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2023 (12) TMI 1138 - ANDHRA PRADESH HIGH COURT
Maintainability of petition - availability of efficacious and alternative remedy of appeal - Services of storage and warehousing of food grain - Exemption from levy of tax as per Notification No. 12/2017 – Central Tax (Rate), dated 28.06.2017 - agreement with APSCSCL for providing storage, warehousing services involving loading, unloading, stacking, packing, care, custody and security etc., of food grains - HELD THAT:- Admittedly, the petitioner has an efficacious and alternative remedy to file appeal. The said fact is also mentioned in the impugned order to the effect that an appeal lies against the impugned order before the Appellate Joint Commissioner (ST), Tirupathi.
In view of the decision in ASSISTANT COMMISSIONER (CT) LTU, KAKINADA & ORS. VERSUS M/S. GLAXO SMITH KLINE CONSUMER HEALTH CARE LIMITED [2020 (5) TMI 149 - SUPREME COURT] wherein the Hon’ble Apex Court held that the High Court ought not to have entertained the writ petition when an efficacious and alternative remedy of appeal is available to the petitioner, without expressing our opinion on the merits of the petitioner’s case, it is deemed apposite to give liberty to the petitioner to file an appeal against the impugned order.
The writ petition is disposed of giving liberty to the petitioner to file an appeal against the impugned order dated 10.07.2023 passed by the 2nd respondent before the concerned Appellate Authority within four (4) weeks from the date of receipt of a copy of this order, in which case, the Appellate Authority shall admit the appeal and after affording an opportunity of hearing to both parties, pass an appropriate order on merits in accordance with governing law and rules expeditiously.
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2023 (12) TMI 1137 - PUNJAB AND HARYANA HIGH COURT
Seeking release of vehicle and the goods - invoice showing different detail - petitioner was ready to pay the penalty and fine - HELD THAT:- The exigency of the situation regarding the vehicle and the goods is over and the petitioner who is a consigner will necessarily have to reply to the show cause notice whether the circumstances spelled out in the show cause notice had any substance. The show cause notice shows the reference to invoice no. 201 dated 16.08.2023 in favour of Durga Multimetals Pvt. Ltd. for a sum of Rs. 12,75,885/- had a grand total of Rs. 15,05,545/- dated 16.08.2023, the date when the vehicle was detained. The invoice which has been placed on record as Annexure P-1 would go on to show that the goods had been consigned by Rajan Trading Corporation at Rajkot to the petitioner and carries a separate detail.
The genuineness of the facts and transit would require further verification and it has specifically been mentioned that it was entrusted from M/s Rajan Trading Corporation at Rajkot and Section 16(2)(c) of the Act needs verification from the books of account. The Apex Court in THE STATE OF PUNJAB VERSUS M/S SHIV ENTERPRISES & ORS. [2023 (1) TMI 842 - SUPREME COURT] has held that it is not for this Court to entertain the writ petition against the show cause notices and has set aside the order of this Court while not interfering in the order whereby the goods had been released.
Keeping in view the settled position and the fact that the matter has to be gone into by the competent authority, the present writ petition is disposed off with liberty to the petitioner to file his response to the said notice. It is open to the authorities to take action in accordance with law.
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2023 (12) TMI 1136 - KARNATAKA HIGH COURT
Validity of recovery notice - Denial of benefit of exemption - - refund claim - petitioner has discharged tax under wrong head - importing “Bulk Simulator Training Services” to the Helicopter pilots from Indian Air Force, Indian Army, Indian Navy and other defence establishments including some of the departments of the State Government - Absebnce of GSTIN and PAN - HELD THAT:- The second and the third respondents’ impugned orders are perused. These authorities have elaborately referred to the provisions of IGST Act as also the CGST/KGST Act and they have also referred to the details of the recipient establishments. There is obvious reference in the impugned orders to the details furnished by the petitioner after being served with the notice in GST DRC-02, but the proceedings are concluded in the premise that the petitioner has raised Invoices without mentioning the necessary details.
This Court must opine that this consideration in the peculiarities of the case will not suffice, and if it is undisputed that the recipient establishments are based in Delhi, Jharkhand and Uttar Pradesh and the petitioner’s supply [imparting of training] is exempt, significance of the same should also have been considered. This Court is of the considered opinion that, especially in the peculiarities of this case, the third respondent, to sustain the proposed demand, had to examine whether failure to furnish the details of the GSTIN, notwithstanding the other circumstances, could justify denial of exemption.
The proceedings are restored to the third respondent to reconsider the merits of the petitioner’s response in the light of this Court’s observation - the recovery notice dated 17.10.2023 is also quashed - Petition allowed in part.
