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Income Tax - Case Laws
Showing 121 to 140 of 163549 Records
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2024 (4) TMI 607
Addition u/s 68 - unexplained credit brought to tax - Addition u/s 2(2)(e) - amounts secured as loan were treated as “deemed dividend” - HC [2018 (2) TMI 2113 - DELHI HIGH COURT] deleted both the additions as done by ITAT and decided the appeal in favour of assessee.
HELD THAT:- As we are of the view that the judgment of the High Court does not warrant interference. Hence, the Special Leave Petition is dismissed.
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2024 (4) TMI 606
Addition u/s 14A r.w.r.8D - expenditure incurred on earning exempt income - Effect of section 14A amendment - ITAT deleted addition - HELD THAT:- The issue is squarely covered by an order of the Supreme Court in Essar Teleholdings Ltd [2018 (2) TMI 115 - SUPREME COURT] as held Rule 8D is prospective in operation and could not have been applied to any assessment year prior to Assessment Year 2008-09. - Decided against revenue
Addition made on account of income from interest - assessee is following mercantile system of accounting were the interest income would be considered on accrual basis - ITAT deleted addition - as per revenue Tribunal has erred in granting the benefit of Section 43D of the Act to the assessee - HELD THAT:- In absence of any doubt as to the status of the assessee as a State Financial Corporation and in face of the statutory scheme allowing it to account for recovery of interest on bad debts on cash basis, primarily, there is no error seen in the order of the Tribunal having allowed the benefit to the assessee to account for interest of bad debts on cash basis.
The revenue has not brought on record any material fact as may raise a genuine doubt as to the entitlement of the assessee to account for interest of bad debts on cash basis. Therefore, suggestion made by Shri Mahajan that the matter may be remitted to the Tribunal to pass appropriate order in accordance with the scheme of the Act, is declined. In absence of any basis shown to make such an order of remand, we are of the opinion that that exercise may remain purely academic and may therefore serve no real purpose. Here, we may note that the Tribunal has not recorded any independent finding in the order impugned in the present appeal. It has rather followed its earlier order inter party for the Assessment Year 2001-02.
Revenue as fairly states that the revenue does not appear to have assailed that order inasmuch as despite making efforts to obtain instructions in that regard, those are not forthcoming.
We find that the findings recorded by the Tribunal are findings of fact based on material evidence on record.
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2024 (4) TMI 605
Characterization of receipt - amount received by the appellant upon retirement from the partnership - taxability as capital gains under the Income Tax or not? - department, was of the firm stand that the right of the appellant in the partnership firm is a capital asset and the extinguishment of the right in the said firm is in fact a transfer of the receipt against capital asset - Appellant as contended that receipt of the share value of goodwill cannot be subjected to capital gains tax as there was no transfer of goodwill to the firm by the appellant - Whether the Income Tax Appellate Tribunal was correct in law in holding that the receipt of the share in value of goodwill by the appellant is taxable as capital gains under the Act ?
HELD THAT:- Coming to the impugned order passed by the Tribunal in SMT. GIRIJA REDDY, P HYDERABAD [2012 (7) TMI 652 - ITAT HYDERABAD] would give a clear indication that the principles laid down by the Division Bench of this High Court in Chalasani Venkateswara Rao [2012 (9) TMI 12 - ANDHRA PRADESH HIGH COURT] has been accepted by the Tribunal while making the aforesaid observations. However, while concluding, the Tribunal took a different view altogether which, therefore, would not be in the opinion of this Bench, proper, legal and justified.
Therefore, the respondent-Department cannot tax the amount received by the appellant upon retirement from the partnership as capital gains as there is no specific transfer of a capital asset affected when the appellant had retired from the partnership firm. So also, the finding of the Tribunal holding that the receipt of share in value of goodwill by the appellant is taxable as capital gains is not proper. Therefore, the impugned order passed by the Tribunal is unsustainable and the same deserves to be and is accordingly dismissed. Assessee appeal stands allowed.
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2024 (4) TMI 604
Reopening of assessment - reasons to believe - reopening beyond period of four years - disallowance u/s 40(a)(ia) - non deduction of tds on stake money paid by the petitioner to the horse owners u/s 194B or Section 194BB - as argued receipt on behalf of the horse - owners and the debits affected on their instructions disclosing that the financials are prepared from the primary accounts and without claiming any expenditure in the regard, thus there cannot be any allegation of failure to truly and fully disclose material facts - HELD THAT:- The second respondent, while deciding on the petitioner’s objections to the reasons offered to initiate re-assessment, has overlooked that the question of failure to deduct TDS for the amounts paid as Stake Money and the amounts deducted from the Stake Money on the instructions of the horse-owners to the credit of the horse-trainers and jockeys was examined after scrutiny of the petitioner’s book while considering disallowing these amounts under Section 40(a)(ia) of the IT Act.
