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Showing 161 to 180 of 920 Records
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2020 (4) TMI 760
Failure to furnish returns of income - offences punishable under Section 276C - non-filing of Income Tax returns in terms of Sections 139(1), 142(1) or 153 of Act - sanction order being passed with prior approval for the Chief Commissioner of Income Tax - HELD THAT:- The satisfaction would be dependent on the approval of the Chief Commissioner of Income Tax is that only if the Chief Commissioner of Income Tax accorded approval for prosecution than the satisfaction of the Commissioner of Income Tax could be considered and acted upon by sanctioning prosecution. However, if the Chief Commissioner of Income Tax were to refuse permission then the Commissioner of Income Tax though satisfied could not initiate any proceedings due to the non approval by the Chief Commissioner of Income Tax.
Contention of Sri Kiran Javali, that the prosecution has been initiated and sanction order came to be passed on 12.03.2014 being influenced by the Chief Commissioner of Income Tax, though may not be entirely correct but however does merit consideration since no sanction could be given and prosecution initiated if the Chief Commissioner of Income Tax refused permission, the order dated 12.03.2014, can therefore be said to be an order of the Chief Commissioner of Income Tax, rather than the Commissioner of Income Tax. The Chief Commissioner of Income Tax is not the sanctioning authority.
Even the approval dated 10.02.2014 does not indicate any application of mind by the Chief Commissioner of Income Tax nor is it signed by the Chief Commissioner of Income Tax. Hence, even if it were to be assumed that Chief Commissioner of Income Tax was the sanctioning authority there is no subjective satisfaction by the Chief Commissioner of Income Tax for granting such sanction.
Process and procedure and methodology followed by the Commissioner of Income Tax being not that as contemplated under Section 279 - The sanction order being passed with prior approval for the Chief Commissioner of Income Tax, the same is not tenable in law and the entire proceedings initiated thereafter including those in C.C.No.219/2014 cannot be countenanced in law. Therefore, the sanction letter dated 12.03.2014 and the proceedings in C.C.No.219/2014 pending on the file of the JMFC III Belagavi are hereby quashed.
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2020 (4) TMI 759
Stay petition- recovery proceedings - lockdown due to COVID -19 - All the bank accounts of the assessee have also been subjected to attached by garnishee proceedings under section 226(3) - AO has also attached all the debtor - Out of total demand assessee applicant has already paid little more than the tax component and the balance outstanding demand represent interest and penalty only. The assessee applicant seeks vacation of garnishee proceedings initiated against the assessee - HELD THAT:- We find that in view of the attachment of asessee’s bank accounts and assessee’s debtors, the assessee is stated to be not in a position to perform these obligations.
Given this situation, we are satisfied that this situation calls for our interference. In any case, even though we refrain from commenting upon merits of the case at this stage, we find that prima facie the assessee has an arguable case in appeal.
Assessee has already paid his entire tax liability, and in case the assessee is to opt for Vivad se Vishwas Scheme, he will have nothing further to pay. In these circumstances, the legitimate interests of the revenue cannot be prejudiced by our grant of stay on the remaining outstanding dues which are primarily on account of levy of interest, and consequential levies. In view of the above discussions, as also bearing in mind entirety of the case, we deem it fit and proper to grant a stay on collection/ recovery of the outstanding demands of ₹ 2,91,05,660 till the disposal of appeal or till the end of six months from the date of this order- whichever is earlier, subject to the following conditions:
(a) Any amount available to the assessee, as a result of this stay order and as a result of garnishee proceedings being lifted, will be first used for making payments of overdue and current wages payable to the labourer working with the assessee, and for making payment of overdue and current salaries to its employees. The amount available, after this exercise, will be used for the purpose of carrying out construction activity as necessary for providing quarantine facilities, as directed by the Collector. Any surplus amount thereafter will be used for construction activities of the business. The assessee will give an undertaking to this effect in writing.
(b) The assessee will file a statement showing utilization of funds, so available to the assessee on account of the garnishee proceedings being lifted, within 15 days from the date of this order.
(c) The assessee will fully cooperate in expeditious disposal of this appeal on out of turn basis, on 8th June 2020, and will not seek any adjournment. All the requisite paper books etc will be filed sufficiently in advance.