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2023 (12) TMI 1135 - KARNATAKA HIGH COURT
Validity of reopening of assessment u/s 147 - reasons to believe - change in opinion - Whether the petitioner assessee has failed to “disclose fully and truly all material facts necessary for assessment”? - admissibility of deduction under Section 10A - Whether the petitioner assessee has failed to “disclose fully and truly all material facts necessary for assessment? - HELD THAT:- There has been declaration including of expenditure relating to providing technical services. Once such primary facts have been declared and the assessee had made the declaration and claimed deduction under Section 10A of the I.T. Act, there was no further obligation on the assessee. If the Assessing Officer was of the view that details furnished would fall within Section 80HHE and not under Section 10A of the I.T. Act and accordingly, assessee was not entitled to claim such expenditure under Section 10A of the I.T. Act, the non-drawing of such legal inference by the assessing officer at the relevant point of time cannot result in holding that there is no true and full disclosure of primary facts.
Whether the re-assessment notice u/s 147 r/w Section 148 of the I.T. Act is merely a product of change in opinion and accordingly is impermissible in law? - A perusal of Section 148 of I.T. Act, the notice along with the reasons for reopening make it clear that the tangible material relied upon are the MSA’s, Works contracts/SCW’s, Invoices and other details relating to the deduction claimed under Section 10A of the I.T. Act. All of which is stated to have come to the notice of the Department relating to the Assessment Year 2008-2009.
However, even on a perusal of para-2.10 of the Assessment Order relating to the Assessment Year 2008- 2009, “ the assessee as has been asked on innumerable occasions to submit MSAs and SOWs that it had with its clients the assessee has only been able to provide some of the sample MSAs and SOWs…”. Similar observation is made at para-2.12, which reads as follows, ”the assessee has not been able to submit all the SOWs and MSAs entered for software contract services…”. The finding by the Assessing Authority is by placing the burden on the assessee regarding correlation between the MSA, SOW/ work order vis-a-vis work carried out by STP/SCZ unit.
Thus the tangible material sought to be relied upon itself not being complete, it cannot be held that the MSAs and SCWs would demonstrate that the declaration made by the assessee leads to a conclusion that there has been escapement of income. It is also a settled position that reassessment proceedings cannot be in the nature of review and accordingly, the material as has come to light in the assessment proceedings for the Assessment Year 2008- 2009 cannot be a sufficient ground to resort to reassessment proceedings.
Whether the re-assessment notice u/s 147 r/w Section 148 amounts to borrowed satisfaction as it places reliance on findings recorded in the assessment proceedings recorded in the Assessment Year 2008-2009? - The jurisdictional requirement under Section 147 of the I.T. Act for re-assessment requires “the assessing officer to entertain reasons to believe that income chargeable to tax has escaped assessment”. It is clear that the reason to believe has to be entertained by the Assessing Officer by forming an opinion himself.
Clearly, reasons for reopening rests on the satisfaction of the Assessing Officer who has passed an Assessment Order for the Assessment Year 2008-09 which would amount to substitution of the assessment orders of reasons to believe by borrowed satisfaction of the Assessing Officer who has passed an order for the year 2008-09 which is impermissible in law.
Whether the bar under third Proviso to Section 147 of the I.T. Act is a legal impediment insofar as the present re-assessment notice is concerned? - In the above context and looking into the bar under the third proviso to Section 147, the object being to prohibit proceedings u/s 148, when appeal/revision/reference is pending, in the present case, taking note of the details in the Table above, more particularly, noticing pendency of appeals in Column No.(4) as on the date of Section 148 notice, clearly, notice under Section 148 was hit by the bar under third proviso to Section 147 of I.T. Act.
Computation of deduction u/s 10A - Assessment Year 2006-2007 - HELD THAT:- The nexus between the technical services rendered and the STP which is necessary for an allowable deduction u/s 10A is a legal requirement and existence of such nexus is a conclusion to be arrived at by the AO. Once the primary facts regarding providing of technical services outside India is made out, there would end the duty of the assessee and the question of nexus is a matter that the Assessing Officer ought to have clarified by further investigation.
