be safeguarded by imposing stringent conditions.
Thus, the gravity of offence leveled against the accused and other mitigating circumstances along with medical condition of present accused, the apprehension of prosecution in respect of absconding or tampering of evidence, imposing conditions will suffice purpose. Hence, accused Prateek Patel be released on bail on terms and conditions.
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2024 (3) TMI 1083
Validity of reopening of assessment - notice u/s 148 against petitioner company after the approval of the resolution plan for a period prior to closing - liability of previous management - as argued proceedings for assessment year 2013-14, being a period prior to the closing date are non-est and could not have been initiated by the Income-tax Department in view of the resolution plan approved by the NCLT - HELD THAT:- Section 148 read with Section 147 of the Act only deals with a situation where any income chargeable to tax has escaped assessment for any assessment year. We are unable to fathom as to how the provisions of Section 148 of the Act can be applied for collection of evidences of third party, ex-promoters etc., and we say this because there are separate provisions under Section 133(6) of the Act in which, such evidences can be collected. We are also unable to understand how the provisions of Section 148 of the Act can be used when the proceedings are not for recovery of tax.
During the course of submission, the Learned ASG stated that in view of the legal position as it stands under the Code, once resolution plan has attained finality, new management and company can get the benefit of clean slate principle. While the department does not dispute that such benefit has to go to new management, the Learned ASG further submitted that while department would not go to the new management, this cannot, however, result into direct benefit to the erstwhile Directors to make them go scot-free from their evasions and misdeeds. Therefore, some assessment and fact-finding process is required to be carried out, where erstwhile Directors’ role is given a closer scrutiny.
Even then, in our view, for reasons recorded above, Section 148 read with Section 147 of the Act cannot be applied against the company and the present management.
Thus issue of notice under section 148 of the Act to petitioner company after the approval of the resolution plan for a period prior to closing is invalid and bad in law, having been issued contrary to the provisions of the Code and the Resolution Plan. Section 31 of the Code provides that the resolution plan which is approved under the Code is binding on the Corporate Debtor, its employees, members, creditors including the Central Government, State Government and any local authority to whom a debt or a statutory due is owned. Decided in favour of assessee.
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2024 (3) TMI 1082
Validity of reopening of assessment u/s 147 - Default in sanction/approval u/s 151 as obtained and granted without application of mind - Petitioner claimed that despite certain transactions being booked under the PAN of erstwhile company (amalgamated company) due to an error, they had correctly considered all transactions in their return. - HELD THAT:- The draft of the order u/s 148A(d) states that income has escaped assessment within the meaning of provision of Section 147 of the Act and the same is required to be examined. If the AO who had sought the approval, the Additional/Joint CIT, who had recommended grant of approval and the PCIT, who granted the approval had only bothered to read the request for approval along with draft of the order under Section 148A(d) of the Act, they would have certainly noticed the discrepancies.
It is, therefore, clear that none of these officers have even bothered to read the request for approval or draft of the order. In the affidavit in reply, it is mentioned as a typographical error. We are not inclined to accept this explanation because a typographical error could have been committed by the AO, who was seeking the approval, but if only the Additional/Joint CIT or the PCIT had read the approval application and the draft of the order to be issued under Section 148A(d) of the Act, they would have certainly noticed the discrepancy and they should have either refused approval or sent the application back to the AO for filing correct form for approval.
We hereby quash and set aside the order under Clause (d) of Section 148A - Decided in favour of assessee.
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2024 (3) TMI 1081
Release of the Amount Seized along with interest u/s 132B(4) read with Rule 119A - Scope of the term 'shall release' - Application of seized or requisitioned assets u/s 132B - Seeking direction to quash the seizure effected u/s 132B(1)(i) - The petitioner contended that during the course of that investigation, petitioner had produced regular books of accounts and details of his income tax returns filed for the past Assessment Years to establish that the seized cash was duly accounted for/tax paid money - HELD TH AT:- The only consequence of non-compliance of Section 132 B (1) (i) of the Act is by way of payment of interest at the highest rate provided by the legislature i.e. @ of 18 % per annum. The period for which such interest may become payable has also been specified under that provision. By imposing the levy of interest on the revenue, a plain reading of sub section (4) of Section 132 B (1) (i) of the Act, the legislature itself contemplated cases where orders may remain to be passed by the Assessing Authority within the timeline provided u/s 132 B (1) (i) of the Act. Payability of interest may arise only in a case where the order may have remained to be passed within a time stipulation provided under the second proviso to Section 132 B (1) (i) of the Act.