In the light of the above, this Court must opine that there was no failure on the petitioner’s part to disclose primary facts and the reasons for re-assessment are recorded arbitrarily without considering all the circumstances. Hence, the second question framed is answered in favour of the petitioner holding that the re-assessment that is initiated after four years on the ground that there is failure to disclose primary facts is barred in law. Decided in favour of assessee.
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2024 (4) TMI 603
Rejection of DTVsV application - petitioner/assessee was seeking to settle only a part of the dispute obtaining between them - HELD THAT:- Given the fact we have concluded, while disposing of MUFG BANK LTD VERSUS COMMISSIONER OF INCOME TAX 2 & ANR. [2024 (4) TMI 530 - DELHI HIGH COURT] that an applicant can choose to settle one or more appeals or SLPs that may emerge from a given assessment year under the VSV Act, the issue raised in this writ petition stands covered by a decision in the said matter.
Accordingly, the prayer made in the writ petition is allowed. The impugned order rejecting the declaration and undertaking made by the petitioner/assessee along with the communication are set aside.
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2024 (4) TMI 602
Validity of Reopening of assessment - as argued notices were not served on the petitioner - HELD THAT:- The documents that are relied on by the petitioner disclose that respondent had issued various notices to the petitioner calling upon him to file his returns for the year 2014-15. Even though it is contended that notices were not served on the petitioner, the same cannot be accepted, in view of the specific averment made in the assessment order regarding service of notices. Therefore, the contention taken by the petitioner is that, he was not given sufficient opportunity of being heard and the order in question is an ex-parte order, also cannot be accepted.
Annexure-D was came to be passed on 19.03.2022 and before passing the order, several notices were issued to the petitioner. In spite of that, he has not chosen to appear before the authority and not complied the demand made therein. The next ground urged by the petitioner that the order in question was passed during Covid-19 also cannot be accepted.
Under such circumstances, even though we do not find any reason to entertain the petition, only to afford one more opportunity to the petitioner of being heard, we deem it appropriate to quash the assessment order produced, and petitioner is directed to file income tax returns for the assessment year 2014-15 with respondent No. 3 within 30 days from today and to cooperate in compliance of the procedure in terms of the Act.
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2024 (4) TMI 601
Revision petition u/s 264 by assessee - contention of the petitioner was negated by passing the order in the absence of any proper material being placed on record by the petitioner to establish that there was expenditure incurred in relation to earning income - as argued when the money was collected by the petitioner from farmers and repaid to the rig owners, the petitioner has acted as only a collection agent and there cannot be any income that has been derived by the petitioner and the said aspect of the matter has not property considered by the Commissioner of Income Tax
HELD THAT:- In the first place, there is no material on record to show that there was income derived by the petitioner by doing business. According to the petitioner, he was only a collection agent. The previous year returns and the relevant year business would only go to show that he was running vulcanizing shop and he could not have derived so much of income from his business.
Nevertheless, it was for the petitioner to place on record necessary documents before the Commissioner of Income Tax so as to consider the case of the writ petitioner in a proper manner while exercising the revisional jurisdiction u/s 264 of the I.T. Act.
As settled principles of law and requires no emphasis that the power of the revisional authorities is not as vide as an appeal and therefore, in was incumbent on the part of the petitioner to place clinching material on record so as to revise the order of assessing authority by exercising the power under Section 264 of the I.T. Act.
The petitioner having not placed on record such clinching material to show that what is the amount of money exactly derived, who are the persons who are land owners, who said to have dug the borewell in their lands and what exactly the charges that has been paid by him to rig owners, except producing the Bank statement as is rightly contended by the learned counsel for the respondents, the impugned order was inevitable.
Petitioner as seeks one more opportunity for the petitioner to place on record the necessary material before the Commissioner of Income Tax and requests the Court to set aside the impugned order and provide one more opportunity for the petitioner to place necessary clinching evidence so as to show that there was no income derived by him or to explain the alleged expenses.
Thus the matter is remitted to respondent No. 1 - the Commissioner of Income Tax for fresh disposal in accordance with law.
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2024 (4) TMI 599
Ex-parte order passed by CIT - Revision u/s 263 - no representation on behalf of the assessee in respect of the notice issued by him - DR placed on record the assessment order passed by the AO in pursuance to the direction of Ld.Pr.CIT - HELD THAT:- DR for the Revenue and perused the material available on record and gone through the orders of the authorities below. It is brought to our notice that the assessment has already been passed by the Revenue in pursuance to the direction of Ld. Pr.CIT.
From the assessment order, it is transpired that there was no compliance by the assessee. Further, it is noted that the original assessment order dated 21.10.2016 which has been revised, does not disclose any inquiry conducted by the AO except he accepted the documents filed by assessee. In the absence of any verification by the AO by making inquiry, we do not see any reason to interfere in the finding of Ld.Pr.CIT. Under these identical facts in the case of Rajmandir Estates (P.) Ltd. [2017 (1) TMI 774 - SC ORDER] has approved the action of Ld.Pr.CIT. Therefore, respectfully following the same, the grounds raised by the assessee are dismissed.
