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2023 (1) TMI 1221 - DELHI HIGH COURT
Seeking no objection certificate from the Income Tax Department in order to leave India - no objection certificate is not being issued as the Petitioner does not have a PAN number - HELD THAT:- The company i.e., the Petitioner’s employer, has submitted Form 30A under the Income Tax Act, 1961 giving an undertaking to the Commissioner of Income Tax and applied for the issuance of the No-Objection Certificate (NOC) under Form 30B, on behalf of the Petitioner. The said Form 30B is to be issued by the Income Tax Department. However, the issuance of the same seems to have been delayed.
The case of the Petitioner is that the company i.e, his employer has given an undertaking as per Form 30A of the Income Tax Act, 1961 to the Income Tax Department in respect of any income tax liability which may become due and payable. Accordingly, reliance is placed upon the duly filled Form 30A which has been certified by the employer.
As submitted by ld. Counsel for the Income Tax Department that if the company appears before the Income Tax Department or furnishes requisite documents relating to the Company and the Petitioner, the NOC under Form 30B, would be issued expeditiously.
Let the company’s official along with the Petitioner appear before the Income Tax Department on 7th February, 2023 - On the said date whatever documents or undertakings are required from the Petitioner or his employer, shall be submitted to the Income Tax Department and Form 30B shall be issued within two weeks thereafter.
Upon receiving the NOC under Form 30B, the Petitioner shall then leave India. The requisite permit/exit clearance shall be extended till 15th March, 2023 within which period the Petitioner shall make all necessary arrangements to leave India.
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2023 (1) TMI 1220 - DELHI HIGH COURT
Stay of demand - petitioner granted stay subject to payment of 15% of the demand - pending the decision in the appeals, the demand raised against the petitioner - HELD THAT:- The issue involved in all the appeals pending consideration before the CIT (A) is common. Six (6) of eight (8) appeals are ripe for a decision. The decision in these appeals would also govern, even according to Mr Rai, the remaining two (2) appeals. Secondly, Mr Rai has been unable to point out any provision in the Act, wherein demand can be raised against the petitioner with regard to withholding tax, for the failure to deduct the same at source.
Petitioner’s contention that the cost of free samples handed over to its vendors cannot be construed as commission or brokerage, is also required to be examined in the pending appeals. At worst, the petitioner is an assessee in default, therefore, only consequences provided in the Act will attach to it. Under Section 191 of the Act, the liability for tax, prima facie, would rest on the assessee i.e., the vendors in this case.
We do that not do not want to express any final view on the merits of this aspect of the matter, since the appeals are pending consideration before the CIT (A).
Given the aforesaid position, we are of the view that the best way forward in these cases would be to direct the CIT(A) to dispose of the six (6) appeals in which written submissions have already been filed.
Insofar as the remaining two (2) appeals are concerned, reference to which is made hereinabove, the CIT(A) should issue notice within the next five days, whereupon the petitioner should file its written submissions, as early as possible, though, not later than two (2) weeks from the date of receipt of notice. CIT(A) will, then, dispose of the eight (8) appeals pending before it within the next eight (8) weeks.
Pending the disposal of the appeals, the impugned order in the above-captioned writ petitions i.e., the order dated 16.12.2022, shall remain stayed. Once CIT(A) passes an order in the pending appeals, the fate of the petitioner will be governed by the order that would be passed by the CIT(A).
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2023 (1) TMI 1219 - ITAT RAJKOT
Reopening of assessment u/s 147 - unexplained cash credits - suspicious transactions carried out against Late Shri Chhotalal V. Doshi (Prop. of Abhi Enterprise) and it was found that he used to lend his bank account to other persons for commission - HELD THAT:- As the Revenue has not brought on record any corroborative evidence to demonstrate that the money deposited in the Bank Account operated by Late Shri Chottalal Doshi belong to the assessee, the Co-ordinate Bench has been pleased to delete the addition made by the authorities below.
We, under the identical facts and circumstances of the case as relied upon by the assessee in the case of Shri Mukeshkumar Vrajlal [2022 (9) TMI 1115 - ITAT RAJKOT] do not find any reason to deviate from such stand taken by the Co-ordinate Bench. Hence, respectfully, relying upon the same, we delete the addition made by the authorities below. The appeal preferred by the assessee for A.Y. 2010-11 is, thus, allowed.