If, the nature and source of acquisition of a seized asset is wholly explained and it may not be required for recovery of any outstanding demand or demand of tax that may arise under the assessment proposed to be made consequent to the search giving rise to the seizure itself, the same may be released. The provisions does not stipulate any consequence of automatic release. It would first have to be invoked by the assessee by filing a proper application. Then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non-imperative basis. In the event of delay in making the decision the revenue has been saddled with interest liability @ 18 % per annum.
On the contrary under Section 132 (8) of the Act [as considered in Cowasjee Nusserwanji Dinshaw [1987 (3) TMI 106 - GUJARAT HIGH COURT], a statutory duty was cast on the seizing authority to itself record reasons to detain seized documents beyond 180 days and the consequence of its nonadherence was also provided by way of release of the same. Therefore, in absence of statutory intent shown to exist, it may not be inferred through the process of legal reasoning-that if no order is passed within a time of 120 days, seized assets must be released notwithstanding its impact on the recovery of existing and likely demands.
As similar stipulations of time provided under different enactments have been interpreted to be directory and not mandatory. Therefore, we are unable to pursue ourselves to subscribe to the reasoning that has found its acceptance in the case of Mitaben R. Shah [2010 (2) TMI 684 - GUJARAT HIGH COURT], Ashish Jayantilal Sanghavi [2022 (4) TMI 1285 - GUJARAT HIGH COURT],Nadim Dilip Bhai Panjvani [2016 (1) TMI 811 - GUJARAT HIGH COURT] and Mul Chand Malu (HUF) [2016 (5) TMI 550 - GAUHATI HIGH COURT]
As petitioner has invoked the principle-if an Act is required to be done in a particular way, it may be done in that way or not at all, we find the same to be inapplicable to the present law. In our opinion, the provision in question [Section 132 B (1) (i)] being directory, the jurisdiction of the Assessing Authority to deal with the petitioner's application dated 15.09.2022 did not lapse or abate upon expiry of the period of 120 days. Since that stipulation of law is only directory, it survives to the Assessing Authority to deal with the application, even today.
We may also observe at this stage, if on due application of mind, the Assessing Authority reaches a conclusion that the nature and source of Rs. 36,12,000/- seized from Om Prakash Bind was duly explained and if assessing officer is adequately satisfied that that amount was neither required for satisfaction of any outstanding demand or satisfaction of demand that may arise pursuant to the assessment proposed to be made, such refundable amount would attract liability of interest under Section 132 B (4) of the Act read with Rule 119 A of the Rules.
We decline to issue the writ of Mandamus as prayed. Instead, we dispose of the writ petition with a direction on the Assessing Authority/respondent No.2 to proceed to deal with and decide the application of the petitioner dated 15.09.2022 within two weeks from today
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2024 (3) TMI 1080
Reopening of assessment u/s 147 consequent to revision proceedings u/s 263 pending - notice u/s 148 issued during the pendency of the assessment proceedings following the directions given by the PCIT - HELD THAT:- Such a reopening notice, in our view, could not have been issued, more particularly, because the notice involved matters which were the subject matter of revision u/s 263 - when the order of assessment u/s 143(3) of the Act has been remanded to the AO to enquire into and make a fresh assessment, the question of entertaining reasonable belief that the income chargeable to tax has escaped assessment does not arise, much less the assessment when the assessment proceedings are still pending.
The concept of reason to believe comes in picture if the income chargeable to tax has escaped assessment. So long as the assessment is pending, the assessing authority cannot have any such reason to believe that income chargeable to tax for the assessment year in question has escaped assessment. Income cannot be said to have escaped assessment within the meaning of this section if the assessment proceedings in respect of that income and/or issue are still pending and have not culminated into a final order.