The reliance on documents that has come out as regards the proceedings for the Assessment Year 2008-2009 by way of MSAs, Work Contracts, SCWs and Invoices cannot be sufficient by itself to initiate proceedings for deduction under Section 10A of the I.T. Act in light of absence of nexus. If that were to be so, as the reliance on such documents for the purpose of reducing Section 10A of I.T. Act, the deduction for Assessment Year 2008-2009, itself has not attained finality and is subject to appeal as averred by the petitioner in the pleadings which remains uncontroverted. If that were to be so, the material relied upon in assessment proceedings for the Assessment Year 2008-2009 not having been finally adjudicated so as to indicate requirement to reduce Section 10A deduction, the same cannot be made use of for reassessment proceedings. The requirement that there must be true and full disclosure cannot be stated to have been breached by taking recourse to the material produced during the Assessment Year 2008-2009 as such conclusion for the Assessment Year 2008-2009 leading to reduction in Section 10A deduction itself is a subject matter of further adjudication.
Implication of Circular No. 1/2013 [F.No.178/84/2012 - ITA.I - Government of India, Ministry of Finance, Department of Revenue, CBDT dated 17.01.2013.] - It is clear that the clarification stipulates that the benefits under Section 10A deductions can be availed of, if there exists a direct and intimate nexus or connection between the development of software abroad with the eligible units setup in India. Though the clarification is issued on 17.01.2013, whereas the said circular is only clarificatory and does not confer any new benefit and hence can be made use of to interpret the scope of deduction under Section 10A of the I.T.
The conclusion arrived at by the Assessing Officer for the Assessment Years 2005-2006, 2006-2007 and 2007-2008, when examined from the point of view of the Circular would strengthen the case of upholding deduction under Section 10A of the I.T. Act and would indicate that the resort to a review by recourse to Section 148 of the I.T. Act in the guise of reassessment would be a futile exercise.
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2023 (12) TMI 1134 - DELHI HIGH COURT
Reopening of assessment u/s 147 - constitutional validity of Section 115BBE questioned - HELD THAT:- It is settled law that Statutory Acts and their provisions are not to be declared unconstitutional on the fanciful theory that power would be exercised in an unrealistic fashion or in a vacuum or on the ground that there is an apprehension of misuse of Statutory Provision or possibility of abuse of power. It must be presumed, unless the contrary is proved, that administration and application of a particular law would be done “not with an evil eye and unequal hand”.
Consequently, at this stage, Section 115BBE of the Act cannot be held unconstitutional on the ground that there is an apprehension of misuse of the said provision.
Further, it is settled law that the Act provides a complete machinery for assessment/re-assessment of tax and the assessee is not permitted to abandon that machinery to invoke jurisdiction of the High Court under Article 226 of the Constitution [See Commissioner of Income Tax & Ors. vs. Chhabil Dass Agarwal,[2013 (8) TMI 458 - SUPREME COURT].
Consequently, the present writ petitions and pending applications are dismissed.
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2023 (12) TMI 1133 - DELHI HIGH COURT
TP Adjustment - comparable selection - HELD THAT:- Rejection of comparables as functional dissimilar as covered against the appellant/revenue by the decision rendered by this Court in the matter of Principal Commissioner of Income Tax vs. ST Microelectronics Private Limited [2017 (11) TMI 266 - DELHI HIGH COURT]
Nature of expenses - purchasing software licenses - revenue or capital expenditure - HELD THAT:- There is no dispute that the respondent/assessee had purchased licensed software, of which, it did not have ownership or title. It is also not in dispute that the license had a duration that did not exceed one (1) year.
Assessee’s stand that the licensed software was used for business operations was also not disputed by the appellant/revenue. That said, the test employed by the AO and the DRP, that is “enduring benefit” is not, in our view, a conclusive test to determine the nature of the expense [See Empire Jute Company Limited vs. Commissioner of Income Tax 1980 (5) TMI 1 - SUPREME COURT].
The ratio of the judgment rendered in the Asahi India Safety Glass Ltd. [2011 (11) TMI 2 - DELHI HIGH COURT] as held that the expenditure which is incurred, which enables the profit-making structure to work more efficiently leaving the source of the profit-making structure untouched, would in our view be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably; leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would in our view be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or added to the fixed capital of the assessee
In our view, would apply to the facts of this case, and therefore, no substantial question of law arises with regard to the said issue.
Amount expended on training its employees - capital or revenue expenses - ITAT Ruled in favour of the respondent/assessee - HELD THAT:- In our view, qua this issue as well, the test employed, i.e., the advantage of “enduring nature” is not the correct one. Training accorded to employees, which may have a lasting impact, is not determinative of the fact that the expenditure should be treated as one incurred on the ‘capital’ account.
In determining the treatment to be given to expenses, it has to be seen whether the profit structure of the assessee is altered. It is well established that if the profit structure is left undisturbed, such an expense is to be treated as one incurred on the revenue account. The mere fact that employees' efficiency improves with learnings acquired through seminars, conferences, and other forms of training, cannot be the reason to treat such expenses as ‘capital’ expenditure.