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2023 (1) TMI 1218 - ITAT DELHI
Characterisation of income - interest on the compensation received by the assessee -compensation exempt from tax u/s 10(37) or taxable u/s 56(2)(viii) - interest received on enhanced compensation treated as Income of the appellant - assessee was owner of agricultural land and the same was taken under compulsory acquisition by Government of Haryana - assessee claimed the entire enhanced compensation inclusive of interest as residual part of compulsory acquisition of agricultural land and claimed it as exempted u/s 10(37) - AO did not accept the contention of the assessee and held that the interest income as taxable income under the head “income from other sources u/s 56(2)(viii) - HELD THAT:- As decided in SHRI SATBIR, SHRI VED PAL, SHRI SHEO CHAND, SHRI KARAMBIR, SHRI DHARAM PAL AND SHRI CHANDGI RAM [2018 (7) TMI 1163 - ITAT CHANDIGARH] as per proposition laid down in Ghanshyam, HUF [2009 (7) TMI 12 - SUPREME COURT] remains and which having been laid down by the Hon'ble Apex Court is the law of the land and has to be followed by all lower authorities. The interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. Appeals of the assessees are allowed.
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2023 (1) TMI 1217 - ITAT DELHI
CIT(Appeals) dismissed the appeals of the assessee ex parte - Reopening of Assessment u/s 147 - reassessment pursuant to search proceedings conducted against the assessee as per the provisions of Section 153A - unexplained investments by the Assessing Officer in the absence of any response from the assessees - assessee contended that there is a petition pending before the Settlement Commission in the case of company wherein assessee made investment and the outcome of the decision of the Settlement Commission will have bearing on the appeals of the assessee - HELD THAT:- Taking the totality of facts and circumstances into consideration and since the assessments were made under 144 r.w.s. 147 of the Act and the Ld. CIT(A) also passed ex parte order rejecting the submission of the assessees to keep the appeal proceedings in abeyance and in the interest of justice, these appeals are restored to the file of the Assessing Officer for denovo assessment in accordance with law. The Assessing Officer shall provide adequate opportunity of being heard to the assessees. The assessees are at liberty to file necessary evidences in support of their claims. Grounds raised by the assessee are allowed for statistical purpose.
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2023 (1) TMI 1216 - ITAT MUMBAI
Assessment u/s 153A - Addition u/s 68 - bogus LTCG - As argued no incriminating material found during the course of search and therefore, no addition can be made in the hands of the assessee - HELD THAT:- During the course of search, the long-term capital gain earned by the assessee claimed as exempt under section 10 (38) of the act was found recorded in the books of account of these non-genuine companies. The statement recorded of the assessee under section 132 (4), assessee himself has explained whole modus operandi of the scheme and admitted that long-term capital gain claimed by the assessee and his family members and the companies is bogus, non-genuine and all out of many political and fraudulent transactions.
Nothing is required to be unearthed during the course of search as more than enough incriminating material was already available with the search party confronted to the assessee were admitted having the unaccounted income. It is always not necessary that there have to be some paper trail, which should have been found during the course of search for making an addition. The statement made by the assessee confirming the information, admitting the unaccounted income, explaining the modus operandi of earning such income, naming the parties involved in such activity shows clear-cut evidences of earning unaccounted income. Therefore, we do not find any infirmity in the order of the learned CIT – A the extent holding that that the addition of unaccounted long-term capital gain which is proved to be bogus is based on material found during the course of search and satisfies all the conditions prescribed under section 153A - no merit in the cross objections of the assessee, hence it is dismissed.
Telescoping of the gross profit addition in the hands of this assessee company - The appeal filed by the learned assessing officer is allowed for statistical purposes setting aside back to the file of the learned CIT – A to give clear-cut finding as to how merely an addition of ₹ 6 crores is enough where as bogus long-term capital gain earned is more than ₹ 120 crores. The learned CIT – A is also directed to give a specific finding year wise, amount twice, assessee wise with reasons that how telescoping of the long-term capital gain earned by individuals and companies can be subsumed in a meager addition of ₹ 6 crores in the hands of Hazel Mercantile Ltd.