The underlying principle is how can an escapement of income from an assessment be predicted before an assessment is complete. Thus, it was not open for the AO to invoke powers u/s 147 and 148 - In our view, so long as the assessment proceeding in respect of certain income subsists, income cannot be said to have escaped assessment. Such proceedings, if initiated, will have to be held as invalid, ab-initio, void and illegal. We find support for this view in Ador Technopack Ltd. v. Dr. Zakir Hussein, Deputy Commissioner [2004 (3) TMI 22 - BOMBAY HIGH COURT]
Also sanction granted u/s 151 as held by this Court in J M Financial and Investment Consultancy Services Private Limited [2022 (4) TMI 1446 - BOMBAY HIGH COURT] is invalid. Decided in favour of assessee.
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2024 (3) TMI 1079
Deduction u/s. 32AB - rental income earned by the Appellant and assessed under the head ‘Income from house property’ not qualify for deduction u/s. 32AB as per ITAT - whether appellant is entitled to deduction on the entire income which would include income from house property or it should be restricted only to the income chargeable to tax under the head “profits and gains of business or profession”? - HELD THAT:- The activity of income from house property has to be construed as forming part of the same business as there is one account for the printing business and for income from house property and the business is conducted under a common management. There is one profit and loss account and one balance sheet. It is the perception of the activities from the point of view of businessman that is material. As such perception that is recognised in Part II and Part III of the Sixth Schedule to the Companies Act, 1956. In Section 32AB(3) or Section 32AB (1)(ii) the expression “chargeable to profits and gains of business” is conspicuous by its absence. Hence, the dichotomy as between the income from printing and rental income from house property is not warranted in terms of Section 32AB(3) of the Act.
In our view, all eligible business or profession shall include every income except that which is excluded specifically in the definition of eligible business or profession. We find support for this view in Apollo Tyres Ltd. [1998 (8) TMI 68 - KERALA HIGH COURT] of Kerala High Court and [2002 (5) TMI 5 - SUPREME COURT] Hon’ble Apex Court. It is not the case of the Revenue or the findings of the ITAT that appellant has in its account not shown rental income as part of the business income. Infact as per the assessment order, these charges have been considered as part of business income but the AO has excluded it for the purpose of profits to arrive at the eligible business income for the purpose of Section 32AB of the Act.
Therefore, so long as the rental income is part of the business income, it will be included in the term of eligible business because the rental income is not excluded in the definition of eligible business. The question of law, as framed, is answered in negative. The rental income earned by appellant and assessed under the head “Income from house property” will qualify for deduction u/s 32AB of the Act.
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2024 (3) TMI 1078
Validity of reopening of assessment u/s 147 - Reason to believe - tangible material to initiate reassessment proceedings or not? - HELD THAT:- There was no failure on the part of Petitioner to disclose fully and truly the material facts, nor there was any tangible material with the AO, which could have otherwise justified the reopening of assessment by issuing the notice impugned.
In the present case, the notice to reopen assessment does not even remotely make any mention of any tangible material has come to the notice of the AO after passing original assessment order to conclude that there was an escapement of assessment. AO has failed to aver what material fact that Petitioner has failed to disclose fully and truly. It is clearly the very information which was before the AO as provided by Petitioner on the basis of which, a different view is being taken. In the present case, there is a full and true disclosure by Petitioner, and information on those transactions have been accepted under the heads claimed by Petitioner. Appeal allowed.
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2024 (3) TMI 1077
Estimation of profit - AO applying a profit rate of 20% on the contract receipt against the rate of profit declared by the appellant at 8.13% - CIT(A) directing the AO to apply a profit rate of 14.5% - HELD THAT:-Assessee fairly admitted instead of 14% estimated by the Ld. CIT(A) if the estimation of 11% be made so as to give justice to the assessee as against the 8 % disclosed by the assessee and the same is generally also considered by the provision of section 44AD @ 8 % but considering the overall fact he prayed in the open court that if the profit is estimated @ 11 % which will end the justice. We deem it fit to estimate the profit @ 11 % in the interest of justice to the parties. Based on this observations ground no. 2 raised by the assessee is partly allowed.