As noted by the Tribunal, it is not as if the employees stay with the employer (in this case, the respondent/assessee) for all times to come. It is quite possible that the employees may shift to another employer.no substantial question of law arises.
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2023 (12) TMI 1132 - DELHI HIGH COURT
Exemption u/s 11 denied - sum offered for tax and Form No. 10 was filed during the reassessment proceedings as conditions provided in Section 11(2) of the Act, for accumulation of income, had not been fulfilled - as stated that due to an inadvertent error, the respondent/assessee had failed to show this in its original ROI - CIT(A) also held that the AO had not returned a finding that the conditions provided in Section 11(2) of the Act, for accumulation of income, had not been fulfilled - whether a revised Form No. 10 could have been filed by the respondent/assessee during the reassessment proceedings? - HELD THAT:- To claim the benefit of the provisions of sub-Section (2) of Section 11, the respondent/assessee had to file a statement in the prescribed form, i.e., Form No. 10. The Tribunal has noted that there is no adverse finding by the AO concerning the fulfillment of conditions subject to which the accumulation of income was allowed under Section 11(2).
Insofar as the issue concerning the timing of the filing of Form No. 10 is concerned, i.e., in the course of reassessment proceedings, this stands covered by a decision of a coordinate Bench of this court rendered in Association of Corporation & Apex Societies of Handlooms case [2013 (1) TMI 317 - DELHI HIGH COURT] Clearly, the respondent/assessee is not precluded from filing a revised Form No. 10 during reassessment proceedings.
The record also shows that the appellant/revenue had carried the judgment rendered in Association of Corporation & Apex Societies of Handlooms in appeal to the Supreme Court. The appeal preferred by the appellant/revenue, i.e., Civil Appeal 2020 (1) TMI 1664 - SUPREME COURT] was dismissed as withdrawn, on account of low tax effect.
Given this position, according to us, no substantial question of law arises for our consideration.
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2023 (12) TMI 1131 - MADRAS HIGH COURT
Validity of reopening of assessment - denial of natural justice - order passed on last date for exercising power of reassessment without supplying the reasons pursuant to notice u/s 148 despite request by the petitioner to furnish reasons for reopening - HELD THAT:- Division Bench of this Court in SHRI JANAK SHANTILAL MEHTA [2020 (12) TMI 991 - MADRAS HIGH COURT] wherein while examining as to whether failure to furnish the reasons for reopening on a request made would vitiate the assessment proceedings, it was held that it was mandatory for the Assessing Authority to furnish reasons and if the Assessing Authority fails to do so, the re-assessment proceedings is liable to be set aside. Further, after referring to the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. [2002 (11) TMI 7 - SUPREME COURT] it was held that non-furnishing of reasons would cause serious prejudice and would vitiate the proceedings, resultantly the impugned proceeding was quashed
The impugned order under Section 147 of the Act is made contrary to and in gross disregard/ non-compliance with the procedure laid down for reassessment by the Hon'ble Supreme Court inasmuch as the assessment order is passed without furnishing the reason for reassessment despite a specific request. The impugned order stands vitiated and is thus set aside. Decided in favour of assessee.
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2023 (12) TMI 1130 - MADRAS HIGH COURT
Revision u/s 263 - Tribunal upheld the order passed by the Principal Commissioner of Income Tax, in directing the Assessing Officer to recompute the taxable capital gain u/s 54F and pass revised assessment order, after providing opportunity to the assessee - as submitted on the side of the appellant / assessee that the appeal filed against the order of assessment passed by the Assessing Officer is pending adjudication before the appellate authority - HELD THAT:- This court is of the view that the parties need not agitate the factual matrix in this appeal and it would be appropriate to raise all the grounds raised herein before the appellate authority, with whom the appeal is pending, in order to avoid multiplicity of proceedings.
Substantial questions of law involved herein are left open to be decided by the appellate authority with whom the appeal against the assessment order passed under section 144 is pending. Accordingly, the appellate authority shall consider the same along with the grounds raised in the appeal and pass appropriate orders, on merits and in accordance with law, after providing due opportunity of personal hearing to the appellant / assessee, without being influenced by any of the observations made by the Tribunal, within a period of twelve (12) weeks from the date of receipt of a copy of this judgment. The appellant / assessee is at liberty to raise all the grounds before the appellate authority with supportive materials, at the time of personal hearing.
