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2024 (8) TMI 1184
LTCG on sale of the property - deeming provisions of Section 50C - whether the assessee's claim for deduction u/s. 54F of the Act would be looked into based on the investment of the actual sale consideration or the deemed sale consideration adopted for the purpose of Section 50C of the Act?
HELD THAT:- Quantification of claim of deduction would be based on the amount of the "net consideration" of the original asset which is invested by the assessee towards purchase/construction of a new asset, i.e. the residential house.
Also, we find that "Explanation" to Section 54F of the Act defines the term "net consideration", as the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
We, thus, are of a firm conviction that it is the actual sale consideration received or accruing as a result of the transfer of the capital asset which is invested towards purchase/construction of the new asset, i.e. residential house which would form the basis for quantification of the deduction u/s. 54F of the Act.
The term "net consideration" does not make any reference to the deemed sale consideration of the property, i.e. the value adopted or assessed or assessable by any authority of State government for the purpose of payment of stamp duty in respect of such transfer, as provided in Section 50C.
Accordingly, AR's contention that now when the assessee had invested his actual share of sale consideration towards construction of new asset, i.e. residential house, he should be allowed deduction u/s. 54F of the Act in respect of the entire LTCG, merits acceptance.
Although we principally concur with the aforesaid contention of the Ld. AR, but as claim of deduction u/s. 54F of the Act is subject to satisfaction of certain conditions contemplated in the said statutory provision, therefore, the A.O is directed to re-compute the LTCG which is liable to be brought to tax in the hands of the assessee after reworking out the deduction u/s. 54F of the Act in terms of our aforesaid observations. Thus, the Ground of appeal No.1 raised by the assessee is allowed in terms of our aforesaid observations.
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2024 (8) TMI 1183
Penalty u/s 271(1)(c) - specific charge framed while initiating penalty or not? - non striking of irrelevant portion - Whether assessee has concealed the particulars of income or furnishing inaccurate particulars of income? - CIT(A) deleted addition - HELD THAT:- As during survey certain sales were found not to be recorded in the books of accounts and hence, assessee admitted additional income and declared in the return of income filed in response to notice u/s. 148 of the Act.
AO initiated penalty proceedings but while issuing notice u/s. 274 r.w.s. 271 AO has mentioned no specific charge in the notice whether the penalty is being levied for concealment of particulars income or for furnishing of inaccurate particulars of income.
AO has not struck of the inapplicable words in the notice issued u/s. 274 r.w.s. 271. In these facts, admittedly the issue is covered by the decision of Babuji Jacob [2020 (12) TMI 574 - MADRAS HIGH COURT] wherein considering the decision cited in the case of Sundaram Finance Ltd. [2018 (5) TMI 259 - MADRAS HIGH COURT] decided the issue in favor of assessee.
Hence, we confirm the order of CIT(A) deleting the penalty. The appeal of the Revenue is dismissed.
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2024 (8) TMI 1182
Penalty proceedings u/s. 271(1)(c) - disallowing deduction u/s. 54EC and deduction u/s. 54F - HELD THAT:- So far as the claim u/s 54EC, it is observed that the assessee herself admitted that the claim is incorrect and by filing revised statement of income on 19- 10-2015 withdrew the claim u/s 54EC of the Act, which clearly is an act of furnishing inaccurate particulars. Therefore, in our considered opinion, the Revenue rightly imposed the penalty for intentionally furnishing inaccurate particulars of income within the meaning of section 271(1)(c) of the Act relating to quantum of incorrect deduction under section 54EC of the Act.
Quantum of penalty relating to deduction of 54F we are of the opinion that, during the course of assessment proceedings, the assessee repeatedly misrepresented the facts. Therefore, the AO disallowed the deduction, which was confirmed by the Ld.CIT(A), and the Tribunal granted relief to the extent of Rs. 30,00,000/-.
There is no doubt that the assessee had claimed wrong deduction u/s. 54F of the Act and, therefore, the AO levied the penalty which was confirmed by the Tribunal. However, it is observed that the assessee's claim under section 54F of the Act, though partially disallowed, was not found to be entirely devoid of merit, as evidenced by the partial allowance in the quantum proceedings, therefore the penalty levied on the allowed portion should be reconsidered.