Addition of Unexplained creditors - HELD THAT:- Considering the facts of the case that when the books of account of the assessee are rejected and the profit is estimated a separate addition arising out of that books of account cannot be made in the hands of the assessee.
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2024 (3) TMI 1076
Penalty u/s 270A - misreporting of the income - disallowances of 40A(3) on account of interest income in the other sources and has also disallowed the claim of the assessee u/s 32 disputing the period use of the asset of the assessee - HELD THAT:- We find force in the arguments of assessee that the additions/disallowance made by the Assessing Officer are not in the nature of misreporting of the income of the assessee to drive home to this contention, the assessee relied upon the decision of the jurisdictional high court in the case of G. R. Infraprojects Ltd.[2024 (1) TMI 163 - RAJASTHAN HIGH COURT] wherein held that the case of levy penalty without specifying the limb of under reported or misreported the income the levy of penalty is not correct. Here in this case the claim of assessee denied though assessee did not challenge it on merits.
The bench noted that the CIT(A) has treated assessment and penalty proceedings at par. While it is settled that penalty proceeding are different from assessment proceeding and that mere addition in assessment could not automatically lead to concealment.
Addition made in assessment is not conclusive in the penalty proceeding in which the assessee is free to place further material to substantiate the claim that there was no concealment. Merely non-filing of appeal by the assessee against addition made in assessment cannot be a ground to conclude that assessee accepted the concealment. Therefore in these facts the CIT Appeal has wrongly upheld the penalty imposed by the Assessing Officer.
Immunity from imposition of penalty for underreporting of income if assessee has deposited the demand created by the Assessing Officer within 30 days from receipt of demand notice and intimated to him under rule 129 in Form No. 68 - In this case assessee duly deposited the demand created against her within 30 days but she failed to file Form No. 68 within the prescribed time before the Assessing Officer but while responding to the penalty proceeding subsequently the assessee filed Form No. 68 before the Assessing Officer but he did not consider it.
CIT(Appeal) has also did not consider the filing of Form No. 68 belatedly. The delay in filing the Form is only a procedural lapse on the part of the assessee not the substantive failure. In substance the assessee deposited the demand within 30 days, which is the part of substantive law and merely filing the Form No. 68 is only a technical or venial breach of procedural law. Therefore benefit of substantive law is required to be given to the assessee. CIT(Appeal) has also not considered this aspect.
Penalty @200% on account of misreporting of income on depreciation of fixed assets claimed by the assessee for full year as against half year since the asset was put to use for less than 180 days - Assessee due to inadvertence claimed the depreciation for full year this is certainly not the misreporting of income. The misreporting of income is something in which mensrea on the part of assessee is required to be present. The willful default constitutes misreporting of income which is not the case. The assessee has made inadvertent wrong claim but has disclosed the facts fully and truly therefore old law in this regard hold good and the penalty imposition is not warranted. Please refer to CIT vs. Reliance Petrol Products Private Limited (2010) [2010 (3) TMI 80 - SUPREME COURT] and Dilip Shroff [2007 (5) TMI 198 - SUPREME COURT] - Considering the fact that the nature of addition/disallowance are not in the nature of misreporting or misreporting income of the assessee and the assessee has paid the demand within 30 days and filed the required form no. 68 since that form being procedural nature we condone that aspect of the matter and direct the ld. AO to delete the penalty levied u/s. 270A - Decided in favour of assessee.
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2024 (3) TMI 1075
Reopening of assessment - reason to believe or reason to suspect - ex-parte ad interim order passed by the SEBI relied upon against director of assesee company - SEBI had restrained fifty four (54) persons/entities including the director of the assessee company from trading in security market/stock exchange stating that those persons/entities have misused the stock exchange system to generate fictitious profits/losses for the purpose of tax evasion/facilitating tax evasion - HELD THAT:- As rightly pointed out by the assessee the interim ex-parte order of the SEBI against director, which could have triggered “Reasons to Suspect” and not “Reasons to believe escapement of income” which doesn’t satisfy the requirement of law to successfully usurp the jurisdiction to re-open the assessment of the assessee-company, which is a separate legal entity.