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2020 (4) TMI 758
Deduction u/s 80P - CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 disallowing the claim of the assessee u/s 80P(2) - HELD THAT:- CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 wherein the claim of deduction u/s 80P was denied, by relying on the judgment of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety.
The Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act.
Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business’ instead of `income from other sources’. However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly.
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2020 (4) TMI 757
Disallowance of service expenditure - service charges were incurred by the assessee in order to attract the customers in India who are transacting in overseas capital market - HELD THAT:- Assessee has stopped utilizing the services of group entities and started employing its own staff and relevant services extended to its customers by utilizing its own staff. There is considerable increase in the employees cost shows that there is shift in the management decision. Even otherwise assessee has submitted the analysis of making payments to its sister concern and submitted the relevant documents treating this as international transaction. Since the transaction involved is only to the extent of ₹ 2.89 crores, therefore AO may not have referred this case to TPO, just because it is not coming under TP study and there is abnormal increase in the cost, does not mean that assessee has not incurred this expenditure for its business. Therefore, in our considered view, these transactions are revenue in nature and having direct relevance to its business and incurred to extend the services to its customers in the overseas market with the help of its group concerns are only a revenue expenditure and eligible to be claimed as deductible expenditure under section 37 of the Income Tax Act.
Payment of membership and subscription charges disallowed - HELD THAT:- These expenses are renewable and recurring in nature and only in this assessment year, assessee has borne the above said expenditure for its business purposes. As per the submission of the assessee, for the subsequent assessment years, these costs were diverted to its clients. Since these expenditure was incurred in order to facilitate the clients in India and it has direct relevance to the business carried on by the assessee, but however there is no assets installed by the assessee except facilitating the installation to the clients.
It may look capital in nature, but it is the cost incurred by the assessee to facilitate the transactions between the clients and group concerns. There is no direct enduring benefit to the assessee, it can be termed as incurred for the purpose of business and to set up a transaction meant for overseas capital market - this expenditure can be treated preliminary expenditure for the purpose of business and therefore this transaction may increase the business/ trade for the assessee in the subsequent year. Accordingly, we direct AO to allow one fifth (1/5th) of the expenditure in this assessment year and balance in the next 4 assessment years treating this similar to the treatment as preliminary expenditure. Accordingly, Ground no. 2 raised by the assessee is partly allowed.
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2020 (4) TMI 756
TDS u/s 194C - disallowance u/s 40(a)(ia) - Payments to contractors - HELD THAT:- Settled position in law is that if the deductee/payee has paid the tax, no recovery can be made from the person responsible for paying of income from which he failed to deduct tax at source. In a case where the deductee/payee has paid the tax on such income, the person responsible for paying the income is no longer required to deduct or deposit any tax at source. In the similar circumstances, we find that the first proviso to section 40(a)(ia) inserted by the Finance Act, 2010, which has been held to be curative and therefore, retrospective in its operation by CIT v Virgin Creations [2011 (11) TMI 348 - CALCUTTA HIGH COURT] provides for allowance of the expenditure in any subsequent year in which tax has been deducted and deposited. The intention of the legislature clearly is not to disallow legitimate business expenditure. The allowance of such expenditure is sought to be made subject to deduction and payment of tax at source.
In a case where the deductee/payee has paid tax and as such the person responsible for paying is no longer required to deduct or pay any tax, legitimate business expenditure would stand disallowed since the situation contemplated by the first proviso viz. deduction and payment of tax in a subsequent year would never come about. Such unintended consequence has been sought to be taken care of by the second proviso inserted in section 40(a)(ia) by the Finance Act, 2012. There can be no doubt that the second proviso was inserted to supply an obvious omission and make the section workable.
No contrary decision was brought to our knowledge by the ld. D.R. We restore this issue to the file of the Assessing officer with the direction that the assessee shall provide all the details to the Assessing Officer with regard to the recipients of the income and tax es paid by them. AO shall carry out necessary verification in respect of the payments and taxes of such income and al so filing the return by the recipient. AO finds that the recipient has duly paid the tax es on the income, the addition made by the AO shall stand deleted. Thus this ground is allowed for statistical purposes.
Having said so, we will be failing in our duty if we do not discuss the amendment brought in by the Finance (No.2) Act, 2014 with effect from 01.04.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such shall be allowed as a deduction in computing the income of previous year, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of ₹ 6,18,73,785 by disallowing the whole amount.