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2024 (4) TMI 598
Dismissal of appeal in limine u/s 249 by CIT(A) - Addition of purchase price of the property bought by assessee son - as argued payment made for purchase of property for which the investment is made by assessee's son from his own independent source - D.R. submitted that as per section 249(4)(b) the assessee is liable to file the return of income and pay the advance tax before filing the appeal before the CIT(A) but assessee failed to do so
HELD THAT:- The provisions of section 249(4)(b) of the Act is clear that the appeal before the CIT(A) should be admitted only when the assessee paid the advance tax where return of income has not been filed. The proviso to said section also describes that the assessee will get exemption from this clause if the application is made before the CIT(A) for not filing return of income or paying advance tax.
But in the present case assessee has explained that the assessee herself has not obtained the said property but her son has paid the said amount for purchase of property from his own fund. In fact, the assessee’s son is a joint owner of the said property and for the sake of conveyance specially the conveyance deed, the stamp deed is lesser therefore the assessee’s name has been utilised in the conveyance deed.
The relation is direct relation between the mother and son and therefore this should have been considered by the Assessing Officer as well as by the CIT(A). In the peculiar circumstances of the present case, the proviso to section 249(4)(b) of the Act should have been pointed out by the CIT(A) during the hearing which the CIT(A) failed to do so. Merely on the technical ground, the appeal before the CIT(A) cannot be dismissed and in fact after seeing the merit of the case, it appears that the transaction was not doubted and the investment made by the son of the assessee was also not questioned by the Assessing Officer. Decided on favour of assessee.
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2024 (4) TMI 597
Deduction u/s 80P(2)(d) - interest received from the Co-operative Bank - gross interest calculation - HELD THAT:- We note that issue under consideration is no longer res judicata and the interest received from Co-operative Bank is allowable deduction u/s 80P(2)(d) for that reliance is placed on the decision of Surat VankarSahakari Sangh Ltd [2016 (7) TMI 1217 - GUJARAT HIGH COURT] wherein it was held that assessee-co-operative society was eligible for deduction under section 80P(2)(d) of the Act, in respect of gross interest received from co-operative bank without adjusting interest paid to said bank - Appeal of assessee allowed.
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2024 (4) TMI 596
Addition u/s 68 sales made by the assessee to M/s Sangeeta enterprises - distance between the factory of the assessee and destination of Sangeeta enterprises is 54 km and therefore in the timing that is provided in the invoices of dispatch of goods is not possible - argument in the decision of Unicot food products private limited [2023 (9) TMI 1458 - ITAT MUMBAI] which is raised before us by the learned departmental representative of goods transported from assessee to destination of Sangeeta enterprises in one lorry and at jet speed - HELD THAT:- We find that the distant shown by the learned departmental representative of 54 km however the learned authorised representative has shown that the distance has wrongly been calculated by the learned departmental representative by Google Maps taking the wrong destination. The correct destination is hardly 30 km away from the place of dispatch of goods to the destination of delivery of goods. Even otherwise, from the excise records of the assessee, the goods have been shown as dispatch to the Sangeeta enterprises and relevant quantity of goods are reduced from the stock. Such stock has been sold by Sangeeta enterprises and sales is assessed in the hence of Sangeeta enterprises. Even in the case of unicot food products private limited the dispute was with respect to the sales made by that entity to Samaira enterprises, the coordinate bench has upheld in favour of the assessee. Therefore, we do not find any reason to deviate from the finding of the coordinate bench in that case. We confirm the order of the learned CIT – A deleting the addition.
Addition u/s 69C - advertisement expenditure incurred by the assessee on video shooting of its product "santoor" not recorded in the books of account of the assessee - HELD THAT:- As the product Santoor is owned by the assessee, marketed by the assessee and manufactured by the assessee naturally the expenditure is belonging to the assessee only. Thus, the argument that these expenses do not belong to the assessee is devoid of any merit.
Also out of the total payment to be made of the expenditure of ₹ 28,222,000 the payment of ₹ 229 lakhs belongs to the period prior to 4/3/2014. Thus, the above payment, if at all made, does not belong to financial year 2014 – 2015. Thus, addition could not have been made for assessment year 2015 – 2016. Accordingly, the addition made by the learned AO under section 69C of the act and confirmed by the learned CIT – A is not sustainable and hence directed to be deleted.