Therefore, having carefully perused the material on the basis of which AO re-opened the assessment i.e, SEBI ex-parte interim order, we are of the considered opinion that at best it is an adverse information against director of assessee company [Shri Nikil Jalan]; and AO after receiving the same, ought to have conducted preliminary enquiry [since at that stage there was only “Reason to suspect” escapement of income in his hands and collected material and if it was found that it is not the director of assessee company who has misused the stock exchange, instead it was the assessee company which actually misused the stock exchange, in such an event, the AO should have recorded his own reason warrant holding the belief that income chargeable to tax has escaped assessment, which essential requirement of law has not been met in the “reasons recorded” by AO in the instant case to successfully re-open the assessment of assessee company - Decided in favour of assessee.
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2024 (3) TMI 1074
Estimation of income - Bogus purchases - CIT(A) in restricting the disallowance to 12.5% of the purchases instead of addition made by the ld. AO for the entire purchases - HELD THAT:- We find that AO has made addition on account of entire purchases which is wholly unjustified, because once the source of purchases have been debited in the books of accounts and corresponding quantity of material purchased had been recorded in the books and corresponding quantity of sales has also been accepted then, it cannot be held that purchases are outside books.
At the most, it could be the case of purchases made from hawala dealers for inflating the cost and suppressing GP rate. If parties have not confirmed the transaction then in such a case the principle laid down in the case of PCIT vs. Vishwashakti construction [2023 (5) TMI 278 - BOMBAY HIGH COURT] wherein GP rate of 12.5% has been held to be reasonable in such cases, is applied in the present case also, then CIT (A) is justified. Decided against revenue.
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2024 (3) TMI 1073
Levy of penalty u/s. 271(1)(c) - Defective notice u/s 274 - non striking of irrelevant clauses - Estimation of income on bogus purchases - HELD THAT:- A perusal of the notice reveals that it is in a pre-drafted Performa and mentions both limbs of section 271(1)(c) of the Act as. 'have Concealed the particulars of your income or Furnished inaccurate particulars of such income.'
The Assessing Officer has not struck off irrelevant clauses in the notice. As decided in Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] held that where AO clearly records satisfaction for imposing penalty on one or other or both grounds mentioned in section 271(1)(c) of the Act, non-striking of irrelevant matter would render the notice defective and such defective notice vitiate the penalty proceedings. In the present case, we find that in assessment order the AOhad initiated penalty proceedings for furnishing inaccurate particulars of income only. Since, both limbs i.e. “concealed particulars of income and furnished inaccurate particulars of income” are recorded in the notice, the notice is defective. The penalty levied u/s. 271(1)(c) is liable to be deleted on the ground of defective notice as well. Decided in favour of assessee.
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2024 (3) TMI 1072
Revision u/s 263 - CIT held AO had fallen in error by accepting the source of cash investment - limited scrutiny concluded against assessee - AR has primarily came up with the plea that the return was filed on the presumptive income and the scrutiny proceedings were for a limited purpose which was duly examined by the ld. AO - HELD THAT:- It comes up that the notice u/s 143(2) of the Act for limited scrutiny was issued on 29.09.2017 where the primary query under consideration was ‘whether the investment and income relating to security transactions are duly disclosed’.
The copy of return of income shows that the assessee had filed presumptive income return. The aforesaid leaves no doubt in the mind of this Bench to conclude that the finding of the ld. PCIT that the AO had not been diligent enough and had not conducted worthwhile inquiries during the scrutiny assessment is erroneous. It appears that the ld. PCIT had questioned the prudence of the assessee for investing the sale proceeds of the business in security investment and transactions.
We are of the considered view that such observations cannot be the foundation to hold that the order is erroneous so far as prejudicial to the interests of the Revenue. Rather, without pointing out anything specific during the revision proceedings, the ld.PCIT has merely substituted his own view to the matter examined by the ld. AO during assessment proceedings. Thus, the grounds raised are sustained in favour of assessee.
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2024 (3) TMI 1071
Reopening of assessment u/s 147 - AO initiated reassessment proceedings based on the information received from Investigation Wing that the Assessee was involved in making cash payment - HELD THAT:- Information on basis of which AO had initiated proceedings u/s 147 of the Act was certain and it could be construed to be sufficient and relevant material on basis of which a reasonable person could have formed a belief that income had escaped assessment. Thus, there was reason to believe that income of the assessee company to the extent of Rs. 6.61 Crores had escaped assessment on account of failure on the part of the assessee to disclose fully and truly all the material facts/particulars of its income necessary for its assessment.