Though the substitution in section 40 has been made effective with effect from 01.04.2015, in our view, the benefit of the amendment should be given to the assessee either by directing the Assessing Officer to confirm from the cab owners, as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of the disallowance. In our view, it will be tied of justice if the disallowance is only restricted to 30% of the amount liable for TDS u/s 194C of the Act. Accordingly, this issue is partly allowed.
Addition u/s 40(a)(ia) - reimbursement of petrol and diesel charges to the drivers - HELD THAT:- As observed that as agreed by and between the assessee and the cab owners, a vehicle was to be provided by the assessee to the parties and thus, the assessee was to bear the vehicle expenses actually incurred by the said cab owners and which will be reimbursed by the parties concerned. If bills for such expenses incurred by the said cab owners were separately raised by them on the assessee in addition to bills for hire charges and since the amount of bills so raised was towards the actual expenses incurred by them, there was no element of any profit involved in the said bills. It was thus a clear case of reimbursement of actual expenses incurred by the assessee and the same, therefore, was not of the nature of payment covered by section 194C of the Act requiring the assessee to deduct tax at source therefrom, where bills were raised separately by the cab owners for reimbursement of actual expenses incurred by them. As such, considering all the facts of the case, we are of the view that the provisions of section 194C of the Act were not applicable to the reimbursement of actual expenses and the assessee was not liable to deduct tax at source from such reimbursement. Accordingly, we set aside the orders of the Income tax authorities and direct the A.O. to verify the claim of the assessee.
Addition incurred for the deficiency of services - HELD THAT:- The facts of this issue are that the Assessing Officer noted from the profit and loss account furnished by the assessee that the assessee has debited an amount of ₹ 5,22,346 for penalty paid, which according to the A.O. is not an allowable expenses. Since the assessee has not made any submission before the CIT(A), he confirmed the same. - Since assessee failed to substatiate the claim, additions confirmed.
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2020 (4) TMI 755
Exemption u/s 11 - Charitable activities u/s 2(15) - assessee is a regulatory body created by State Government u/s 22 of Gujarat Town Planning and Urban Development Act (GTPUDA), 1976 for proper development of specified area in the state as ensured by the State Government - HELD THAT:- As relying on GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION [2017 (7) TMI 811 - GUJARAT HIGH COURT] and GANDHINAGAR URBAN DEVELOPMENT AUTHORITY VERSUS THE DCIT, GANDHINAGAR CIRCLE, GANDHINAGAR [2019 (7) TMI 1608 - ITAT AHMEDABAD] we find merit in the plea raised on behalf of the assessee for holding the activities of assessee to be for charitable purposes under s.2(15) of the Act and consequence eligibility of benefits under s.11 & section 12 of the Act. The order of the CIT(A) is thus set aside and the AO is directed to grant relief claimed under ss.11(2) and 11(1)(a) of the Act to the assessee in accordance with law. - Decided in favour of assessee.
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2020 (4) TMI 754
Bogus purchases - Profit estimation - HELD THAT:- As under oath on 18.12.2007 before the DGIT that M/s Khushi Enterprises, which he was controlling, was engaged in the issuing bogus bills. Further, he mentioned that M/s Moraj Building Concepts Pvt. Ltd. (the assessee) was one of the beneficiaries of such bogus bills. The notice u/s 133(6) issued by the AO dated 14.12.2010 to M/s Khushi Enterprises was not replied to - the enquiry by the Ward Inspector showed that no purchases were made by the assessee from M/s Khushi Enterprises. In such a factual scenario, the Ld. CIT(A) has rightly followed the decision in Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] ; Bholanath Polyfab [2013 (10) TMI 933 - GUJARAT HIGH COURT] and brought to tax the profit @ 12.5% of the disputed purchases of ₹ 3,62,881/- which comes to ₹ 45,360/-. As the order passed by the Ld. CIT(A) is based on proper appreciation of facts and position of law, we uphold it.
TDS u/s 195 - Disallowance on account of Consultancy Charges paid to Modern Line distribution - amount remitted to non-resident - HELD THAT:- Submissions made by the assessee that no tax was liable to be deducted at source as per Article 14 of the DTAA with UAE on account of payment to non-resident for services rendered outside India need re-examination by the AO. Therefore, we set aside the order of the Ld. CIT(A) on the above issue and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. Thus the 2nd ground of appeal is allowed for statistical purposes.