Addition u/s 69A - unexplained money - Loose papers found the learned assessing officer noted that during search - HELD THAT:- We find that the order of the learned CIT – A in case of Unicote for products private limited has travelled before the coordinate bench wherein [2023 (9) TMI 1458 - ITAT MUMBAI] as according to ld. AO, the entire cash sales reflected in the loose sheets pertain to the assessee when there are corresponding sales, which has been accounted in the books of M/s. Samaira Enterprises. If that premise of the AO is to be accepted then sale of M/s. Samaira Enterprises would be nil which cannot be the case, because this entity has shown sales and is assessed to tax since past. Thus, based on these documents and the ld. CIT (A) has given his elaborate finding for his conclusion and given direction to the ld. AO to verify and cross check, whether the sales adopted by him from the loose sheets appears in the cash book / bank book / sales of M/s. Samaira Enterprises or not and similar exercise to be undertaken with respect to expenses of the outgoing in the loose sheets seized and impounded in search proceedings. We do not find any reason to tinker with such a direction, which is based on the facts and material on record. Decided against revenue.
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2024 (4) TMI 595
Exemption u/s 11 - Charitable activity u/s 2(15) - AO has treated that the activities of the trust as commercial activity by invoking the proviso to section 2(15) - HELD THAT:- As relying on decision by the Co-ordinate Bench in assessee’s own case [2024 (3) TMI 944 - ITAT KOLKATA] we are inclined set aside the order of ld. CIT(A) and further uphold that the assessee is entitled to exempt u/s. 11 of the Act during the year on the ground that the profit derived from the services rendered as public utility service is very meager or there is deficit. Accordingly, the AO is directed to allow the exemption u/s. 11 of the Act. Appeals of the assessee are allowed.
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2024 (4) TMI 594
Addition u/s 68 - share capital/share premium received as unexplained - onus to prove - no compliance of summons issued u/s 131 to the directors of the assessee - HELD THAT:- When the assessee has filed all the evidences as desired by the AO ,then the assessee is presumed to have discharged the onus cast upon it and the onus shifts to the revenue to conduct an enquiry on this evidences and record findings as to how the investment/money received by the assessee are covered u/s 68 of the Act. However in the present case, we note that no such enquiry was conducted into the evidences filed by the assessee and the addition was made simply for the reason that there was no compliance of summons issued u/s 131 to the directors of the assessee for enquiry and to produce the directors of the subscribing companies. In our opinion, there is no substantive ground for making the impugned addition and non production of directors of subscribing companies cannot be a justification for addition u/s 68 - Also assessee has filed all the details/evidences/ information from his own source as well as from all the subscribers.
In the present case before us the assessee has furnished all the evidences before the AO but the AO has failed to conduct any further enquiry into these details /evidences and merely relied on the theory of non production of directors of the subscribing companies by the assessee while issuing no summons u/s 131 or notices u/s 133(6) of the Act to the subscribers. Decided in favour of assessee.
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2024 (4) TMI 593
Reopening of assessment u/s 147 - Addition u/s 68 - applicability of section 115BBE - HELD THAT:- Information received from investigation wing, while recording the reasons AO categorically mentions that escapement of income has arisen on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. However, assessee has already assessed u/s 143(3).
The search on Mr. Dilip Kumar Gupta, his statement and information about accommodation entries received by the assessee from Sarwaria Investments Consultants Pvt. Ltd. as a result into formation of belief that income of the assessee has escaped assessment cannot be found fault with.
AO has received a tangible material and therefore, found if the assessment u/s 143(3) of the Act has been made, the reopening of the assessment on receipt of new information cannot be found fault with. As the assessee is also not challenging reopening of the assessment, same stands confirmed. Thus, ground no. 1 of the appeal is dismissed.
Addition u/s 68 - onus to prove the identity, creditworthiness of the lender and genuineness of the transaction - Assessee produces material to discharge onus cast up on it in reassessment proceedings showing identity and creditworthiness of the lender as well as genuineness of the Transaction. If we hold that such material is enough, it will result in to blurring distinction between reopening of an assessment and reassessment of income. Reopening is door to make a reassessment.
Assessee has accepted a loan from Sarwaria Investments Consultants Pvt. Ltd. To prove the identity of the above company, assessee has submitted the PAN No. of the lender as well as the fact that it is assessed with ITO, ward 2(1), Kolkata. With respect to the credit worthiness of the above loan, assessee has submitted the copy of the bank account of the lender with IndusInd bank. In the bank account when the loans were given to the assessee company, lender had received the sum from other entities.
With respect to the genuineness of the transaction, assessee has submitted the copy of account of the lender from the books of the assessee and the confirmation of the lender from the books of lender providing copy of account of the assessee. The bank account of the lender and bank account of the assessee is also shown at the time of taking of the loan and on repayment of the loan. Form no. 26 AS, which is the annual tax statement of the lender, also shows that assessee has paid interest to the lender is deducted. In view of the above information provided before the lower authorities it is clear that assessee has discharged its initial onus to prove the identity, creditworthiness of the lender and genuineness of the transaction as per provision of Section 68 of the Act.