Therefore, the reassessment proceedings initiated by the Assessing Officer were within jurisdiction and valid in the eyes of law in as much as reasons recorded by the Assessing Officer satisfied the requirement of section 147
It is well settled law that, for an assessment to be re-opened what is required that the AO should have reason to believe that the income of assessee had escaped assessment and the said belief should be an honest and reasonable person based on reasonable grounds. The correctness of the materials/reason to believe is not a matter to be looked into at the initial state. Therefore, we find no merit in the ground No.1 of the assessee. Ground No.1 of the assessee is dismissed.
Addition u/s 69 - addition based on the estimation of the cost of acquisition of the property - cash component of Rs. 5.41 Crores was paid over and above the registered value - addition based on statement of witness - HELD THAT:- In the present case, the addition has been made by the AO ignoring the documentary evidence in the form of registered sale deed which being a best evidence for finding the actual sale value and in the absence of any other material to show the transactions involved in cash outside the sale consideration mentioned in the sale deed and in the absence of any corroborative documentary or credible oral evidence, the AO should not have made addition.
The entire addition made by the AO based on the statements of the witnesses which have been retracted thereafter and no opportunity of cross examination was granted by the AO and in the absence of any corroborative material on record, the AO could not have made any addition and the Ld. CIT(A) should have deleted the addition. Thus, in our considered opinion the CIT(A) committed error in upholding the addition made by the AO - Ground No. 2 of the Assessee allowed.
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2024 (3) TMI 1070
Penalty proceedings u/s 271(1)(c) - failure of the assessee to explain the source of cash deposit in the bank account - burden of proof - HELD THAT:- Burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty u/s 271(1)(c) - On facts, we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives.
Assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not, in our view, warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se.
We are inclined to agree with the contention on behalf of the assessee that discretion vested with the AO u/s 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty u/s 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so.
Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased, it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus, a soft instance deserves in the present case. Appeal of the assessee is allowed.
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2024 (3) TMI 1069
Accrual of income in India - Royalty receipts - taxation of revenue from online database of text journal and books as royalty income u/Article 12 of India US DTAA - HELD THAT:- Perusal of the order of the Tribunal shows that identical issue came up for consideration in assessment years 2013-14 and 2014-15 [2022 (3) TMI 1019 - ITAT DELHI] in respect of taxation of revenue from online database of text journal and books as royalty income under Article 12 of India US Double Taxation Avoidance Agreement (DTAA) amounts paid by resident Indian end users/ distributors to non-resident computer software manufacturers/suppliers, as consideration for the resale/use of the computer software through EULAs/distribution agreements, is not the payment of royalty for the use of copyright in the computer software, and that the same does not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195. Decided against revenue.
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2024 (3) TMI 1068
TP Adjustment - MAM - “other method” used by the assessee for carrying out the arms length analysis for purchase of traded goods rejected - TPO proceeded by applying TNMM as the most appropriate method for bench marking assessee’s international transactions by doing fresh search for comparables - assessee is engaged in trading of edible oils whereas all the comparables mentioned here in above are in manufacturing of edible/ non edible oils.
HELD THAT:- Since the market quotes were available on corresponding dates and when corresponding dates data was not available on the date of contract entered between the assessee and its AE, therefore, in our considered view the “other method” has been rightly applied by the assessee.
As given a thoughtful consideration to the orders of the TPO we are of the considered view that the TPO has failed to analyze the TP documentation prepared by the assessee. We find that the assessee has appropriately compared the prices of third party brokerage houses / associations/ exchanges where ever available during the time of preparation of the TP documentation.
Assessee has considered all the market quotations available while maintaining the transfer pricing report and considering the contemporaneous nature of documentation process as provided under the relevant provision of the Act.