Addition u/s. 69 on account of unexplained expenses - HELD THAT:- We find merit in the observation of the Ld. CIT(A) that when on the same set of papers, more than one entry is made and one such entry is recorded in the books of accounts, it was for the assessee to prove that the other entries were not in respect of unexplained expenditure/investment because the entire document as such has to be either taken as true or dumb.
Expenditure confirmed by the Ld. CIT(A) need to be re-examined on the basis of evidence of such expenditure to be filed by the assessee. Therefore, we set aside the order of the CIT(A) on the above ground of appeal and restore the matter to the file of the AO to make an order afresh after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO.
Disallowance on account of payment made to Shri Sai Prerna Charitable Trust - HELD THAT:- In the instant case, the assessee has made a donation of ₹ 55,00,000/- to Shree Sai Prerna Charitable Trust. As observed by the Ld. CIT(A), the assessee failed to explain the purpose of making the donation and as to how it was related to assessee’s business. Moreover, it failed to explain that the said Trust was having tax exemption certificate based on which deduction could be claimed by the assessee-company. CIT(A) has rightly observed that as the assessee is following project completion method, the said disallowance would result in reduction of WIP to the extent of ₹ 55,00,000/- leading to a higher profit in the year in which the project is completed and offered to tax. Thus we uphold the order of the Ld. CIT(A) on the above ground of appeal.
Addition u/s 69 of purchases - HELD THAT:- Goods amounting to ₹ 1,27,999/- were returned to Satya Narayan Marble for which no payment was made by the assessee. In fact it was not payable at all. In such a situation, the addition of ₹ 1,27,999/- confirmed by the Ld. CIT(A) cannot be sustained. Therefore, we delete the above addition of ₹ 1,27,999/- and allow the 5th ground of appeal.
Addition being alleged discrepancy in cash in hand - HELD THAT:- Difference in cash was explained by way of cash lying at sites viz. Plot 448 (H.O.) : ₹ 25,517/-, Plot 448 – Khare (H.O.) : ₹ 1,87,599/- and Plot : ₹ 53,709/-. A perusal of the above explanation which was furnished during the course of survey and also before the ADIT (Inv.) and the AO is further corroborated by the books of account.
Addition u/s 68 on account of alleged untallied trial balance - HELD THAT:- Assessee has maintained regular books of accounts which have been duly audited. In the instant case, the AO has not rejected the books of accounts. There is nothing on record brought out by the AO to prove that the transactions were not accounted and included in the books of accounts. All the more the said excel sheet does not represent any income or expenditure and it was prepared by the accountant to record the results of trial run taken for the purposes of shifting from Foxpro accounting software to Tally. The assessee at the year-end has drawn final accounting on the basis of regular account which included the transactions in the said two rough trial balances.
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2020 (4) TMI 753
Disallowance u/s. 14A - Whether AO recorded the requisite satisfaction before proceeding to compute disallowance u/s 14A - HELD THAT:- No suo-moto disallowance was offered by the assessee despite earning exempt income in the form of dividend income and LTCG. AO specifically took note of the fact that most of the income earned by the assessee was in the form of dividend income and capital gains. The said analysis, in our opinion, was quite sufficient to establish that Ld. AO had recorded the requisite satisfaction before proceeding to compute disallowance u/s 14A. Therefore, this plea raised by Ld. Sr. Counsel could not be accepted.
While computing the disallowance, only those investments were to be considered which yielded exempt income during the year - AO is directed to verify the computations and restrict the disallowance considering only those investments which have yielded exempt income during the year. The separate disallowance of Bank Charges for ₹ 1.38 Lacs would not be warranted since it could not be said that the bank was used only for the purpose of earning exempt income. Ground No. 1 stand partly allowed.
MAT computation u/s 115JB - HELD THAT:- Unless the factum of debit of actual expenditure was brought on record, adjustment of disallowance u/s 14A while computing book profits u/s 115JB would not stand test of law. Similarly, disallowance u/s 40(a)(ia) was a statutory disallowance for want of TDS. Unless the same was specifically covered by manner of computations as provided u/s 115JB, the adjustment of the same would also not be justified.