Assessee admitted to an incorrect claim and withdrew the claim under section 54EC of the Act. Therefore, we upheld the penalty related to the incorrect deduction under section 54EC of the Act as the act of furnishing inaccurate particulars of income.
We direct the AO to re-compute the quantum of penalty. Relief of Rs. 30,00,000/- should be granted in the penalty computation, reducing the penalty amount accordingly.Appeal of the Assessee is partly allowed.
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2024 (8) TMI 1181
Revision u/s 263 - Deduction u/s. 80P(2)(d) - interest income from Keira District Central Co.Op. Bank of Ltd. - HELD THAT:- It is pertinent to note that at the assessment proceedings the AO has categorically questioned the assessee related to deduction claimed u/s 80P(2)(d) of the Act and the component of interest derived from Nationalised Banks and Co-operative Banks.
AO has categorically made the enquiries full-fledged in respect of provisions of Section 80P(2)(d) of the Act and also made addition to that extent regarding interest earned from Nationalised Banks. The observation of the PCIT that no proper enquiry was made and there are binding judicial precedent, will not be justifiable for invoking Section 263 Explanation-2 as there are several other decisions of the various Hon’ble Courts which decides this issue in favour of the assessee.
Thus, the invocation of Section 263 of the Act by the PCIT is not justifiable and, therefore, order passed by the CPC, Income Tax Department, does not sustain. Appeal of the assessee is allowed.
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2024 (8) TMI 1180
Addition u/s. 69A - non-payment of advance tax - case of the assessee that the document on which the assessment proceedings initiated itself is based on the wrong information and challenged the entire addition and claimed that assessee is not liable to pay any advance tax by disputing the entire addition - HELD THAT:- Since the assessee has alleged that her income is not chargeable for tax, there cannot be any obligation upon the assessee to pay the advance tax, therefore in our opinion invoking the provision of section 249(4) of the act by the CIT(A) is erroneous.
Since the Tribunal being a final fact finding authority and considering the fact that the assessee has advanced the argument on the merit of the case as well, we have gone through the material produced by the assessee.
As found that the AO based on the information received from National e-Assessment Centre, Delhi initiated proceedings u/s. 148 of the act wherein an information has been provided that the ‘assessee had bought an immovable property from Shri Madhava Gatti for sale consideration which was the sole basis for the initiation of the proceedings.
AR has produced the said information at page No. 63 followed by the sale deed of the parties thereon. As per the said document, the sale deed has been executed by Mr. B.N. Radhakrishna Rao and Mr. U. Ramdas Achar in favour of Mr. Nedle Rama Bhat for sale consideration of Rs. 45 Lakhs in respect of the property bearing survey no. 65/2A1P1 measuring 11 cents situated at Kavoor village, Mangalore Taluk, wherein the assessee is neither the purchaser nor the vendor.
The assessee has produced her sale deed at page No. 20 which depicts that Mr. Madhava Gatti has sold a property bearing R.S. No. 189/2A measuring 0-05.75 acres situated at Kotekar Village, Mangalore Taluk for a sale consideration of 31 Lakhs (pages 20-31 of the paper book).
Thus it is crystal clear that the Ld.AO made addition on the basis of wrong assumption of facts observing that assessee has made purchase of property for Rs. 45 Lakhs, contrary to the fact that the assessee had purchased the property for Rs. 31 lakhs.
Apart from the same, assessee has also produced the source for the said transaction which being a loan availed from Vijaya Bank, Mangalore. Thus the basis for making the addition itself does not survive. Considering the above facts and circumstances of the case, we are inclined to delete the addition made by the Ld.AO u/s. 69A - Appeal of the assessee is allowed.
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2024 (8) TMI 1179
Penalty u/sec 271(1)(c) - assessee has filed an appeal against the quantum addition made in the assessment order u/sec 147 r.w.s 144B - HELD THAT:- CIT(A) deleting the addition made by the A.O vide order as dealt in the above paragraph. Therefore the penalty levied by the AO and sustained by the CIT(A) in the order dated 30-04-2024 shall not survive. Accordingly, we set aside the order of the CIT(A) and direct the AO to delete the penalty. And we allow the grounds of appeal in favour of the assessee.