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2023 (12) TMI 1129 - KARNATAKA HIGH COURT
Reopening of assessment u/s 147 - petitioner has failed to support documentary evidence regarding the purchase of immovable property and the post office deposit - HELD THAT:- Petitioner is categorical that he has not participated in any sale transaction or availed the benefit of the deposit with the Post Office in the subject assessment year to be served with notice under Section 148A[b] of the IT Act. Secondly, the petitioner asserts that because of his peculiar circumstances he had no knowledge of the notice and as such, he has not filed any response to the notice issued u/s148A[b]. Thirdly, when a show cause notice under Section 142[1] of the IT Act is issued, the petitioner has responded asking for details and an opportunity of hearing. This Court must further observe that the necessary details will be provided when notice under Section 148A[b] of the IT Act is issued, but the notice under Section 148A[b] of the IT Act in the present case does not contain all the necessary details, and it could be that such information could not be sought for at the stage of Section 144B of the IT Act but an opportunity of hearing is contemplated at this stage under these provisions.
The petitioner has not received the notice under Section 148A[b] of the IT Act and an opportunity of personal hearing is not extended before the impugned assessment order, and therefore, this Court must opine that there is a definite lack of opportunity and failure to comply with the requirements of putting the assessee on notice for reasons to commence proceedings under Section 148 of the IT Act.
As such, there must be interference quashing the assessment order dated 13.03.2023 and the adjudication order dated 28.03.2022 u/s 148A[d] and restoring the proceedings to the stage where the petitioner could show cause against adjudication under Section 148A[d] - Further, the second respondent must be called upon to furnish to the petitioner information such as the details of the sale deed and the deposits with the postal department upon receipt of a certified copy of this order with due opportunity to the petitioner to file a response.
The petition is allowed in part. The impugned assessment order and the consequential computation, demand and penalty notices are quashed. The adjudication order under Section 148A[d] of the IT Act is also quashed and the proceedings restored for reconsideration.The second respondent shall furnish the reasons recorded for initiation of proceedings under Section 148 of the IT Act before proceeding further consequent to this order.
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2023 (12) TMI 1128 - ITAT VISAKHAPATNAM
Scope of limited scrutiny - Addition u/s. 69A - Addition towards Interest paid to Bank of Baroda - HELD THAT:- It is a fact that the assessee maintains a cash credit account with Bank of Baroda which is in the nature of current account. From the bank statement we observe that the opening balance as on 1/4/2017 is Rs. 9,67,51,144.25 and the closing balance as on 31/3/2018 is Rs. 8,28,19,048.25. It is also noticed that the amount debited for Rs. 4,52,58,180/- on 29/12/2017 and even after such debit, the balance is within the limits which indicates that the assessee has serviced the interest portion.
It is also seen from the paper book submissions of the Ld. AR that the bank has issued a Certificate dated 27/5/2022 regarding the receipt of interest from the CC Account. In view of the above facts of the case, we have no hesitation to delete the addition made by the Ld. Revenue Authorities u/s. 43B of the Act. We therefore allow this ground raised by the assessee.
Limited scrutiny proceedings for examining “business loss” - In case, if the Ld. AO wants to take up the case for complete scrutiny, first the Ld. AO has to convert the limited scrutiny into complete scrutiny case and then he may take up the case for complete scrutiny with the prior approval of the Ld. Pr. CIT / CIT concerned after being satisfied about the issue of converting it into a complete scrutiny. In the instant case, we find that no such approval has been granted to the Ld. AO. We therefore find that the Ld. AO has travelled beyond his jurisdiction in treating the cash deposits u/s. 69A of the Act which is not valid in law and therefore we are inclined to delete the addition made by the Ld. Revenue Authorities and allow the ground raised by the assessee.
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2023 (12) TMI 1127 - ITAT DELHI
Treatment of advance received in respect of sale of agricultural land jointly executed with co-owner - Treating partial advance received against agreement to sell of an ancestral joint agricultural land as sale consideration - Whether no transfer of possession of land in the year under consideration? - only argument of the assessee is that the land in question was only advance and it could not be treated as sale consideration and since no possession of land was given, therefore, there was no transfer - HELD THAT:- AO did not discard completely the contention regarding source of deposit being advance/sale consideration. However, he made addition on the basis that no capital gain was offered by the assessee.
We find merit into the contention of learned counsel for the assessee that the amount was merely advance payment and the transfer was completed in the year 2020. Our attention was drawn towards sale deed and settlement agreement executed. As per these documents the possession was handed over on 15.02.2020.
Therefore, hereby direct the AO to delete the impugned addition. The AO would be at liberty for taxing the capital gain arising out of sale of capital asset in the relevant year in accordance with law, Grounds of appeal are allowed.