Disallowance u/s 41(1) - outstanding debt - HELD THAT:- Assessee has placed on record debt-confirmation dated 24/02/2016 issued by M/s Status Marketing Pvt. Ltd. The said confirmation letter acknowledges the fact that amount of ₹ 90.43 Lacs was receivable from the assessee as on 31/03/2014. It also acknowledges the fact that amount of ₹ 59.56 Lacs was due by the director of that entity to the assessee company against booking of flats in the Hill view park project. Upon perusal of the same, it could not be said that the amount payable by the assessee had ceased to exist or there was remission or cessation of trading liability. The factum of outstanding debt was duly acknowledged in the confirmation of M/s Status Marketing Pvt. Ltd. Therefore, the provisions of Sec. 41(1), in our considered opinion, could not be applied to the fact of the case.
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2020 (4) TMI 752
Treating the reimbursement of the expenses as income for the year - DRP treating the travel expenses reimbursed to the Appellant by 'GIA India Laboratory P. Ltd.' as the income of the Appellant - HELD THAT:- We find that the issue and facts are identical to this year and the Coordinate Bench for the immediately preceding assessment year i.e. A.Y. 2014-15 in [2018 (6) TMI 1107 - ITAT MUMBAI] held that the fee for technical services is different from the expenses incurred on third party cost and there is a clear bifurcation in the agreement between the internal cost incurred and external cost paid by the assessee on behalf of GIA India Laboratory Pvt. Ltd. The Tribunal applying the ratio of the decision of the Hon'ble Supreme Court in the case of DIT v. A.P. Moller Maersk [2017 (2) TMI 993 - SUPREME COURT] held that amount received towards reimbursement of cost cannot be taxed in the hands of the assessee.
Levy of surcharge and education cess - whether once the DTAA rates are applied education cess and surcharge cannot be levied separately? - HELD THAT:- As relying on M/S. EPCOS ELECTRONIC COMPONENTS S.A [2019 (7) TMI 708 - DELHI HIGH COURT] and SUNIL V. MOTIANI [2013 (12) TMI 1105 - ITAT MUMBAI] direct the Assessing Officer to delete the education cess and surcharge levied on the assessee. This ground is allowed.
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2020 (4) TMI 751
Bogus purchases - onus to establish the genuineness of such purchases by providing documentary evidence - CIT-A deleted the addition - HELD THAT:- CIT(A) after considering the submissions of the assessee concluded that the assessing officer allowed purchases from both the parties in the assessment order passed under section 143/147 dated 29.01.2019 and 20.10.2016. Moreover the requirement of producing the proprietor of Girnar Sales Corporation and Jainam Enterprises is impossible, accordingly ld CIT(A) directed the assessing officer to allow the purchases from both the parties. CIT(A) has taken a correct view and directed the Assessing officer to allow the purchases. We are also of the view that the assessing officer must follow the consistency on same set of facts. - Decided against revenue.
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2020 (4) TMI 750
Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT:- In the instant appeal are similar to those adjudicated by us in the case of Varad Mehta [2018 (12) TMI 1091 - ITAT INDORE] we therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s 271(1)(c) of the Act is invalid, untenable and suffers from the infirmity of non application of mind by the AO.
Since we have held the notice u/s 274 of the Act as invalid, the subsequent proceeding u/s 271(1)(c) of the Act are thus held to be void ab initio. We accordingly allow the legal ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. - Decided in favour of assessee.
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2020 (4) TMI 749
Disallowance of deduction u/s 10B - HELD THAT:- Wherein in respect of the claim of deduction u/s 10B of the Act, a coordinate bench of this Tribunal found that by applying the decision of Textile Machinery Corporation Ltd. Vs. CIT [1977 (1) TMI 3 - SUPREME COURT] CIT(A) had rightly extended the relief to the assessee u/s 10B of the Act and, therefore, the revenue cannot have any grievance against the same. It is not the case of the revenue that any appeal was preferred against the order or that this position was disturbed. It is not the case of Revenue that there is any change of facts and circumstances involved in this case to taken a different view.