Addition u/s 14A r.w.r. 8D - HELD THAT:- CIT – A held that there is no dispute on applicability of section 14 A, the assessee is not given its working for the computation of disallowance, therefore the satisfaction recorded by the learned AO is correct. However, he held that the investment made by the assessee in its subsidiaries and where share capital and free reserve of the assessee stands at ₹ 616 crores, which is far in excess of the investment made in those subsidiary companies.
Therefore he confirmed the disallowance only with respect to 0.5% of the administrative expenditure to ₹ 174634/–. No infirmity is pointed out. Therefore, the action of the learned CIT – A cannot be found fault with. Ground number 7 of the appeal of the assessee for assessment year 2014 – 15 is dismissed. These findings also apply to the assessment year 2015 – 16.
Disallowance of 10% of business promotion expenses - In absence of any details furnished by the assessee, disallowance was confirmed. As we also do not have any other details, we do not have any hesitation in confirming the disallowance. Ground number 8 is dismissed. For other years, also the above finding covers the issue against the assessee.
Addition with respect to certain transactions pertaining to one-company Sumilon industries Ltd - assessee argued seized paper is merely a loose paper and irrelevant and inadmissible as evidence - HELD THAT:- CIT – A considered the seized documents and held that an amount of ₹ 50 lakhs is written by hand against the above company and further there is an Angadia expenses on 30 July 2015 which clearly shows that assessee has sent the above amount through courier and commission is paid for the same. Accordingly applying the provisions of section 292C he confirmed the addition. We do not find any infirmity in the order of the learned CIT – A as the seized documents clearly shows the nature of the payment, the amount paid, the party to whom it is paid and the courier details showing the commission how it is paid. Therefore, the addition deserves to be confirmed.
Appeal filed by the assessee for all these years are dismissed and appeal of the learned assessing officer are allowed for statistical purposes.
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2023 (1) TMI 1215 - ITAT DELHI
Addition u/s 40A - Cash purchases - assessee argued addition made relying on third party statement without giving opportunity to the assessee to rebut such statement - HELD THAT:- It is stated by the assessee that requisite sale was duly reflected in the statutory return filed before the Excise and Sales-tax authorities. The assessee has stated that sales are duly supported by the requisite evidences. The fact that the sale was made and it is supported by the evidences, is required to be verified by the assessing authority.
Therefore, the issue is restored to the file of the Assessing Officer to verify the correctness of the claim of the assessee that he had sold the material to M/s Haryana Traders and also reflected the sales in Excise/WAT returns. The Assessing Officer will verify from the record of the assessee whether such return was filed related to the transactions in question and other supporting evidences. This ground of the assessee’s appeal is allowed for statistical purpose.
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2023 (1) TMI 1214 - ITAT MUMBAI
Penalty u/s 271(1)(c) - as submitted there is a confusion in the mind of AO about which limb penalty is to be levied - as per assessee A.O. has not applied his mind and non striking of charge in the penalty notice i.e. whether the charge is for concealment of income or furnishing of in accurate particulars of income - HELD THAT:- We find the Jurisdictional Hon’ble High Court of Bombay in Mohd Farhan A Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] has dealt on this disputed issue of not striking off charge in the penalty notice would vitiate the penalty proceedings.
Thus we are of the view that in the present case the A.O has not has not strike off the charge for levy of penalty for concealment of income or for furnishing of inaccurate particulars of income. Accordingly, we set aside the order of the CIT(A) and quash the penalty notice. And allow the grounds of appeal in favour of the assessee.
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2023 (1) TMI 1213 - ITAT MUMBAI
Revision u/s 263 - PCIT has held that the A.O. has not made proper verification as to the cash deposits during the demonetization period for which the assessee is said to have not furnished the documentary evidence in support of its claim - PCIT also stated that the A.O. has failed to call for the complete details of cash deposits (old and legal notes) from the banks and has also failed to make a comparative analysis of deposits of earlier year and subsequent year from the respective banks and also from the assessee - PCIT held that in view of the audit objection raised by the IAP as well as the direction received from CCIT, Pune, the assessment order passed by the A.O. u/s. 143(3) is held to be erroneous insofar as it is prejudicial to the interest of the Revenue - HELD THAT:- A.O. has sought for details pertaining to all the issues raised by the ld. PCIT during the assessment proceedings and has also received adequate reply from the assessee by way of written submission and documentary evidences to substantiate the assessee’s claim, pertaining to these issues. So from this, we can infer that there was no lack of enquiry pertaining to the issues raised. While considering the fact that whether there was inadequacy in conducting the enquiry by the A.O. was to be looked into in view of the propositions laid by the various courts.