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2024 (8) TMI 1178
Unexplained share capital/share premium u/s 68 - Assessee during the year has issued equity shares to two group companies to note that these group companies have common directors - AO noted that these companies were not having any business and were having only loan transactions and non-current investments
HELD THAT:- Pertinent to state that the assessee has filed all the evidences / explanation as called for by the AO during the course of assessment proceedings comprising details as to names, addresses, PANs, audited accounts, bank statements, confirmation letters etc. to prove this transactions. Besides the AO in order to verify these transactions has also issued notice u/s 133(6) of the Act to both the subscribers which were also duly complied with and the share subscribing companies have furnished all the details as called for by the AO.
Besides the summon u/s 131 were issued to the director of the assessee company who happens to be director on the subscribing companies and his statement was recorded by the AO. The said director has admitted to have issued equity shares from the assessee company to two group companies and it was also stated that the subscribing companies having substantial resources available to invest in the assessee company. It was also stated that the subscription proceeds were utilized for the purchase of flat.
The statement of the said director is extracted. We note that despite all these evidences being furnished as stated above, the AO has only doubted the business of the assessee as well as the investing companies without disputing the evidences filed by the assessee or pointing out any defect/deficiency therein.
CIT(A) simply affirmed the order by relying on the preponderance of human probability thereby ignoring the facts on record. We note that in the present case the assessee or its group companies are not shell companies engaged in providing accommodation entries and therefore we find that theory of the AO that the assessee’s own money routed through these investing companies appears to be incorrect.
As the assessee has filed all the evidences qua the investing companies and these share subscribers have also complied with the notices issued u/s 133(6) of the Act as well as summon issued u/s 131 - The assessee has proved identity and creditworthiness and genuineness of the transactions by furnishing the evidences and the CIT(A) has not controverted these documents by giving substantive findings. Therefore, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Decided in favour of assessee.
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2024 (8) TMI 1177
Addition u/s 68 - unsecured loans - disallowance of interest payment under section 69C - CIT(A) deleted addition - HELD THAT:- In the present case, it is discernible from the record that the assessee filed documentary evidence including PAN, address and other details of the lenders like extract of bank statement, ledger confirmation, ITR V, and financial statements to prove the identity, genuineness and creditworthiness of each loan lender separately.
We find that these documents also form part of the assessee’s paper book - even though during the assessment proceedings, these documents do not form part of the record, however, during the appellate proceedings before the learned CIT(A) no remand report was filed by the jurisdictional AO despite multiple opportunities, as noted by the learned CIT(A).
Even during the hearing before us, the Revenue could not bring any material on record to doubt the identity and creditworthiness of the loan lenders and the genuineness of the transaction.
Therefore find no infirmity in the impugned order deleting the addition made under section 68 on account of unsecured loans taken by the assessee. Consequently, the disallowance of interest payment under section 69C also does not have any basis, and therefore the same is also rightly deleted by the learned CIT(A). Decided against revenue.
Disallowance u/s 14A r.w.r. 8D - absence of tax-free income - CIT(A) deleted addition - HELD THAT:- We find that during the year the assessee earned a net gain on the sale of investments and there is no receipt of exempt income u/s 10 - Further from the ledger of the short-term capital gain, we find that the total gain on the sale of investments. Therefore, we find merit in the submission of the assessee that the amount considered as exempt income by the AO is in fact the gains earned by the assessee from the investments. The Revenue could not bring any material to controvert the aforesaid factual position.
We find that in Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. We further find that in Pr.CIT v/s Kohinoor Project (P) Ltd.[2020 (1) TMI 1161 - BOMBAY HIGH COURT]rendered similar findings and dismissed the Revenue’s appeal on a similar issue. Since, in the present case, the assessee has not earned any dividend income, therefore, respectfully following the aforesaid judicial pronouncements, disallowance of expenditure under section 14A read with Rule 8D is not sustainable.