Failure of the learned Assessing Officer to make any further inquiry on the document submitted by the assessee and throwing back onus on the assessee is fatal to the addition made in this case. Ld AO is not correct in holding that inquiry made by the Investigation wing is clear-cut. According to us AO should have conducted inquiry on the evidences submitted during reassessment proceedings either by (i) deputing inspectors (ii) issuing summons u/s 131 or (iii) by issuing inquiry letter u/s 133 (6), (iv) by asking assessee to produce the directors of the company. If none of the above steps or any other efforts are made by the ld AO on the evidences submitted, AO cannot make addition u/s 68 - we reverse the orders of the Ld. lower authorities and direct the learned Assessing Officer to delete the addition u/s 68 - Appeal of the assessee is partly allowed.
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2024 (4) TMI 592
Penalty proceedings u/s 271(1)(c) - deduction u/s 35(2)(AB) was reduced by the Competent Authority - HELD THAT:- As time of filing of the return of income, the claim of deduction u/s 35(2)(AB) of the Act, was not reduced by the Competent Authority. The Competent Authority had subsequently approved the expenditure to an extent , therefore, the assessee during the course of assessment proceedings, reduced its claim as approved.
CIT(A), therefore, considering the facts and circumstances of the case, applied the ratio laid down in the case of Price Water House Coopers Pvt. Ltd [2012 (9) TMI 775 - SUPREME COURT] It is not the case of the Revenue that expenditure claimed by the assessee, was not genuine. The accounts are audited and reported in Form No.3CLA was filed. Thus, the assessee had disclosed all material particulars before the Assessing Authority.
Merely because the DSIR reduced and approved lower expenditure should not be the only reason for imposition of penalty. The AO ought to have brought adverse material in respect of the expenditure so claimed by the assessee more particularly, when the assessee himself has reduced its claim as recorded by the AO in the assessment order itself.
Thus in the light of decision of M/s. Napord Life Sicences P.Ltd. [2019 (2) TMI 980 - ITAT MUMBAI] no infirmity in the finding of Ld.CIT(A), the same is hereby affirmed. Grounds raised by the Revenue are accordingly, dismissed.
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2024 (4) TMI 591
Royalty receipts - income deemed to accrue or arise in India - assessee had sold software licenses to its associated enterprises and to other Indian customers - HELD THAT:- As decided in assessee own case [2021 (9) TMI 1542 - KARNATAKA HIGH COURT] relying on the case of Engineering Analysis Centre of Excellence Pvt. Ltd. (2021 (3) TMI 138 - SUPREME COURT] sale proceeds received by the assessee on sale of software licenses cannot be categorized as "Royalty" within the meaning of provisions of DTAA. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete the addition made as "royalty" income - Decided in favour of assessee.
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2024 (4) TMI 590
Determine the nature of losses on forward foreign exchange contracts and foreign exchange derivative contracts - CIT(A) deleting the disallowances of losses made by the AO on Forward Foreign Exchange Contract and Foreign Exchange Derivative Contract by treating them as business loss and allowed them to set off and carry forward against the business income - AR as submitted that the transactions would not be covered u/s 43(5) but the losses were allowable to the assessee as business expenditure u/s 37(1) - HELD THAT:- The assessee, in the present case, is not a dealer in foreign exchange and therefore, it could not be said that such transactions were part and parcel of business transactions unless interse nexus thereof was established by the assessee.
In the decision of Mumbai Tribunal in Vinodkumar Diamonds Pvt. Ltd. [2013 (11) TMI 408 - ITAT MUMBAI] it was held by the bench that in order that for forward transactions in commodities may fall within proviso (a) to section 43(5) of the Act, it would be necessary that the raw materials or merchandise in respect of which the forward transactions have been made by the assessee must have a direct connection with the goods manufactured or the merchandise sold by him.
As per Board’s Circular, in order to be genuine and valid hedging contracts of sales, the total of such transactions should not exceed the total stocks of the raw materials or the merchandise on hand which would include existing stocks as well as the stocks acquired under the firm contracts of purchase as held by Mumbai Tribunal in the case of Araska Diamond (P.) Ltd [2014 (10) TMI 776 - ITAT MUMBAI] - This decision considered the decision of MP Sugar Mills (P.) Ltd. [1983 (8) TMI 42 - ALLAHABAD HIGH COURT] which held that it will depend upon the facts of each case whether a particular transaction by way of forward sale, which is mutually settled otherwise than by actual delivery of the said goods, has been entered into with a view to safeguard against loss through price fluctuation in respect of the contract for actual delivery of the goods manufactured. Therefore, the loss was held to be not allowable either u/s 43(5) or under proviso thereof.
Thus the adjudication of Ld. CIT(A) is set aside and the issue is restored back to the file of CIT(A) for de novo adjudication with a direction to the assessee to substantiate its case and by filing requisite details / explanations. Revenue appeal stand allowed for statistical purposes.