The assessee has relied on the decision of Brahma Centre Development Pvt Ltd. [2021 (7) TMI 347 - DELHI HIGH COURT] wherein it was held that the inadequacy in conducting the enquiry by the A.O. cannot be the reason for the ld. PCIT to invoke the provision of section 263 of the Act.
From the facts of the case, it is observed that the A.O. has enquired into the details of the cash deposits during demonetization period and there is no infirmity in the conclusion arrived at by the A.O. For the issue pertaining to the deduction u/s. 80P to the assessee for which the assessee has also furnished sufficient evidences in support of its claim, we are of the view that as there are divergent views in relation to interest received from the deposits made in co-operative banks, the A.O. is said to have taken one of the view possible and has allowed the impugned deduction.
A.O. has considered the submissions of the assessee and has taken one of the plausible view and passed the assessment order. We find no latches and mistakes committed by the A.O. while passing assessment order. In view of the decision by Hon'ble Apex Court in Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME COURT] merely because two plausible views are available and the A.O. has taken one view, the jurisdiction u/s. 263 of the Act cannot be exercised and we thereby hold that exercise of power u/s. 263 of the Act was not in accordance with the law.
Appeal filed by the assessee is allowed.
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2023 (1) TMI 1212 - ITAT MUMBAI
Disallowance of depreciation on purchase of assets from its holding company - HELD THAT:- CIT(A) has recorded a finding that though the transfer of assets was between holding company and subsidiary company, the exemption provided u/s 47 was not availed by the transferor company and the transferor company has offered capital gains on such transfer - we notice that the fifth/sixth proviso as the case may be, relates to the case of apportionment of depreciation between the transferor-company and transferee company. We also agree with the analysis made and decision given by CIT(A) holding that the provisions of Explanation 4A, 3 and 6 of Sec.43(1) shall not be applicable to the facts of the present case. The provisions of sec. 43(6)(c)(i)(C) was related to the computation of WDV and it is not applicable, since the assessee has purchased the assets in the hands of seller. We are of the view that the Ld CIT(A) was justified in holding that the assessee is entitled to claim depreciation on the purchase cost.
Disallowance of depreciation on the claim of site restoration cost - We are of the view that the depreciation on site restoration cost is not allowable as deduction. Accordingly, we are of the view that the Ld CIT(A) was not justified in allowing depreciation on site restoration cost. Accordingly, we reverse the order passed by Ld CIT(A) on this issue and restore the disallowance made by the AO on site restoration cost.
Depreciation claim relates to the disallowance of depreciation on new assets for want of evidences - HELD THAT:- We notice that the AO had made the disallowance of depreciation on the new additions without discussing anything in the assessment order. Only in the remand report, the AO has stated that the assessee did not produce bills. The submission of the assessee before CIT(A) was that the number of towers installed by TTSL on its behalf during November, 2007 to Feb. 2008 was 6603 and the assessee has installed 879 new towers. It is submitted that the materials are purchased in bulk and kept in ware houses. The materials were issued to the construction sites as per the requisition. It is also submitted that the assessee keeps track of goods received and goods issued (GR-GI) for the entire addition of fixed assets and each invoice can be tracked to GR-GI.
The assessee being a limited company, its accounts are audited and hence the purchase of materials could not be doubted with. As noticed earlier, the assessee contends that the receipt and issue of materials could be tracked by it in its computer systems. The number of new towers added by the assessee during the period from November, 2007 to March, 2008 was not disputed.
Hence the new towers added would definitely have corresponding cost. CIT(A) has observed that the assessee could bring 100 binders before him. Accordingly, under these set of facts, we are of the view that there is no reason to suspect the addition of new towers worth Rs.223.41 crores. Accordingly, we are of the view that the assessee would be entitled for depreciation claimed on the above said amount. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance of the same.