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2023 (12) TMI 1126 - ITAT VISAKHAPATNAM
Estimation of income - unaccounted purchases - grievance of the Revenue is that since the assessee has not properly explained the sources for the cash purchases the decision of the Ld. AO by making an addition u/s. 69A of the Act treating it as unexplained cash holds good and therefore the same may be sustained - HELD THAT:- We are of the opinion that the entire unaccounted purchases cannot be treated as income of the assessee and only the profit element should be considered as income for the purpose of computing the tax on sales. Hence, we are inclined to allow 8% on the sales made by the assessee as income of the assessee. Accordingly, the Ld. AO is directed to work out the income of the assessee and tax the same in accordance with law.
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2023 (12) TMI 1125 - ITAT MUMBAI
Penalty u/s. 270A - under reporting of income by not reducing the insurance claim received by the assessee from the block of assets which has in fact resulted in excess claim of depreciation - assessee in the present case has stated that it was not in an advantageous position to claim higher depreciation as it was adverse for the assessee in subsequent years and that there was no question of reducing the tax liability where the assessee’s return of income declared a huge loss during the year under consideration - CIT(A) deleted penalty levy - HELD THAT:- CIT(A) had relied on the decision of Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] where it has held that furnishing inaccurate claim of expenditure would not amount to giving inaccurate particulars of such income.
Assessee has relied on various other decisions which have reiterated the proposition that the claim of higher depreciation would not amount to concealment of income. It is also observed that the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Somany Evergreen Knits Ltd. [2013 (4) TMI 154 - BOMBAY HIGH COURT] has held that excess claim of depreciation was a bona fide mistake on the part of the assessee which attracts no levy of penalty.
By respectfully following the above said decision, we deem it fit to hold that there is no infirmity in the order of the ld. CIT(A) in deleting the penalty levied by the ld. A.O. Decided in favour of assessee.
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2023 (12) TMI 1124 - ITAT RAJKOT
Assessment against deceased/non existent assessee - Whether any proceedings which could have been taken against the deceased if he had survived may be taken against the legal representative in terms of section 159(2)(b)? - HELD THAT:- As seen that the AO despite having knowledge of the deceased assessee, except mentioning in the show cause notice, the name of the Legal Heir has not incorporated the deceased assessee either in the Assessment Order or in the subsequent demand notice or show cause notice for imposing/ proposing to impose penalty u/s 271AAC(1) of the Act.
In the decision of Hon’ble Punjab And Haryana High Court in the case of Swaran Kanta [1988 (11) TMI 91 - PUNJAB AND HARYANA HIGH COURT] AO therein has acknowledged the Legal Heir of the deceased assessee and, therefore High Court has held that the title of the Assessment Order which was not correctly worded would not make the Assessment Order invalid as was sought to be declared by the Revenue Authorities and the Tribunal was fully justified in restoring the order of assessment in exercising power under Section 292B of the Act. But in the present case, the Assessing Officer, despite having knowledge, has not recognised the Legal Heir while passing the final order as well as the subsequent demand order/notice and notices relied to imposing of penalty.
From the perusal of records, it can be seen that the AO has passed the Assessment Order in the name of deceased person which is non-existent person and when the order passed on the non-existent person despite represented by the Legal Heir, the same cannot be curable under Section 292B.
AO has consciously chose the name of the deceased assessee. In the eyes of law, if the assessee is deceased and Assessing Officer is very well aware about the same, then order has to be passed in the name of the Legal Heir of the deceased assessee. But the AO chose otherwise and, therefore, this defect is not curable as later on notices for demand as well as for imposing of penalty was issued in the name of the deceased assessee and thus the Assessment Order itself becomes void-ab-initio. CIT(A) has taken proper cognisance of the same and allowed the plea of the assessee and held the Assessment Order invalid. Appeal filed by the Revenue is dismissed.
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2023 (12) TMI 1123 - ITAT DELHI
Allowability of Employee Stock Option Plan [ESOP] expenses - allowable revenue expenses or not? - AO who was of the firm belief that there is no specific section under which ESOP expenditure is allowable under the Income tax Act, 1961 and the only section under which the said claim can be made is section 37, but even u/s 37 of the Act, claim of ESOP expenses cannot be allowed and added the same - HELD THAT:- It is the say of assessee that now this issue is no more res integra as the same has been decided in the case of Lemon Tree Hotels [2015 (11) TMI 404 - DELHI HIGH COURT] similar question was answered in favour of the Assessee by holding that the cost of ESOP could be debited to the profit and loss account of the Assessee. This Court has also in its decision in Oswal Agro Mills Ltd.[2015 (11) TMI 301 - DELHI HIGH COURT] held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure. Decided in favour of assessee.