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2024 (4) TMI 589
Disallowance of Provision for leave encashment - AO disallowed the same on the ground that, as per Section 43B(f) deduction for Leave Encashment is allowable only on actual payment and provision for Leave Encashment cannot be allowed as deduction - HELD THAT:- The issue is now settled against the assessee by the decision of the co-ordinate bench of this Tribunal in the assessee’s own case [2020 (3) TMI 713 - ITAT CHENNAI]. Thus we are of the considered view that the assessee is not entitled for deduction towards the provision for Leave Encashment and thus, we are inclined to uphold the findings of the ld. CIT(A) and reject ground taken by the assessee.
Disallowance of deduction u/s 36(1)(viii) - AO has disallowed the claim, mainly on account of the fact that the amount was not transferred to Special Reserve during the financial year 2013-14 - HELD THAT:- Assessee has transferred Rs. 30 Cr to Special Reserve from the profits of the previous year 2013-14 and therefore, is eligible to claim the deduction u/s 36(1)(viii). Though as per the section, Reserve needs to be created out of the income of the previous year, there is no stipulation that the Reserve should be created in the previous year itself. A similar issue has been decided by the co-ordinate Bench of this ITAT in the assessee’s own case in [2016 (2) TMI 1236 - ITAT CHENNAI] for the Asst Year 2009-10.
The only reason for disallowing the claim of the assessee is that the Reserve was not created during the Financial Year 2013-14 and the ITAT order for the earlier year has not been accepted by the Department. Therefore, respectfully following the decision of the co-ordinate bench of the ITAT in assessee’s own case[supra], we hold that the assessee is entitled to the deduction u/s 36(1)(viii) as the Reserve was created out of the profits for the year 2013-14 and delete the addition made by the AO. This ground of the assessee’s appeal is allowed.
Enhancement by CIT(A) - Depreciation on investments - CIT(A) confirmed additions based on the enhancement petition by the AO - HELD THAT:- Disallowance of depreciation on investment, was never subject matter of assessment order. Hence, we are of the view that enhancement made by CIT(A) on altogether new issue is without authority of law and accordingly, we quash the enhancement. Since we have decided the issue on technical grounds, the issue on merits is left open.
Release of NPA provision - During the assessment proceedings the AO did not raise the issue - as during the appellate proceedings before the CIT(A), the AO moved an enhancement petition requesting him to enhance the income in respect of reversal of NPA provision made by the assessee in the books - HELD THAT:- We find that this issue is also a purely a new issue raised by CIT(A) and this was never the subject matter of appeal before him or this was never discussed by the AO during assessment proceedings or even a whisper is not there in the assessment order about this issue. The reasons given by us in the preceding paragraph on the power of enhancement shall mutatis mutandis apply to this ground of appeal as well. Therefore, we quash the enhancement and allow the ground of assessee’s appeal by directing the AO to delete the addition.
Deduction u/s. 36(1)(vii) - bad debts actually written off in the books of accounts of the assessee - HELD THAT:- As relying on decision of City Union Bank Ltd [2020 (3) TMI 475 - MADRAS HIGH COURT] we hold that the bad debts written off relating to non-rural advances is not required to be adjusted against provision for bad and doubtful debts made u/s. 36(1)(viia) of the Act and quash the enhancement made by the CIT(A) allowing the ground of assessee’s appeal by directing the AO to delete the addition. Since we have decided this issue on merits, the issue on technical ground is left open.
MAT computation - computing the book profit u/s 115JB towards provision for leave encashment - assessee had made provision for leave encashment in the books based on actuarial valuation and claimed the same as deduction while computing book-profit by observing the same an unascertained liability - HELD THAT:- As relying on HP. Tourism Development Corporation Ltd [2013 (6) TMI 97 - HIMACHAL PRADESH HIGH COURT] we hold that the provision for leave encashment is an ascertained liability and cannot be added to book profit, allowing the ground of assessee’s appeal by directing the AO to delete the addition.
Enhancement ordered by the CIT(A) - rework the deduction u/s. 36(1)(viia) by reclassifying some of the banks as non rural based on the census data of the year 2011 - HELD THAT:- As in the assessee’s case in [2021 (11) TMI 568 - ITAT CHEENAI] for the A.Y 2013-14. we hold that the branches cannot classified considering the population as per 2011 census and therefore set aside the order of the CIT(A) on this issue and allow the ground of appeal of the assessee. Since the issue is decided on merits the technical ground raised by the appellant is left open.
Disallowance of stale drafts - assessee is in the business of banking, has issued demand drafts to various persons and further any unclaimed demand drafts was kept in stale draft account under the head ‘outstanding liabilities' - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of ITAT in assessee’s own case for assessment year 2013-14 [2021 (11) TMI 568 - ITAT CHEENAI], where under identical circumstances the Tribunal has deleted addition made by the AO by holding that amount kept under stale draft account is not income of the assessee.
Identical issue in case of City Union Bank Ltd. [2020 (3) TMI 475 - MADRAS HIGH COURT] where it has been clearly held that amount kept under stale draft account cannot be treated as income of the assessee. Decided against revenue.