Scope of amendment by the Finance Act, 2022 - The non-obstante clause and explanation were inserted in section 14A of the Act to the effect that the section shall apply even if no exempt income has accrued or arisen or has been received during the year. We find that while dealing with the issue of whether the aforesaid amendment by the Finance Act, 2022 is prospective or retrospective in operation, in PCIT vs M/s Era infrastructure (India) Ltd, [2022 (7) TMI 1093 - DELHI HIGH COURT] held that the amendment by Finance Act, 2022 in section 14A is prospective and will apply in relation to the assessment year 2022–23 and subsequent assessment years. Thus, even in view of the aforesaid amendment also, the disallowance under section 14A read with Rule 8D is not permissible in the present case.
Disallowance computed under section 14A read with Rule 8D has rightly been deleted by the learned CIT(A). Decided in favour of assessee.
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2024 (8) TMI 1176
TP adjustment - management charges paid to its AE towards intra group services - AO benchmarked by applying TNMM method - HELD THAT:- We find considerable merit in the plea of the assessee that determining the value of management services at ‘Nil’ by resorting to CUP method runs contrary to the factual matrix as well as overwhelming legal position enunciated in this regard. On facts, the assessee has reasonably demonstrated the rendition of services against the management charges paid to its AE by direct and circumstantial evidences inter-company namely agreement, emails correspondence, invoices, payments and substantive improvement in the revenue and profitability.
Ostensibly, no independent reasons whatsoever have been cited by the DRP while upholding the action of the TPO. DRP is completely swayed with the adjustment made by the TPO without objectively examining the factual matrix and applicability of CUP method in the light of judicial precedents and treating the value of services rendered at ‘Nil’. Such arbitrary exercise by the DRP without showing any application of mind cannot be countenanced in any manner. The directions made are neither clear nor implemented by the TPO and TP adjustment earlier made was mechanically reiterated.
DRP directions are required to be set aside and the adjustment made by the TPO on account of intra group services are liable to be cancelled and reversed. The value of transactions towards management charges under TNMM methodology adopted by assessee thus stands reinstated.
The adjustments made towards payment of management services in question are quashed.
TP Adjustment - imputed interest on delayed receivables beyond the period of 60 days - HELD THAT:- Recently, the Delhi Bench of the Tribunal in the case of ERM India (P) Ltd. vs. National e-assessment Centre [2021 (9) TMI 1422 - ITAT DLEHI] after following the judgment of Kusum Healthcare [2017 (4) TMI 1254 - DELHI HIGH COURT] held that once the working capital adjustment is given, it subsumes the interest on receivable and no separate benchmark is to be made.
DRP in the instant case has already directed the TPO/AO to allow working capital adjustment. One of the main features of such working capital adjustment is that it takes into account both debtors and creditors. If after making working capital adjustment to the PLI of comparable enterprises, the profit margins of Tax Payers compares well with the adjusted PLIs of comparable enterprises then it can be contended that overdue receivables do not have any adverse impact on profitability of Tax payer and imputing notional interest on overdue receivables is not warranted. The assessee has worked the PLI after working capital adjustment and even after the working capital adjustment as directed by DRP, the PLI is still better vis-a-vis comparables. The impact of imputed interest costs on account of high credit period would thus get offset by the higher profits earned.
Therefore, no rationale exists for separate benchmarking of interest on outstanding receivable. The adjustment as made by AO/TPO deserves thus to be deleted. Decided in favour of assessee.
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2024 (8) TMI 1175
Credit of TDS - HELD THAT:- In assessee own case in AY 2007-08 and 2009-10 Tribunal held that the credit of TDS in a financial year can be granted only when income corresponding to such TDS is assessed to tax in the said financial year. Further, the Tribunal directed that the assessee will be at liberty to approach the Assessing Officer for claiming credit of TDS in the concerned year and the AO may allow the claim in accordance with law.
We hereby hold that credit of TDS in a financial year may be granted only when income corresponding to such TDS is assessed to tax in the said financial year. Further, the assessee will be at liberty to approach the Assessing Officer for claiming the such credit in the concerned year in which income is offered and the AO may allow the same in accordance with law. Ground no.1 to 4 of the appeal is allowed for statistical purposes.