Disallowance u/s 40a(ia) - non deduction of TDS on reimbursement of circuit expenses - During the course of scrutiny assessment proceedings, AO noticed that the assessee has reimbursed to Ameriprise Financial Services Inc [AFSI] on behalf of the assessee but assessee has not deducted - HELD THAT:- As considered the invoice and find that though the AT&T has raised invoice on AFSI, but it is for the service provided to the assessee at Gurgaon. The said notice for an amount and AFSI has raised the invoice of the same amount on the assessee and this amount has been reimbursed to the assessee. Thus we are convinced that the amount reimbursed by the assessee is towards circuit expenses to which provisions of section 40a(ia) do not apply. We, therefore, decline to interfere with the findings of the ld. CIT(A). Ground No. 2 is also dismissed.
Addition of employees contribution to the Provident Fund deposited beyond the due date - HELD THAT:- This issue is now well settled in favour of the Revenue and against the assessee in the case of Checkmate Services [2022 (10) TMI 617 - SUPREME COURT]
Disallowance u/s 14A - as been strongly contended that during the year under consideration, the assessee did not earn exempt income. Therefore, no disallowance is called for u/s 14A - HELD THAT:- We are of the considered view that if no exempt income is earned by the assessee, no disallowance can be made u/s 14A r.w.r 8D of the Rules as held in the case of Cheminvest Ltd [2009 (8) TMI 126 - ITAT DELHI-B] affirmed in CORRTECH ENERGY PVT. LTD. [2014 (3) TMI 856 - GUJARAT HIGH COURT]
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2023 (12) TMI 1122 - ITAT BANGALORE
Income taxable in India - interconnectivity utility charges (IUC) received by the assessee as Royalty / FTS in India - HELD THAT:- On perusal of the agreement between the assessee and the end users, it is noted that the installation and operation of sophisticated equipments are with the view to earn income by allowing the users to avail the benefits of such equipments or facility and does not tantamount to granting the use or the right to use the equipment or process so as to be considered as royalty within the definition of "royalty" as contained in clause 3 of Article 13 of India-France DTAA.
We note that the issue has now been settled pursuant to the decision of in a group of cases between M/s. Vodafone Idea Ltd. (Formerly known as M/s. Vodafone Mobile Services Ltd. vs. DDIT(IT) & Ors. [2023 (7) TMI 1164 - KARNATAKA HIGH COURT]
In case of Vodafone Idea Ltd [2023 (7) TMI 1164 - KARNATAKA HIGH COURT] also observed that the equipments and submarine cables are situated overseas and that Vodafone Idea Ltd. had availed certain services from the non-resident telecom operators and that such agreements would not create a permanent establishment of such non-resident telecom operators in India.
Thereafter Hon'ble High Court after verifying the facts of the case having regards to the decision of Hon'ble Supreme Court in case of Engineering Analysis Centre of Excellence (P.) Ltd [2021 (3) TMI 138 - SUPREME COURT].
We hold that payments received by assessee towards interconnectivity utility charges from Indian customers/end users cannot be considered as Royalty/FTS to be brought to tax in India under section 9(1)(vi)/(vii) of the Act and also as per DTAA.
We also note that in the present facts of the case, at no point of time, any possession or physical custody, control or management over any equipment is received by the end users/customers. It is also noted that the process involved in providing the services to the end users/customers is not "secret" but a standard commercial process followed by the industry players. Therefore the said process also cannot be classified as a "secret process", as is required by the definition of "royalty" mentioned in clause 3 of Article 13 of India-France DTAA.
The receipt of IUC charges cannot be taxed as Royalty under Article 13 in India of India-France DTAA. The payment received by the non-resident assessee amounts to be the business profits of the assessee which is taxable in the resident country and is not taxable in India under Article 5 of the DTAA as there is no case of permanent establishment of the assessee that has been made out by the revenue in India. Even Hon'ble High Court has in para 25, held that the non-resident service providers do not have any presence in India. Appeal filed by the revenue stands dismissed.
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2023 (12) TMI 1121 - ITAT DELHI
Assessment order passed on an non- existent entity - status of assessee - Pvt Ltd. Company or LLP - appellant company has been converted from the existing private limited company into a Limited Liability Partnership ('LLP') in accordance with the provisions of Limited Liability Partnership Act - say of the ld. DR that the facts of the present case is neither of amalgamation nor of merger/demerger, but a simple case of change in the status of the assessee from a private limited company to a limited liability partnership, therefore, assessment cannot be quashed as the status of the assessee continued for the year under consideration.