Disallowance of ex-gratia payment - AO had disallowed ex-gratia payment made by the assessee to its staff by observing that the Revenue has filed appeals before the Hon’ble High Court against the orders of the ITAT and in order to keep the issue alive, the claim made by the assessee was disallowed - HELD THAT:- An identical issue had been considered by the Tribunal in assessee’s own case for assessment year 2013-14 in [2021 (11) TMI 568 - ITAT CHEENAI], where the Tribunal after considering relevant facts held that exgratia payment to staff is deductible u/s. 37(1) - Decided against revenue.
Disallowance of expenditure relatable to exempt income u/s. 14A - HELD THAT:- An identical issue had been considered by the Tribunal in assessee’s own case for assessment year 2013-14 [2021 (11) TMI 568 - ITAT CHEENAI], where the Tribunal after considering relevant facts held that no disallowance u/s 14A is warranted held that no disallowance u/s. 14A is permissible in terms of Rule 8D, where the assessee is engaged in banking business. A similar view is taken by the Hon’ble Supreme Court in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] and held that shares and securities held by a bank are stock-in-trade and income received on such shares and securities must be considered to be business income. That is why, Section 14A of the Act would not be attracted to such income. Decided against revenue.
Accrual of income - Addition made towards interest on non-performing assets - AO has made addition towards interest on nonperforming assets (NPAs) by holding that interest on loans needs to be offered to tax on accrual basis in respect of NPAs, which are more than 90 days old but less than 180 days - HELD THAT:- We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment year 2013- 14 [2021 (11) TMI 568 - ITAT CHEENAI], where under identical set of facts and by following the decision of Vasisth Chary Vyapar Ltd., [2018 (3) TMI 56 - SUPREME COURT] held that interest income cannot be said to have been accrued to the assessee on NPAs account - Decided against revenue.
Disallowance of depreciation on ATMs - assessee has claimed depreciation on ATMs at 60% - AO treated the ATMs as Plant & Machinery and restricted the depreciation @ 15% - HELD THAT:- We find that an identical issue has been considered in the case of NCR Corporation [2020 (6) TMI 439 - KARNATAKA HIGH COURT] wherein held that the ATM machines are computers and are eligible for 60% depreciation.
Disallowance of deduction claimed by the bank u/s 36(1)(viia) by computing the Aggregate Average Rural Advances by considering the incremental advance and not outstanding advance - HELD THAT:- We find that an identical issue has been considered by the Tribunal in the case of City Union Bank [2024 (3) TMI 613 - ITAT CHENNAI] where under identical set of facts has decided the issue in favour of the assessee as held AO is erred in computing deduction u/s. 36(1)(viia) of the Act, by considering only incremental advances made by rural branches of appellant bank as against the aggregate average advances made by rural branches of appellant bank as outstanding at the end of the financial year and thus, we direct the Assessing Officer to consider aggregate average advances outstanding at the end of the relevant financial year for the purpose of computing deduction u/s. 36(1)(viia) of the Act - Decided against revenue.
Depreciation on investments - notional appreciation adjustment against the depreciation - HELD THAT:- We find that this issue is squarely covered by the ITAT in the case of State Bank of India [2020 (2) TMI 1350 - ITAT MUMBAI] with regard to addition of notional appreciation. In the said decision, the ITAT after analysing various decisions of the Hon’ble Supreme Court held that notional appreciation cannot be taxed.
Valuation of Preference Shares, we find that the same is held by the assessee as stock in trade. The Courts have consistently held in various decisions that the securities held by the Bank are stock in trade and can be valued at lower of cost or market value. Further we also find that the Board has issued a circular No. 18/2015 dated 02-11- 2015 in which it has stated that all the securities held by the Bank are business assets. In view of the above, we hold that the notional appreciation need not be offered to tax and the depreciation on the Preference shares is allowable and we delete the addition made by the AO and allow the assessee’s ground of appeal.
Computation of deduction u/s. 36(1)(viii) - Assessee has followed a particular method. But the AO has substituted his own method and has disallowed a sum - HELD THAT:- We find that this issue has been decided by the ITAT in the assessee’s case for the Asst Year 2013-14 [2021 (11) TMI 568 - ITAT CHEENAI] wherein as held AO had already accepted computation methodology adopted by the assessee bank for assessment years 2010-11 & 2011-12, based on directions of ITAT, we are of the considered view that this year also the issue needs to go back to the file of the AO to consider the issue in light of directions of the Tribunal for earlier years. Hence, we set aside the issue to the file of the AO and direct him to follow the directions given by the Tribunal for earlier assessment years. This ground of the assessee is allowed for statistical purpose.
Classification of 8 branches as non rural by the AO - HELD THAT:- As we find that the CIT(A) has not adjudicated this ground. Hence, in the interest of justice, we remit the issue back to the CIT(A) with a direction to adjudicate the same. This ground of the assessee is allowed for statistical purpose.