TDS u/s 194C - Disallowance made u/s 40(a)(ia) of the Act - A.R contended that the supply of security personnal does not involve “carrying on of any work” including supply of labour for ‘carrying out any work’ - HELD THAT:- In the instant case, the security charges involve supply of manpower only and the same does not involve “carrying on of any work” within the meaning of the definition of the term “work” given in the Explanation III. Hence we are of the view that the provisions of sec.194C are not attracted for expenses claimed as “security charges”. Supply of manpower may not fall under the provisions of sec. 194J relating to “professional fees”. Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete the additions made u/s 40(a)(ia) relating to security charges.
The balance amount of addition excluding two items, viz., tower rents and security charges are related to Repairs and maintenance - P & M, Rent, Repairs and Maintenance, Legal & Professional Expenses, Interest and Others
The assessee did not show as to how the provisions of tax deduction at source are not applicable to the above said remaining amounts. Accordingly, we confirm the disallowance made u/s 40(a)(ia) of the Act in respect of above said items.
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2023 (1) TMI 1211 - ITAT KOLKATA
Estimation of income - Deposits in the bank accounts - undisclosed turnover - Addition made @ 8% of the undisclosed turnover by applying the provisions of Section 44AD - As argued prevailing margin ranges from 0.75% to 1% of the turnover - HELD THAT:- We note that the assessee is doing the business of jute bag trading. We have also examined the Annual Report for 2018-19 of M/S Ludlow Jute & Specialties Ltd wherein the net profit margin was only 0.42% in 31.03.2019 vis-à-vis 0.53% in 31.03.2018.
We also note that in the current year, the assessee’s profit margin on sale was also around 1%. Therefore we deem it fit and reasonable to apply the rate of 1.25% on the undisclosed turnover of the assessee. We accordingly set aside the order of Ld. CIT(A) and direct the AO to apply the rate of 1.25% on undisclosed turnover instead of 8%. Accordingly the appeal of the assessee is partly allowed.
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2023 (1) TMI 1210 - ITAT JAIPUR
Rectification u/s 154 - disclosures made in the return were wrongly picked up or missed out while the return was processed u/s 143(1) - HELD THAT:- Assessee had filed the Income Tax Return for the year under consideration with assessed income and the same was processed u/s 143(1) of the Act on 20-07-2014. Thereafter, the assessee submitted an application dated 08-09-2017 with a request to allow the loss on depreciation on building which was claimed in the Income Tax Return and to make rectification u/s 154 to reduce the demand raised on processing of Income Tax Return u/s 143(1) dated 20-07-2014.
From the material placed on record, it is found that the assessee has not been able to confirm that the disclosures made in the return were wrongly picked up or missed out while the return was processed u/s 143(1). The AO had only denied the relief in the absence of any such clear cut evidence and the ld. AR has also failed to point out as to what was the mistake committed by the Revenue Authority while processing the return u/s 143(1) of the Act. It is an admitted fact that the assessee had not filed any appeal against the relief denied to the assessee but at the same time the assessee could not point out the mistake committed by the Revenue Authority. In this situation, the Bench does not find any merit in the appeal of the assessee which is dismissed.
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2023 (1) TMI 1209 - ITAT MUMBAI
Income from house property - Addition of notional income on property [flat which was vacant, calculated @8.5% of the cost price of the flat - determination of annual letting value of the property - As the assessee owned a flat at Bandra Breeze in addition to its self-occupied property in Capri Tower AO computed the deemed rent from the 2nd property by considering 8.5% of the value of the flat as appearing in the balance sheet - HELD THAT:- In the present case, it is evident that the lower authorities have determined the annual letting value by considering 8.5% of the value of the flat as appearing in the balance sheet. CIT(A) also upheld the findings of the AO on the basis that standard rent under the Bombay Rent Control Act is to be fixed @8.5% of the total investment.
As noted above, in Tip Top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] held that the AO either must undertake the exercise to fix the standard rent himself and in terms of rent control legislation, if the same is applicable or leave the parties to have it determined by the court or tribunal under the said legislation - Also held until then the AO may not be justified in applying any other formula or method and determine the ‘fair rent’.
In the present case, it is evident that the AO did not follow the applicable rent control legislation while determining the deemed rent of the property @8.5% of the value of the flat. Further, nothing has been brought on record to support that the findings of the learned CIT(A) were reached after undertaking the exercise to fix the standard rent in terms of applicable rent control legislation. Thus, we deem it appropriate to remand this issue to the file of the AO for determination of annual letting value in terms of the applicable rent control legislation in light of aforesaid decisions of the Hon’ble Jurisdictional High Court. Accordingly, grounds raised in assessee’s appeal are allowed for statistical purposes.