Consideration of current year business loss - AO is directed to verify the claim of the assessee and to consider the current year business loss while computing the assessed income as per law.
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2024 (8) TMI 1174
Denial of depreciation - method adopted by the assessee in writing off the expenditure incurred therein basing on the life expectancy of items i.e., 3-5 years - nature of business of the assessee is sale of high end branded readymade garments and its accessories for men and women in reasonably decorated showrooms which are obtained on lease basis for 3 – 5 years and assessee improves the said leased premises by interior decoration like false-ceiling, racks, electrical light fittings, paining, partitions and change of flooring, etc. and expects life of the said items from 1 to 5 years
HELD THAT:- ACIT did not dispute the original scrutiny assessment proceedings and the method of write-off and claiming by way of depreciation. Admittedly, there is no dispute with regard to leased premises by the assessee as it is clear from the order of the AO and the CIT(A). Thus, following the decision of AMRUTANJAN FINANCE LIMITED [2011 (8) TMI 320 - MADRAS HIGH COURT] taking into account of facts and circumstances of the case, we find that the claim of depreciation as allowed by the Assessing Officer in the original scrutiny proceedings, are justified. Thus, the order of the ld. CIT(A) is quashed and the ground raised by the assessee is allowed.
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2024 (8) TMI 1173
Ad-hoc disallowance of 20% expenses - assessee has not filed any supporting documents - HELD THAT:- Assessee has claimed expenditure of employee benefit expenses, other expenses and fiancé costs in its profit and loss account, however, while filing return of income assessee has not claimed any expenditure nor shown to have carry forward the loss, therefore, the assessee has not claimed any expenditure during the year hence, making adhoc disallowance is not proper. Accordingly, ground No.2 raised by the assessee is allowed.
Addition u/s 68 - genuineness of the transaction of loan is not substantiated by the appellant company - HELD THAT:- We observed that assessee has received unsecured loan from its sister concern - the assessee has demonstrated that the assessee has received above said unsecured loan from its sister concern and merely because the assessee has not submitted relevant information during assessment proceedings, the AO proceeded to make the disallowance.
Even in the remand proceedings, and the amount sustained by the CIT(A) with the observation that the bank statements of the creditors other than sister concern was not submitted by the assessee company.
We fail to understand that CIT(A) has sustained the addition with the observation that assessee has not submitted bank statement of the creditors other than sister concern while making the findings whereas that assessee has already submitted the confirmation and bank statements before the lower authorities, non submissions of the bank statements of other creditors has no role to play to adjudicate the issue in hand i.e. relating to unsecured loan, from sister concern when the assessee has submitted all the relevant data of this transaction before Lower Authorities, therefore, we are inclined to allow the grounds raised by the assessee. With regard to ground No.4, assessee has not pressed the same, therefore, the same is dismissed.
Unexplained cash deposits in bank account - assessee has failed to prove the source of these cash deposits, therefore, the same are disallowed - HELD THAT:- As we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us.
We observed that on various dates, the assessee has maintained sufficient cash which are out of share application money and some bank withdrawals and it is substantiated that sufficient source of cash available with the assessee to make the bank deposit of Rs. 8 lacs - assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the AO is deleted. Decided in favour of assessee.
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2024 (8) TMI 1172
Deduction u/s 80P(2)(vi) - Deduction in respect of income of co-operative societies - income earned by the assessee is not only from collective disposal of labour but also from amount received on account of material - HELD THAT:- The words “Collective Disposal of labour of its Members” assumes significance. In our considered view the dominant purpose of assessee is collective disposal of labour in area of civil works. The assessee admittedly while rendering civil works majorly in the terms of labour collectively works for gain. Since civil works is highly fragmented industry in India at times both the Central Government, the State Government, the Local Bodies like Municipal Corporation, Councils, etc. including PSU, State PSU, Electricity Boards, CPWD, PWD Corporate, firms, NGO etc. Nowadays by way of tenders for small and medium size civil works invite the bids which are consisting of both ‘material and labour’ as such civil works primarily are highly labour intensive consequently small to medium society have to bid for both in a competitive world even though their domain field is only pure labour. In order to survive in the competitive world they under quote on labour and a bare minimum on cost of material so that being lowest bidder they get the tender finally.