Thus if any third party rate is not considered for a particular date of contract due to non availability of the data would not give right to the TPO to reject the method adopted by the assessee. We find that the assessee has considered the rates based on the average of available third party market quotations of Murgi Meghan, Sunvin Group, Malaysian Palm Oil and Solvent Extractors and not specifically to any single broker rate.
The objective of applying of any transfer pricing method is to determine the arm’s length price for a given transaction and not to justify any transfer price at which the transaction may have been under taken - If there is a difference between arm’s length price determined by a particular method and the transfer price adopted by the assessee, it may warrant the transfer pricing adjustment, in case such variation is not within the permissible tolerance range specified in the Act. However, such variations cannot be the basis of questioning appropriateness of the method.
A perusal of the order of the TPO show that he has mentioned a difference of Rs. 97,36,699/- and rejected the applicability of “other method”. In our humble opinion this difference is miniscule when considered with the total value of international transaction of Rs. 729 crores. - Decided in favour of assessee.
Enhancing the income of the Appellant pertaining to the purchase of traded goods that allegedly do not satisfy the arm's length principle envisaged under the Act - HELD THAT:- Documentation of arm’s length price by the assessee by adopting quotations from various brokerage houses/ associations/ exchanges cannot be faulted with and, therefore, all the decisions relied upon by the DR are distinguishable on facts. Decided in favour of assessee.
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2024 (3) TMI 1067
Deduction of interest expenditure incurred on borrowed funds u/s 57 - Interest incurred on borrowed funds utilized for making investment in shares in company of Singapore - expenditure allowable u/s. 57 or not? - HELD THAT:- As not disputed that the assessee’s investment in M/s. Dolphin Overseas Private Limited, Singapore is for the purpose of earning income in the future periods. Revenue Authorities also did not bring on record that the investment was made by the assessee otherwise than for the purpose of making an income. We observed that section 57(iii) is clear and has to be construed according to its natural meaning. It should not be given a narrowed meaning and the interpretation of section 57(iii) cannot be held to be conditional upon making or earning of the income.
As relying on SRI SAYTASAI PROPERTIES & INVESTMENT PVT. LTD. case [2014 (2) TMI 796 - CALCUTTA HIGH COURT] we are of the considered view that the assessee is eligible to claim deduction of interest expenditure incurred on borrowed funds utilized for making investment in shares of M/s. Dolphin Overseas Private Limited, Singapore as per the provisions of u/s. 57 of the Act. Appeal filed by the assessee is allowed.
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2024 (3) TMI 1066
Taxability of income in India - assessee is a company based out of the Netherlands which provided various services to its group companies based in India - Taxability as royalty/fee for technical services - revenues received from rendering certain services were claimed by the assessee as non-taxable in India - AO held that the services were taxable as royalty/fee for technical services under the income tax act, read with the India-Netherlands tax treaty - HELD THAT:- The payments do not qualify as royalty for several reasons. Firstly, the Department in the subsequent years (Assessment Years 2018-19, 2020-21 and 2021-2022) has itself not tax the aforesaid payments as royalty. Secondly, we observe that the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT]has effectively overturned all the decisions, on which reliance was placed by the tax authorities to hold that the payments qualify as royalty. Tribunal in the case of mirror transaction, while dealing with the issue of non-deduction of tax at source with respect to the aforesaid payments made by the Indian group companies to the assessee, held that since the payments qualify as royalty under the Act, read with the Tax Treaty, and therefore, held that the Indian companies were not liable to deduct tax at source on such payments under Section 195 of the Act
We are of the considered view that payments for providing HR Shell People Support Services do not qualify as Royalty under the Act, read with the Treaty - ground number 1 of the assessee’s appeal is allowed.
CHR Recruitment Fees, External Information Services (license for online databases) and IT Migration Support Services qualify as fee for technical services u/s 9(1)(vii) of the Act read with Article 12 of Tax Treaty - Scope of “make available” clause - HELD THAT:- Given the wide interpretation to the term “technical” having been taken by the Courts, and looking into the nature of services which have been rendered by the assessee, we are of the considered view that the services involve extensive use of technology, and the same are “technical” in nature.