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2023 (1) TMI 1208 - ITAT PUNE
Levy of penalty u/s 271(1)(c) - addition u/s 36(1)(iii) - appellant had failed to discharge the onus of demonstrating that the loans and advances are made for the business purpose - HELD THAT:- It is an admitted fact that the appellant had not agitated the additions in the appellate proceedings. It is clearly settled position of law that when an assessee not agitated the addition in the appellate proceedings does not amount to either concealment of income or furnishing of inaccurate particulars of income. We have carefully gone through the assessment order and find that the addition u/s 36(1)(iii) was made by the AO because the appellant had failed to demonstrate the advances to sister concern were made for the business purpose. A mere making claim which is not sustainable by law itself will not amount to furnish inaccurate particulars of income as held by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]
Thus we are of the considered opinion that the appellant cannot be held guilty of furnishing inaccurate particulars of income and, therefore, the Assessing Officer was not justified in levy of penalty u/s 271(1)(c) - Decided in favour of assessee.
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2023 (1) TMI 1207 - ITAT MUMBAI
Income deemed to accrue or arise in India - TSIS Service Fee received by the assessee is taxable as royalty- India France DTAA - HELD THAT:- We find that the taxability of income arising from similar services rendered by the assessee’s group concern, namely, Edenred PTE Ltd came up for consideration before the coordinate bench of the Tribunal in Edenred PTE Ltd [2021 (1) TMI 76 - ITAT MUMBAI] for the assessment year 2013-14. The coordinate bench of the Tribunal after considering the facts of the case decided the similar issue in favour of the assessee’s group concern and held that income arising from the provision of services by the assessee cannot be treated as royalty either under the provisions of the Act or under the India Singapore DTAA.
An the present case, from the nature of services provided by the assessee, it is evident that the services are performed by the assessee’s own personnel in France and the payment on account of search services was directly remitted by the Indian group companies to the assessee. As part of the TSIS Service Agreement, the Indian group companies only receive standard services and no licences in any software/right to use any software etc. is provided - there is no sharing of any confidential information by the assessee with the Indian group companies.
The term ‘Royalty’ is not as widely defined in India France DTAA as in the India Singapore DTAA, which was taken into consideration by the coordinate bench of the Tribunal in the case of sister concern. Since it has not been disputed that the facts of the present case are similar to the case of the assessee’s group concern, wherein income arising from services of similar nature are held to be not taxable as royalty, therefore, we find merit in the plea of the assessee. Accordingly, respectfully following the aforesaid decision of the coordinate bench of the Tribunal, we direct the AO to delete the addition in respect of TSIS Service Fees received by the assessee. As a result, ground No. 2 raised in assessee’s appeal is allowed.
Management Service Fee received by the assessee in the nature of royalty - As per the assessee, the services are provided only to support the Indian group companies in carrying on business efficiently and running the business in line with the business model, policies, and best practices followed by the Edenred group. From the perusal of documents available on record, it is evident that the services are general management services rendered by the assessee to its Indian group companies on a recurring basis and there is no use or right to use any copyright, patent, trademark, design, etc. Further, there is no sharing of any confidential information by the assessee with the Indian group companies.
Though the assessee is a resident of France and therefore, is entitled to provisions of the India France DTAA, however, even under the provisions of the Act the fees received by the assessee for rendering the aforesaid services do not constitute royalty. As the impugned management services rendered by the assessee are to be examined only on the touchstone of royalty in the present appeal, therefore, we are of the considered view that Management Service Fee received by the assessee is not in the nature of royalty and thus, the AO is directed to delete the addition on this account. As a result, ground No. 3 raised in assessee’s appeal is allowed.
Taxability of management service fees received by the assessee as fees for technical services - India France DTAA - HELD THAT:- As during the year under consideration, the assessee rendered the services to its Indian group companies under Management Services Agreement which was executed in the preceding assessment year. Under the agreement, the services provided by the assessee broadly include management services in the nature of public relations services, corporate social responsibility, partnership opportunities, networking coordination, financial services, legal services / advices, human resources. The assessee, inter-alia, claimed benefit under para 7 of the Protocol to the India France DTAA and submitted under the restrictive definition of ‘fees are included services‘ as provided in Article 12(4) of the India USA DTAA, the services provided by the assessee are not taxable. In order to decide the claim of the assessee, it is relevant to note the provisions of the Protocol to the India France DTAA.