The above requisite submissions are on record of the present case which has not been disputed by the Department seriously either before Ld. AO and / or before CIT(A). Consequently we are of the considered view that in the given context the services offered by the assessee society cumulatively comes within the mischief of the words “Collective disposal of labour of its members” falling under section 80P(2)(a)(vi) and therefore order of Ld. CIT(A) is sustained. The nature of broad activity which dominates the field is ‘collective disposal of labour of its Members’. Purchases are thus incidental and ancillary to main object of rendering labour services collectively’. Society survives and makes profit income by sacrificing their collective labour in process to earn their livelihood on both counts.
The dominating activity and purpose in the instant case is “collective use of labour by societie’s each member / collective disposal of labour of its members” and is not of doing business of procuring and selling toddy and thereby making profit. Hence we hold the facts in CIT Vs. Uralungal [2009 (10) TMI 890 - KERALA HIGH COURT] to be more parimateria and almost identical with activity of present assessee and respectively disagree with the submissions made by Ld. DR of Revenue.
In respect of the Revenue’s contention that its database of the assessee shows Tara Singh as the only member having 100% share we observe that in the proceedings before Ld. AO and so also before CIT(A) this issue does not arises and consequently there is no finding. However before us this issue has been raised for the first time without any material evidence in support of same. There is no application to bring additional evidence on record consequently we reject the contention of the Revenue. Further such contention is not legal question of law. Decided against revenue.
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2024 (8) TMI 1171
Deduction u/s 80IA - filing of return of income belatedly - HELD THAT:- As relying on case CIT v/s Shelcon Propertyies (P) Ltd [2015 (3) TMI 579 - CALCUTTA HIGH COURT] we hold that once the return of income has been filed belatedly, no benefit under section 80IA of the Act is allowed. Decided in favour of revenue.
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2024 (8) TMI 1170
Deduction u/s 80P(2)(a)(i) - invocation of provisions of section 80A(5) for denial of captioned deduction - assessee has not filed a valid return of income as per the provisions of section 139, thus, claim denied - HELD THAT:- Unable to appreciate the argument of the Ld. AR that the provisions of section 80AC are not applicable to the case of the assessee as the substitution came into effect from 01/04/2018 ie., for the AY 2018-19 onwards because even after the substitution by Finance Act, 2018, to claim the deduction u/s. 80P(2)(a)(i) of the Act, the assessee has to file a valid return of income within the stipulated time as per the provisions of section 139 of the Act which is missing in the instant case.
Since the return of income has not been filed in accordance with the provisions of section 139 of the Act, it was rightly held by the Ld. Revenue Authorities that the claim made by the assessee for deduction u/s. 80P(2)(a)(i) cannot be held as an admissible deduction under the Act - Decided against assessee.
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2024 (8) TMI 1169
Income tax proceedings against company in liquidation - proceedings instituted or against the corporate debtor - HELD THAT:- Once the liquidation process has been initiated then, subject to Section 52 of the IBC, no suit or other legal proceedings shall be instituted or against the corporate debtor save and except the liberty of the liquidator.
Since there is a bar for initiating any suit or any other legal proceedings during moratorium, it also includes the income tax proceedings. Therefore, under these circumstances, it is premature to decide these appeals on merits.
Accordingly, all these appeals are consigned to records and the parties shall be at liberty to restitute the appeal, once the committee of creditors or NCLT directs the Liquidator or corporate creditors (including Income Tax department) to pursue the appeal; or the liquidator after completion of process may approach to get the appeal disposed after filing revised Form 36. All the appeals are dismissed in limine.
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2024 (8) TMI 1168
Condonation of delay filling appeal before CIT(A) - Delay due to the prevailing pandemic situation the same could not be filed before 8/12/2021 with a delay of about 21 months - HELD THAT:- There was a delay in preferring appeal before the First Appellate Authority and the reason for the delay in filing the appeal was attributed to the pandemic
Though the DR does not concede to condone the delay, there is no denial of the fact that the entire country was under complete lockdown for 21 days starting from 25/3/2020 to contain the COVID-19 Pandemic.