Transfer Pricing Adjustment - international transaction - international transaction in respect of ‘firewall charges’ reimbursement to AE - HELD THAT:- In the instant case, the assessee has incurred expenditure and not making payment of mark-up is not adverse to the entity in Indian Jurisdiction. The assessee has claimed the expenditure paid by the AE on its behalf. The contention of the TPO is that the assessee was not required to incur the said expenses. But it was under jurisdiction of the Assessing Officer whether particular expenditure was incurred wholly and exclusively for the purpose of business and not in the domain of the TPO to hold that in view of the warranty etc., the assessee was not required to incur expenditure on firewall charges. The contention of the assessee seems plausible that motors were required to checked for content of moisture acquired in transport from India to the USA, i.e., the destination point and it was the responsibility of the assessee to provide defect free motors to the end customers. Thus, respectfully following the finding of EKL APPLIANCES LTD [2012 (4) TMI 346 - DELHI HIGH COURT] we delete the transfer pricing adjustment.
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2020 (4) TMI 748
Admission of additional evidence by CIT-A - partial relief has been granted by CIT(A) to the assessee on the basis of additional evidences - failure to provide reasonable opportunity to the Assessing Officer - HELD THAT:- No specific mention in the impugned appellate order of the Ld. CIT(A) to the effect that the Additional Evidences had been admitted by him - CIT(A) has failed to record the reasons in accordance with Rule 46A(2) of Income Tax Rules, 1962.
CIT(A) is duty bound, under Rule 46A(3) to allow a reasonable opportunity to the Assessing Officer (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant but he failed to provide such reasonable opportunity to the AO. CIT(A) had only provided a perfunctory opportunity, and a very short time to the Assessing Officer. The letter asking the AO to send report is dated 08.03.2016 whereas the time was allowed to the Assessing Officer up to an earlier date 16.03.2015. It is not understood how a letter dated 08.03.2016 can be responded to by the AO by an earlier date of 16.03.2015.
CIT(A) had failed to provide reasonable opportunity to the Assessing Officer for which the Assessing Officer was entitled under Rule 46A(3) of Income Tax Rules. CIT(A) had failed in due compliance of Rule 46A(2) as well as Rule 46A(3) of Income Tax Rules; in granting partial relief to the assessee on the basis of Additional Evidences furnished by the Assessee during the appellate proceedings before Ld. CIT(A) - We set aside the impugned appellate order dated 30.03.2016 of the Ld. CIT(A), and direct him to pass a fresh order on merits after following due procedure prescribed under Rule 46A of Income Tax Rules. - Revenue Appeal is partly allowed for statistical purposes.
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2020 (4) TMI 747
TDS u/s 195 - software expenses u/s 40(a) (i) for non-deduction of TDS - payments towards purchase of 'off-the-shelf shrink-wrapped software' as 'Royalty' under the Act as well as under the India-Malaysia tax treaty - HELD THAT:- The issue is against assessee vide decision in CIT v Samsung Electronics Co. Ltd. [2011 (10) TMI 195 - KARNATAKA HIGH COURT] wherein it is held that payments towards purchase of software are in the nature of 'royalty' and liable for TDS. - Decided against assessee.
Sales promotion and advertisement expenses u/s 37 (1) - HELD THAT:- In the present facts of the case the expenditure towards advertisement has been incurred by assessee for promoting sales and therefore, ratio laid down in the decisions relied upon by Ld. AR is squarely applicable i.e. SPICE DISTRIBUTION LTD. [2014 (9) TMI 732 - DELHI HIGH COURT], M/S. ASIAN PAINTS (INDIA) LTD. [2016 (11) TMI 258 - BOMBAY HIGH COURT] and INDO NISSIN FOODS LTD. [2012 (11) TMI 1246 - KARNATAKA HIGH COURT] - Accordingly, we direct Ld. AO/TPO to delete addition made on account of advertisement expenses under section 37 (1).
Disallowance of warranty expenses - HELD THAT:- Assessee's case dearly fans in line with the legal ratio set out by the various appellate decisions cited at Bar in so far as the provision for warranty stood crystallized as soon as the sate was made which a customer would like to be fulfilled within the warranty period and is at the cost of an assessee's goodwill. Therefore, the residual amount purported to have been held by the Assessing Officer as an excess provision cannot be considered as a contingent provision and not an ascertained liability. The warranty period continues beyond an year which fact was rightly considered by the Id. CIT(A). - Decided against revenue.