In the present case, the assessee is a resident of France and thus in view of para-7 of the Protocol to the India France DTAA has sought the benefit of the restricted scope of the definition of ‘fees for included services’ as provided under the India USA DTAA.
We are of the considered view that CBDT Circular No. 3/2022 dated 03/02/2022 is not applicable to the present appeal. Therefore, in view of the aforesaid findings, we are of the considered opinion that the assessee is entitled to claim the benefit of the restricted definition under India USA DTAA in view of the Protocol to the India France DTAA. Since the assessee has been found not to have ‘made available’ any technical knowledge, experience, skill, or know-how, therefore, Management Service Fees received by the assessee cannot be taxed under the provisions of Article 13 of the India France DTAA read with para 7 of the Protocol to the India France DTAA and Article 12(4) of India USA DTAA.
In view of the above, the alternative claim of the assessee under India Finland DTAA becomes academic. Further, once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Act, as in terms of section 90(2). The taxability of impugned receipts, u/s 9(1)(vii) of the Act, is thus wholly academic. Hence, the AO is directed to delete the addition on this account. Accordingly, ground No. 2 raised in assessee’s appeal is allowed.
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2023 (1) TMI 1206 - ITAT BANGALORE
Income from other sources - netting method - assessee had earned interest on fixed deposits with IDBI Bank and assessee had set off the same against the interest expenditure incurred for construction etc. and the net amount was capitalized - as argued interest by the assessee was earned during the course of its business and as such the same has been correctly been capitalized after netting off - HELD THAT:- As in assessee’s own case for assessment years 2012-2013 and 2013-2014 [2021 (2) TMI 1328 - ITAT HYDERABAD]Tribunal in the above case, by following the judgment of ACG Associates Capsules Pvt. Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT] had directed the A.O. to adopt the netting method.
Thus we direct the A.O. to allow the netting off of interest.
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2023 (1) TMI 1205 - ITAT AHMEDABAD
Reopening of assessment u/s 147 - unexplained money u/s 69A - Validity of notice issued - HELD THAT:- It is pertinent to note that to meet the emergency situation of additional expenses by the assessee the assessee has obtained cash not only from assessee’s father and mother but also the close relative i.e. the maternal uncle, maternal aunt as well as paternal uncle and paternal aunt and the said relation cannot be doubted by the Assessing Officer. The gift offered by this relatives are appears to be genuine and therefore, the CIT(A) was not right in confirming the addition of the extent of Rs. 4,00,000/-.
Validity of notice - date of approval and date of issuance of notice was identical - As regards, the legal ground of the assessee merely that date of approval is identical to the issuance of notice cannot be treated as the time barring or non-valid notice under Section 148 of the Act. Therefore, the submission to that extent of the assessee is rejected. The appeal of the assessee is partly allowed.
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2023 (1) TMI 1204 - ITAT KOLKATA
Revision u/s 263 by CIT - Addition u/s 68 on account of bogus share capital - HELD THAT:- We are satisfied that the assessee has nothing to say in support of its alleged bogus share capital claim. Apart from the above, we also notice that impugned order was passed in 2016 by the ld. 1st Appellate Authority, whereas appeal has been filed in 2021. The only explanation taken by the assessee is that Certified Copy was obtained by the assessee on 03.12.2020. There is a huge gap of roughly four years, which has not been explained by the assessee, or no one has responded to the notices issued by the Tribunal. Accordingly we do not find any merit in this appeal, it is dismissed. Appeal of the assessee is dismissed.
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2023 (1) TMI 1203 - ITAT MUMBAI
Levy of interest u/s 234C and 234B - Estimation of income for advance tax - assessee has submitted that it is engaged in the business Portfolio Management Services and excess interest was charged by the CPC, Banglore because of performance fees which was reported by the assessee from its client on 31.03.2019 - HELD THAT:- As in the case of Prime Securities Ltd. [2010 (12) TMI 475 - BOMBAY HIGH COURT] and decision of Kotak Securities Ltd [2011 (7) TMI 1395 - ITAT MUMBAI] and Kumari Kumar Advani [2016 (7) TMI 1600 - ITAT MUMBAI] held that in the case of the assessee it had estimated its income and liability for payment of advance tax in accordance with law that was in force, therefore, there was no failure on the part of the assessee to pay advance tax in accordance with provision of Sec. 208 and 209.