Hon'ble Supreme Court in the Suo Motu proceedings in the case of IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION [2022 (1) TMI 385 - SC ORDER] held that in cases, where the limitation would have expired during the period between 15/03/2020 and 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022, and in the event of actual balance period of limitation remaining with effect from 01/03/2022 is greater than 90 days, that longer period shall apply. The limitation period applicable to this appeal is covered by the above decision and, therefore, this appeal deserve to be heard on merits by condoning the delay.
Thus, we condone the delay in filing the First appeal before the learned CIT(A) , set aside the impugned order and the rest of the appeal to the file of the learned CIT(A) for deciding the same on merits.
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2024 (8) TMI 1167
TP Adjustment towards software developments services and related support services - Comparable selection - assessee has benchmarked this transaction by selecting Transaction Net Margin Method (TNMM) with PLI of OP/OC - HELD THAT:-Deselection of comparables on the basis of functional dissimilarity. Accordingly, we direct the TPO to exclude Cadsys (India) Ltd., Cygnet Infotech Pvt. Ltd., Dun & Bradstreet Technologies & Data Services Pvt. Ltd., E-Infochips Ltd., Interglobe Technology Quotient Pvt. Ltd., Cybage Software Pvt. Ltd. , Nihilent Ltd. & InfoBeans Technologies Ltd. (Formerly known as InfoBeans Systems India Pvt. Ltd.).
T.P. Adjustment towards interest on receivables - HELD THAT:- As decided in own case [2024 (1) TMI 26 - ITAT MUMBAI] Charging of interest by the TPO on the closing balance without looking into delay of each and every invoice is incorrect. Therefore, we direct the TPO to compute the amount and number of days outstanding beyond the grace period for each and every invoice. The assessee shall provide complete information in this regard to the TPO. Also, turning to the number of days of grace period, there is no thumb rule that grace period of 30 days, 60 days or 90 days should be allowed AR submitted that the assessee is a captive service provider and there are no comparable transactions with the Non-AEs. Thus, we are left with no choice but to remand this issue to the file of the TPO to examine if there are any agreements with the AE and what is the grace period in those agreements. If there are no agreements with the AEs, the TPO should consider the market practice in the relevant sector and then grant the grace period.
Respectfully following the above decision of the Co-ordinate Bench in assessee's own case we direct the AO to re-compute the interest on receivable with similar directions.
Disallowance of employee contribution to PF in the intimation under section 143(1) - HELD THAT:- Respectfully following the decision rendered by in case of Checkmate Services P. Ltd. [2022 (10) TMI 617 - SUPREME COURT] we are of the considered view since the assessee has failed to comply with the condition precedent for depositing the employees contribution on account of PF & ESI before the due date prescribed under the Act, the assessee is not entitled for any deduction - Decided against assessee.
Addition on account of accretion to reserves under LTCG - assessee has merged with VMSS pursuant to which the shares of the assessee were allotted to the shareholders of VMSS - HELD THAT:- The plain reading of the provisions of section 47(vi) also leads as to the conclusion that the amount recorded as part of amalgamation scheme is not to be treated as transfer and therefore does not result in capital gains. In view of these discussions, we hold that the addition made towards amount credited to capital reserve account as part of merger of assessee and VMSS cannot be treated as LTCG and the addition made in this regard is hereby deleted. This ground is held in favour of the assessee.
AO while preparing the computation statement of assessed income has considered the addition sustained by the DRP twice - We have already held that the addition of Rs. 1.26 crores is not tenable and that the same does not result in capital gains. We therefore direct the AO examine the issue of double addition claimed to be made in the statement of computation and to give relief to the assessee accordingly.