HELD THAT:- The undisputed fact is that the status of the assessee changed from private limited company to a limited liability partnership on 22.04.2019. It is also not in dispute that immediately the assessee informed not only the jurisdictional Assessing Officer but also the PCIT.
Also undisputed fact that subsequent to the change of status, all the notices were replied by the assessee in the name of LLP. Therefore, it can be stated that the change of status was brought to the knowledge of the Assessing Officer in all possible ways. Yet, the Assessing Officer chose to frame the final assessment order in the name of a no-existent entity. The ratio laid down by the Hon'ble Supreme Court in the case of Maruti Suzuki Ltd [2019 (7) TMI 1449 - SUPREME COURT] squarely applies and has been rightly followed by the NFAC.
In the case of Mahagun Realtors [2022 (4) TMI 347 - SUPREME COURT] , no intimation about merger was brought to the notice of the Assessing Officer and the return filed after amalgamation was still in the name of the amalgamated company and fact of amalgamation was not disclosed in the business/organization column and the assessment order indicated the name of both the amalgamation and the amalgamating company and during the assessment proceedings, the assessee made the Assessing Officer believe that the amalgamating company was still in existence. All these facts before the Hon'ble Supreme Court are in favour of the assessee which facts are completely absent in the case in hand. Therefore, we do not find any reason to interfere with the findings of the ld. CIT(A).
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2023 (12) TMI 1120 - ITAT DELHI
Income taxable in India - existence of dependent agent PE - amount received by the assessee from supply of software and automated services - HELD THAT:- The issue in question in AY 2017-18, the Co-ordinate Bench of the Tribunal in assessee own case [2023 (1) TMI 14 - ITAT DELHI] as held we find that the issue of attribution to profit when the transaction has been found to at Arm's Length between foreign party and the Indian AE, then no further attribution is required has already been decided by the decision of the Hon'ble Supreme Court in the case of DIT v. Morgan Stanley & Co. Inc [2007 (7) TMI 201 - SUPREME COURT]
As it follows that the finding of PE is also without cogent basis. Be that as it may issue of PE becomes academic and we are not engaging further into it. We have already found that functions performed by Adobe India are actually not different than the agreement and transfer pricing documentation.
There is no gainsaying that factually the issue stands on identical footing in relation to preceding assessment years, as, both the Assessing Officer and learned DRP have decided the issue following their earlier decisions. That being the case, respectfully following the decision of the coordinate Bench, as referred to above, we hold that the amount received by the assessee from supply of software and automated services, are not taxable in India. The Assessing Officer is directed to delete the additions.
Levying tax on interest on the income-tax refund received by the Appellant during the year under consideration - India-Ireland Double Taxation Avoidance Agreement - Revenue has not brought to our notice any binding precedent on this issue. Therefore, the Assessing Officer is directed to tax the interest @10% as prescribed in the Indo-Ireland Tax Treaty.
Credit of TDS whilst computing the tax liability of the Appellant for the year under consideration - We hereby direct the Assessing Officer verify the claim and grant the credit of taxes deducted at source in accordance with law.
Levying interest u/s 234A whilst computing the tax liability of the Appellate for the year under consideration - When the return of the income has been held to be validly filed then all consequent action related to levy of interest u/s. 234A would follow as prescribed under the law. We therefore direct the AO to verify and levy the interest u/s. 234A as per the provisions of the Act as if it is a valid return. This ground of the assessee appeal is allowed in terms indicate above.
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2023 (12) TMI 1119 - ITAT MUMBAI
Disallowance u/s 14A - if there are funds available with the assessee as a common pool of interest free and interest bearing funds, the assessee cannot be granted the benefit of the presumption - HELD THAT:- We find that on the issue of applicability of Section 14A of the Act, the co-ordinate Bench had decided the issue that when the assessee is holding investment as stock-in-trade, no disallowance under Section 14A of the Act can be made.
The co-ordinate Bench decided the issue for A.Y. 2012-13, relying on the decision of PCIT Vs. Punjab National Bank [2022 (6) TMI 85 - DELHI HIGH COURT] where in it has been held that where the assessee bank is holding investment as stock-in-trade no disallowance under Section 14A of the Act can be made. Decided in favour of assessee.
Refund adjusted first against the interest payment and then on taxes - HELD THAT:- This issue has been decided by the learned CIT (A) in favour of the assessee by relying upon several judicial precedents of the co-ordinate Benches. No contrary decision was produced before us. Therefore, we uphold the order of the CIT (A).when the refund is due to the assessee, the amount refunded has to be adjusted towards interest payment to assessee first and the balance any shall be adjusted towards tax - Decided in favour of assessee.
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