In the case of Prime Securities [2010 (12) TMI 475 - BOMBAY HIGH COURT] it is held that it was not possible for the assessee to anticipate the events that were to take place in next financial year and pay advance tax on the basis of those anticipated events.
After considering all we observe that lower authorities had not controverted the facts reported by the assessee that because of uncertainty about the equity market it cannot estimate before hand amount of performance fees as discussed supra for the purpose of calculation of advance tax. No material has been brought by the revenue to controvert the aforesaid factual submission made by the assessee, therefore, following the finding of judicial pronouncements in the cases as referred above we consider that decision of ld. CIT(A) is not justified, therefore, we allow the ground of appeal of the assessee.
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2023 (1) TMI 1202 - ITAT DELHI
Exemption u/s 10(38) - AO has classified the gains from transfer of long term capital asset being as part of the business activities of the assessee and accordingly denied exemption u/s 10(38) - sale of investment does not qualify to be income from general insurance business therefore, section 40 of the Act is not applicable and the general section 28 of the Act will come into action - HELD THAT:- The words “ business of insurance” here includes all the activities, which enable the insurance company to run the said business of insurance to not just earn profits and for gains but to indemnify the policy holders. Investment of funds in most secured modes has been ensured by IRDA guidelines and the Insurance Act, so that in an attempt of Insurance business company, trying to earn out of risk bearing investments, the insured persons is not left at loss.
So, these investments cannot be termed as stock in trade of the to earn income and make gain, independently of the business of insurance run by the assessee and ld Tax authorities below have completely failed to take note of it and Ld. AO reached a erroneous conclusion that the assessee was doing two different business, one of general insurance business and second “other business‟.
In the present assessment year the ld AO has himself allowed exemption u/s 10(15)(iv)(h) of the Act in regard to investment of tax free in public sector bonds. But still the Ld. AO, without citing reasons as to how u/s 10(15)(iv)(h) of the Act is applicable and Section 10(38) of the Act is not applicable, made the distinction and made the addition avoiding Section 10 of the Act.
As observed that “Profits and gains of business‟ is one of the classified heads of the income as per Section 14 of the Act. To arrive at the income by way of “Profits and gains of business‟ for the purpose of Section 14 of the Act, the scope of total income provided under Section 5 of the Act has to be read with Section 10 of the Act, which as part of Chapter III of the Act, falls under the heading “incomes which do not form part of Total Income”. So, in any case the income by way of ““Profits and gains of business‟ which here in case of assessee means ““Profits and gains of insurance business”, has to be arrived after giving benefit of exclusion of the incomes falling under Section 10 of the Act. That would include disputed exemption of section 10(38) of the Act.
Even otherwise, the issue about applicability of provisions of section 10 of the Act in case of general insurance company stands decided in favor of insurance business companies
In any way we look, the assessee is entitled exemption u/s 10(38) like any other assessee for computation of Income and ld tax authorities below have fallen in error in not extending the benefit. In fact the ld CIT(A) has decided the issue against the assessee following his finding in Assessment Year 2007-08 wherein, the Tribunal‟s order dated 22.07.2011 for Assessment Year 2004-05 was followed. However, as a matter of fact in assessee‟s own case for Assessment Year 2005-06, reproduced above, issue were decided in favour of the assessee by the Hon’ble Delhi High Court. Consequently, ground are decided in favour of the assessee by holding that assessee/appellant is entitled to benefit of Section 10(38) of the Act. However, the matter needs to be restored to the files of the Ld. AO to enquire that claim of assessee u/s 10(38), fulfills the desired conditions about payment of Securities Transaction Tax (STT).
Applicability of section 115JB - HELD THAT:- Issue decided in assessee own case [2017 (9) TMI 172 - DELHI HIGH COURT] in favour of the Assessee and against the Revenue by holding that Section 115JB of the Act does not apply to insurance companies.
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