Addition made towards interest accrued but not due on Government securities - AO made this addition by holding that income has accrued on the Government securities for the period from December 2014 to May 2015 and the same should be offered to tax for the Asst Year 2015-16 - CIT(A) deleted addition - AR submitted that the income on government securities accrues only on appointed days and therefore, the broken period interest receivable is not liable to tax - HELD THAT:- We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that this issue has been decided by the Hon'ble Madras High Court in the assessee’s own case in favour of the assessee. Further, we find that the Hon'ble Karnataka High Court also decided the issue in favour of the assessee.
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2024 (4) TMI 588
Delay in filling appeals - delays of 160 days in filing present appeal - HELD THAT:- The assessee is not likely to get any benefit in filing the appeals belatedly, rather there is always chance that such delay not be condoned. Considering the submission of Ld. AR for the assessee, wherein he has fairly accepted that he could not logged on the ITBA portal due to frequent changing in password by regular CA of assessee. We find that assessee has reasonably explained the cause of delay of 160 days, hence, the delay in the appeal is condoned.
Bogus LTCG on listed company’s shares - Addition u/s 68 - disallowance of appellant’s claim of exempt income u/s 10(38) - HELD THAT:- We find that fact of the present case is identical to the facts in [2024 (4) TMI 529 - ITAT SURAT] wherein held as the assessee proved genuineness of sale transaction by bringing on record contract notes of sale and purchase, bank statement of broker and demat account showing transfer in and out of shares, Assessing Officer was not justified in bringing to tax capital gain arising from sale of shares as unexplained cash credit. Thus, addition of undisclosed income under section 68 is deleted. In the result, the ground of appeal raised by the assessee is allowed.
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2024 (4) TMI 587
Commission paid on bogus purchase and sales made by the assessee company - HELD THAT:- We find that the assessee has been contending right from the assessment proceedings that it has disclosed and offered to tax gross profit on bogus sales which has been accounted for in its books of accounts and the commission payment to the broker is therefore duly covered by the quantum of gross profit already offered to tax. The factum thereof has not been disputed by the Revenue and at the same time, both the lower authorities have failed to give due effect to the same.
On perusal of records, it is noted that the assessee has disclosed gross profit at the rate of 1.60% on bogus sales of knitted cloth and therefore, the commission for procuring the bogus purchase and sale amounting as so determined by the AO stand covered by the said gross profit and there cannot be any separate addition in this regard. Therefore, the addition sustained by the ld CIT(A) is hereby directed to be deleted and the ground of appeal is allowed.
Unexplained investment u/s 69 - HELD THAT:- Useful reference can be drawn to the decision of the Hon’ble Supreme Court in case of Anantharam Veerasinghaiah & Co [1980 (4) TMI 2 - SUPREME COURT] where the Lordships have held that where an intangible addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitute the undisclosed income of the assessee. It was held that that income is as much a part of real income as that disclosed in the account books, has the same existence and could be available to the assessee as the books profits could be and may constitute a fund from which the assessee may draw subsequently for meeting expenditure or introducing amount in his books.
It was held that the mere availability of such fund cannot in all cases imply that the assessee has not earned further secret profits. It is for the taxing authority in each case to determine whether the unexplained cash deficit and the cash credits can be reasonably attributable to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that year. In the instant case, we find that the unaccounted receivables which were brought to tax as undisclosed income at the time of survey was available to the assessee to make subsequent purchases which again remain unaccounted for and now sought to be taxed by the authorities.
Given that the said amount has already been brought to tax in the impugned assessment year, there cannot be any further addition on utilization of the said amount towards making the purchases. Therefore, the addition to the extent of Rs 57.85 lacs out of addition of Rs 58.57 lacs sustained by the CIT(A) is hereby directed to be deleted. In the result, the ground of appeal is partly allowed.
Addition on account of difference in stock - assessed the value of dead stock @ 30% and relief of value of 70% was given - HELD THAT:- We find that the ld CIT(A) has taken due cognizance of the assessee’s contention regarding valuation of stock on average price and has held that the stock valuation was done on the basis of sale price and Gross profit @ 7.45% is to be reduced for arriving at the value as per books of accounts and assessee was held entitled for benefit. Further, regarding the second valuation report, we find that no such contention has been raised by the assessee before the lower authorities or is emerging from the assessment and appellate order. Even if we look at the valuation we find that it is unclear whether the same has been taken cognizance of by the survey team or for that matter, the AO during the assessment proceedings and in any case, it talks about valuation of stock as per average weighted price method for two quarters which has been duly addressed by the ld CIT(A) where he has held that the stock has to be valued at cost after reducing the gross profit rate. No justifiable basis to interfere with the order of the ld CIT(A) where he has sustained the addition and the same is hereby upheld and the ground of appeal taken by the assessee is dismissed.
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