We also observe that in the instant facts, the India- Netherlands Tax Treaty, contains a specific restriction in the form of “make available” clause, which restricts the definition of fee for technical services under the Treaty Law to only those cases where services have been rendered in a manner that the technology have been “made available” to the recipient of services, meaning thereby, the necessary information/knowledge has been imparted to the recipient of services in such manner, so that in the future, they have been enabled/ empowered to perform the services themselves, without any necessity of recourse to future services being provided by the assessee.
The scope of the term “make available” came up for consideration recently before in the case of Star Rays [2023 (8) TMI 296 - GUJARAT HIGH COURT] where the Assessee, a partnership firm, was engaged in business of cutting and polishing diamonds and export of diamonds. It had made remittances qua diamond testing service for certification of diamonds to GIA USA which set up a laboratory at Hong Kong as GIA Hong Kong and claimed that said sum was not tax deductible at source.
AO held that assessee had made payment to GIA Hong Kong Laboratory and not GIA USA and, therefore, could not claim treaty benefit between India-USA and, that assessee was liable to deduct TDS from said remittance. Invoices for payment of fees were issued by GIA USA and accounts reflected that payment was received in offshore bank account of GIA USA. The High Court held that the assessee's case was protected under India- USA DTAA as mere rendering of services could not be roped into FTS when person utilizing services was unable to make use of technical knowledge etc.
Looking into the nature of services, there is nothing on record to establish that during the course of rendering of services, the technology was “made available” to the recipient of services, in such a manner that the recipient of services were enabled to perform the services in the future, by itself, without any requirement of recourse/further assistance from the assessee company. From the contents of the nature of services, we observe that neither has technology be made available to the recipient of services, nor there is any such intention to render services in a manner that the recipient of services is enabled to perform the services itself without recourse to the assessee. Accordingly, we are of the considered view that the services have not “made available” technology to the recipient of services, so as to fall within the definition of FTS under the India-Netherlands tax treaty.
Levy of interest u/s 234B in respect of non- residents - HELD THAT:- As in light of the aforesaid decision by the Hon’ble Supreme Court in Mitsubishi Corporation [2021 (9) TMI 875 - SUPREME COURT] Ground No. 7 of the assessee’s appeal is allowed. We must also add that recently, in the case of Shell Global Solutions International BV [2023 (10) TMI 1286 - GUJARAT HIGH COURT] held that where during relevant Assessment Year assessee was a non-resident, entire tax was liable to be deducted at source on payment made by payer to the assessee u/s 195 and there was no question of advance tax payment by assessee and thus, no interest under Section 234B could be levied upon assessee.
Payment received from affiliates - license to use the database maintained by EIG and such payment is treated as royalty - HELD THAT:- Grant of right to access the online database would not amount to transfer of right to use the copyright, as alleged by the Assessing Officer - payments for grant of access to software database would not take the case of the assessee within the definition of royalty, as defined under the India-Netherlands tax Treaty. In the instant facts, access to the software has been granted to the Indian entities and there is no transfer of copyright, so as to fall within the definition of royalty under the India- Netherlands Tax Treaty.
Taxability of Real Estate And Corporate Travel Services as fees for technical services under Section 9(1)(vii) of the Act read with article 12 of Tax Treaty - AO was of the view that under the Real Estate and Corporate Travel Services, the assessee provides consultancy and assists the regional team of the affiliates in managing real estate transactions and leveraging of global relationships and contract management with key suppliers and real estate information technology tool - HELD THAT:- In respect of the aforesaid services, the condition of “make available” is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was “made available” to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty.
International Tax Administration - as observed that under the international tax administration services, the expertise and experience of the global support team of the assessee is being offered to its affiliates. The nature of tax administration work performed by the Shell group companies is highly technical in nature - HELD THAT:- We are of the considered view that in respect of the aforesaid services, the condition of “make available” is not satisfied and the Department has not brought anything on record to demonstrate that in the instant case, the technology was “made available” to the recipient of services, so as to fall within the ambit/definition of FTS under the India-Netherlands tax treaty. Accordingly, in our considered view, the aforesaid services do not qualify as FTS under the India-Netherlands tax treaty.
Levy of surcharge and cess over and above the taxable rate of 10% on royalty and FTS is not permissible as per the Treaty provisions.
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