Disallowance of foreign exchange loss - DR submitted that foreign exchange loss cannot be allowed, as the transactions are speculative in nature and contingent in character - HELD THAT:- Accounting treatment is to recognise exchange fluctuation gain or loss in the profit and loss account as on the valuation date. Hon’ble Supreme Court in case of CIT vs Woodward Governor India (P) Ltd [2009 (4) TMI 4 - SUPREME COURT] held that, a transaction in which a legal liability has been incurred before it is actually disbursed would be regarded as revenue in nature. In the facts of present case assessee incurred foreign exchange loss far year under consideration towards trading activities, and therefore it is directly attributable to business of assessee, which is an allowable expenditure.
TPA - AMP expenses addition - HELD THAT:- No adjustment needs to be done in respect of AMP expenses as relying on assessee's own case [2019 (5) TMI 1541 - ITAT BANGALORE]
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2020 (4) TMI 746
TP Adjustment - filters application - HELD THAT:- As observed that authorities below have cherry picked on using filters without understanding business model of assessee. It is observed that DRP applied on-site revenue filter suo moto, without being considered by TPO. We are of the opinion that transfer pricing adjustment made by AO/TPO needs to be re-looked in accordance with law. As observed that AO while passing final assessment order in computation of assessed income has not considered transfer pricing adjustment that has been made in para 3 of assessment order. This shows a sheer negligence on behalf of Ld. AO and non-application of mind.
Provision for warranty disallowed - HELD THAT:- We direct Ld. AO to verify the claim of assessee in the light of decision by Hon’ble Supreme Court in case of Rotork Controls India (P) Ltd., vs CIT [2009 (5) TMI 16 - SUPREME COURT] and Hon’ble Delhi High Court in case of CIT vs Goetz India Ltd., [2010 (1) TMI 29 - DELHI HIGH COURT]
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2020 (4) TMI 745
Disallowance u/s 35 - bogus donations - assessee company had given donation to Matravaini Institute of Experimental Research Education, Kolkata - HELD THAT:- Assessee is entitled to deduction of section 35(1)(ii) of the Act as the said research institute was eligible to accept donation and on the date of giving donation by the assessee and that Notification was valid and it is only by way of subsequent letter it was cancelled from back date. The case of the assessee is squarely covered by a series of decisions as referred to and relied by the Ld. A.R. In the case of Borsad Tobacco Company Pvt. Ltd. vs. DCIT [2019 (6) TMI 1484 - ITAT MUMBAI]the co-ordinate bench of the Tribunal has held that donor is not affected due to subsequent withdrawal of recognition with retrospective effect
Hon’ble Bombay High Court in the case of Ram Das Maniklal Gandhi vs. UOI [1999 (9) TMI 64 - BOMBAY HIGH COURT] has held that the donation to an institution whose approval was withdrawn by the prescribed authority with retrospective effect would not affect the assessee who gave the donation. The assessee is entitled to rely upon the certificate granted to an institution under section 35CCA of the Act for claiming deduction under section 35CCA of the Act for claiming deduction under that section which was valid and subsisting when donation was made to it - We set aside the order of Ld. CIT(A) and direct the AO to allow the deduction as claimed under section 35 of the Act by the assessee.
Addition towards depreciation on the let out property - HELD THAT:- As decided in own case 2019 (9) TMI 544 - ITAT MUMBAI] no deprecation u/s 32 of the 1961 Act can be allowed on the two properties which were acquired in earlier years and were let out throughout the year under consideration income thereof being offered for tax under the head income from house properties, as doctrine of supervening impossibility has set in as neither these properties were used for business purposes, nor ready to be used for business nor available for business user for the purposes of business of the assessee, for the entire year under consideration. Thus, deprecation u/s 32 of the 1961 Act under these circumstances can not be allowed on these two properties merely on the grounds that once these properties entered Block of Assets viz. Building many years back and continues to be part of Block of Asset viz. Building despite the fact that factual matrix surrounding these two properties had undergone substantial change over years which cannot be given complete go bye.