Disallowance of Finance Cost u/s 37(1) - AO based on the information furnished by the assessee with regard to the amount reflected as outstanding from the AEs disallowed the finance cost incurred by the assessee by adopting SBI Prime Lending Rate at 11% - HELD THAT:- AO levied interest by applying SBI Prime Lending Rate on the amount outstanding from Varian Medical Systems International AG and Varian Medical Systems Inc. The DRP gave relief to the assessee stating that no interest is leviable on the amount outstanding from Varian Medical Systems International AG and sustained the interest on amount outstanding from Varian Medical Systems Inc. However from the above extracted observations of the TPO, we noticed that the TPO did not propose any TP Adjustment towards interest on amount receivable from Varian Medical Systems Inc. for the reason that the aging of amount outstanding is less than 20 days.
Therefore, we see merit in the contention of the AR that the interest levied by the AO as sustained by the DRP on the amount outstanding from Varian Medical Systems Inc. is not correct. Accordingly, we delete the interest charged on the amount receivable from Varian Medical Systems Inc. This ground of the assessee is allowed.
Short grant of advance tax credit and credit towards TDS - AR submitted that the AO failed to give credit towards advance tax paid by VMSS, which merged with assessee and that the AO did not consider the TDS deducted in the name of VMSS. Our attention in this regard was drawn to the relevant evidences to substantiate the claim. Accordingly, we issue direction to the AO to consider the claim of the assessee based on the documentary evidences and give credit in accordance with law.
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2024 (8) TMI 1166
Applicability of the amendment made in section 50C - retrospective or prospective effect - dispute of valuation of the property for stamp duty purposes - HELD THAT:- Based on the set of evidence furnished by the assessee in the proceeding before the ld. CIT(A) has considered the plea of the assessee that the Hon'ble High Court of Rajasthan had decided the matter and directed the stamp duty valuation authority to make assessment of value for the purpose of stamp duty and accordingly Collector (Stamps), Jaipur Circle Third ( Raj.) had assessed the property for the purpose of stamp duty at Rs. 67,81,105/-.
The appellant further submitted that after considering the stamp duty value at Rs. 67,81,105/- as determined by Collector (Stamps), Jaipur, the difference between sale consideration and value adopted for the purpose of stamp duty remained only 1.045% (Difference in value Rs 70,105/-, i.e. Stamp duty value Rs. 67,81,105/- minus Sale consideration Rs. 67,11,000/-). Hence it was requested to accept the stated sale consideration i.e. 6711000/- at face value and not to invoke the provisions of section 50C. In this regard the appellant relied on order of Smt. Cheryl Maria Fernandes [2021 (1) TMI 620 - ITAT MUMBAI].
The bench noted that the difference in the valuation remain after the direction of the High Court is only 1.04% and therefore, considering the specific exclusion provision which is benefit in nature and ld. CIT(A) has already considered the judicial decisions cited by the assessee has granted the benefit to the assessee. Decided against revenue.
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2024 (8) TMI 1165
Allowability of business expenditure - Disallowance of legal and professional charges - AO observed that the expenses are incurred in respect of the ownership of the firm and takeover of its business assets and liabilities which is a capital expenditure as well as personal expenses cannot be allowed as expenses wholly and exclusively for business purposes - HELD THAT:- No payment has been made by the assessee in the form of any penalty and that no penalty had been levied by any statutory authority for violation of any law for the time being in force. All the aforesaid payments are made only to the advocates who are defending the assessee company in the ordinary course of its business.
These expenses are nothing but expenses incurred to protect the image of the assessee company and for ensuring the smooth conduct of the business of the assessee company.
None of the explanations given by the assessee hereinabove were found to be false by the revenue and that all these payments together with the purpose of payments are duly covered by documentary evidences. All the payments are made by regular banking channels after due deduction of tax at source and the payees are identifiable. The assessee on its part had duly filed the details of payments, purpose of payments, name and address of the advocates, TDS details, details of litigation, court papers and the relevant court orders. None of the payments fall under the ambit of provisions of Explanation 1 to Section 37 of the Act. They are neither penal in nature nor capital or personal in nature.
In our considered opinion, the entire payments made are only mere payments made to advocates for defending the case of the assessee company. This is similar to a lawyer being paid fees for appearance before the Tribunal, Commissioner (Appeals) or before the AO in connection with income tax dispute of the assessee company. Hence they are squarely allowable as deduction.
We direct the ld. AO to allow deduction to the assessee.
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