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2020 (4) TMI 744
Rectification u/s 154 - CIT (A) held that forex loss or gain arising on account of Foreign exchange fluctuation pertaining to Foreign currency convertible bonds (FCCB) utilized for general business purpose and not with respect to capital account is in the nature of “Capital Loss” - HELD THAT:- Assessee has been consistently following the same treatment for all the subsequent. During the course of original assessment proceedings, while responding the query on section 14A the assessee has specifically stated that foreign currency convertible bonds were used for capital account purposes. The revenue has not rebutted the fact that the assessee has followed the same treatment in earlier years. Paper book wherein the assessing officer has reproduced the assessee’s submission in its order. We notice that the assessee has contended before the AO that as per the settled law foreign exchange gain on capital account transaction is not chargeable to tax, therefore, the case is covered in favour of the assessee. Hence, we find merit in the contention of the Ld. counsel that there is no infirmity in the findings of the Ld. CIT(A).
Action of the AO in passing order u/s 154 coordinate Bench in the assessee’s own case for the AY 1996-97 has upheld the findings of the Ld. CIT (A) holding that as per the settled law the only mistake apparent from record can be rectified u/s 154 of the Act and a debatable issues cannot be said to be a mistake apparent from record. - Decided against revenue.
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2020 (4) TMI 743
Rejection of books of accounts - profit estimation - assessment u/s 144 - profit rate determination - HELD THAT:- Assessee has explained the difference in the closing stock figure of the last year and the opening stock figure of the current year filed before the AO and the CIT(A). However, the same was rejected on the ground that the details of the expenditure and date of incurring such expenditure along with the purpose was not given.
Books results were rejected u/s 145(3) and the AO has gone for estimation of profit. Considering the fact that there is difference of ₹ 77,08,967/- in the closing stock of preceding year and the opening stock of the current year, we are of the considered opinion that adoption of net profit rate of 3% on ₹ 2,16,78,967/- (i.e., the turnover of ₹ 1,39,70,000/- + ₹ 77,08,967/- being the difference in stocks) will meet the ends of justice - direct the AO to recompute the addition by considering the net profit at ₹ 6,50,369/- less net profit already disclosed by the assessee at ₹ 1,15,812/- (subject to verification). Grounds of appeal No.2 and 3 filed by the assessee are accordingly partly allowed.
Addition u/s 68 - assessee could not substantiate the amount received from three different parties on account of share application money - HELD THAT:- Since the ld.CIT(A) has sustained the addition to the tune of ₹ 57 lakhs on the ground that no confirmation was filed by the assessee and considering the fact that there is a running account between the assessee and M/s Rama Ply Board Industries Ltd., therefore, considering the totality of the facts of the case, we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate the nature of transaction to his satisfaction and decide the issue as per fact and law.
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2020 (4) TMI 742
Disallowance on advertising expenses and professional expenses including Branding expenses - allowable revenue - HELD THAT:- As decided in own case [2019 (10) TMI 828 - ITAT CHENNAI] AO is not expected to question the necessity of the expenditure. The brand expenditure is nothing but business promotion expenditure which is Revenue in nature and which is clearly allowed as deduction - Decided in favour of assessee.
Delayed employees contribution towards PF - whether contribution remitted before the due date of filing of the return u/s.139(1) - HELD THAT:- This issue is covered by the order of the Hon’ble Madras High Court in the case of Industrial Security & Intelligence India Pvt. Ltd. [2015 (7) TMI 1063 - MADRAS HIGH COURT] in favour of assessee.
Disallowance of depreciation on trade mark - HELD THAT:-This issue is covered in favour of the assessee in the assessee’s own case [2019 (10) TMI 828 - ITAT CHENNAI] wherein held that law is settled to the extent that it is outside the domain of the ld. AO to question the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. Furthermore, it is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. We do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark.
‘Cessation of liability’ u/s 41(1) - HELD THAT:- It is clear from the above that the very same AO allowed the write off of M/s.Rocky Marketing (Chennai) Pvt. Ltd., in its hands. Therefore, M/s.Rocky Marketing (Chennai) Pvt. Ltd., has waived off the liability from the assessee’s hand. As per the explanation extracted, supra, the remission or cessation of any liability by a unilateral Act, is covered u/s.41(1) and hence, we do not find any reason to interfere with the order of the Ld.CIT(A). Therefore, corresponding grounds of the assessee fail.
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2020 (4) TMI 741
Penalty u/s 271AAB - disclosure of additional income in the return of income filed under section 153A - no undisclosed income or the inflation of expenditure during the search/ assessment proceedings - HELD THAT:- Unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure.
An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee - Penalty u/s 158BFA (2) is not leviable. The facts of the assessee's case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act.- Decided in favour of assessee.
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