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Showing 201 to 220 of 1557 Records
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2025 (1) TMI 1358
Assessment of trust and beneficiaries' interest - Determinate Trust or indeterminate Trust - Maintainability of appeal before SC on low tax effect - HC [2020 (10) TMI 1095 - MADRAS HIGH COURT] we cannot accept the contention of the Revenue that the shares were non-determinable or the view taken by the Tribunal is perverse. On the contrary, we do find that the view taken by the Tribunal is correct and would not call for interference so far as determinability of the shares of the beneficiaries are concerned.
Once the shares of the beneficiaries are found to be determinable, the income is to be taxed of that respective sharer or the beneficiaries in the hands of the beneficiary and not in the hands of the Trustees which has already been shown in the present case.
HELD THAT:- Petitioner, on instructions, states that the tax effect in this group of Petitions is below the threshold limit provided in Circular dated 17th September, 2024.
Hence, the Special Leave Petitions are disposed of on that ground. However, the question of law, if any, is kept open
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2025 (1) TMI 1357
Draft assessment order v/s final assessment order - Whether final order was never preceded by a draft assessment order? - HELD THAT:- As mandatory procedures were not followed but seek to apportion the blame on the faceless assessing officer. In any event, based on the above statements relied upon we cannot hold that the order dated 30 March 2021 is the final assessment order and not a draft assessment order.
As based on a draft assessment order, the Respondents were not justified in issuing the impugned demand notice dated 30 March 2021, penalty order dated 16 March 2022, and recovery notices dated 30 December 2021. Accordingly, all these are liable to be set aside and are hereby quashed and set aside.
Since we have held that the order was only a draft assessment order, it cannot be set aside. However, based on this draft assessment order, the Respondents could not have made any tax, or penalty demands or sought recovery of tax or penalty.
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2025 (1) TMI 1356
Rectification of mistake - competent authority of the Department has exercised its power to declare that in view of Section 199 the deduction of TDS made on payment and paid to the Central Government by principal would be treated as income/receipt of the assessee company - Since the assessee had not shown the said amount of income, it has been held that the assessee would not get credit of the entire TDS rather the credit of TDS has to be restricted only in view of the provisions u/s 199 of the Act of 1961 read with Rule 37BA of the Income Tax Rules.
HELD THAT:- This Court allows learned counsel for the petitioner(s) to withdraw both the writ applications with liberty to prefer a duly constituted appeal before the Appellate Authority within a period of thirty days from today.
Since the writ applications were filed on 06.07.2021 and 16.06.2021 respectively as per the date of registration available on the record, we are of the considered opinion that the period spent by the petitioner(s) before this Court would be liable to be taken into consideration for exclusion while counting the period of limitation.
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2025 (1) TMI 1355
Validity of order passed by ITAT in breach of principles of natural justice - impugned order was admittedly made without hearing the Petitioners - only issue involved imposing a penalty on such additions - HELD THAT:- Though we agree with respondent that the Appellants should have pursued the matter, given the peculiar facts of this case, the argument made on their behalf is not entirely unreasonable. Besides, the argument on the disproportionality of the proposed action could not be advanced.
Appellants may not have contested the additions. Still, that does not mean that the penalty has to be imposed automatically once there is no contest. In any event, given the peculiar facts of this case, the appellants should be given an opportunity to hear and attempt to convince the tribunal that no penalty or reduced penalties ought to have been imposed in these matters.
Based on instructions, appellants has offered to pay a consolidated cost of Rs 1,50,000/-. Based on this, the learned Counsel has urged that the interest of justice would be met if an additional opportunity is granted to the Appellants to argue the matter before the tribunal.
After considering the above circumstances and the peculiar facts of this case, we agree that the interest of justice would be met if the appellants were granted an additional opportunity to argue the matter before the tribunal.
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2025 (1) TMI 1354
Violation of principles of natural justice - Non providing all relied upon/non-relied upon documents in relation to Show Cause Notice - HELD THAT:- The contention of the Petitioner that the principles of natural justice were not followed is correct.
It clarified that the proceedings shall be conducted de novo by the Respondent No. 1. All rights and contentions of the parties are left open in this regard.
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2025 (1) TMI 1353
Undisclosed income from Shilpgram Scheme - allocating the sum between the assessee and Shivganga Reality Pvt. Ltd. at the rate of 70% and 30% for sustaining the addition to the extent of 70% in the case of assessee - HELD THAT:- We decline to answer the question being a question of fact confirming the order passed by the Tribunal.
Charging of interest u/s. 158BFA (1) - Tribunal holding that the respondent – assessee cannot be held responsible for the period during which it did not have the seized material to compile the return, the interest under Section 158BFA (1) of the Income Tax Act, 1961 cannot be charged for late filing of the return as the assessee was prevented from filing the loss return without getting the seized material - HELD THAT:- We are of the opinion that there is no infirmity in the impugned order of the Tribunal holding that the interest should not have been charged interest under Section 158BFA (1) of the Act for the period till the assessee was not provided with the photo copies of the seized materials. The question No. 2 is accordingly answered in favour of the assessee.
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2025 (1) TMI 1352
Sale of Attached property - limitation period for the sale of attached immovable property - extension of time limit as per Proviso to Rule 68B(1) - extension of the limitation period for the sale of the petitioner's attached property as valid under Rule 68B of the Second Schedule to the Income Tax Act, 1961 - HELD THAT:- The immovable property of the petitioner was attached on 10.02.2021. This was few days before the period expired on 31.03.2021. On 26.02.2021, a proclamation of sale was made for the sale of immovable property of the petitioner. The auction was fixed to be held on 25.03.2021. There were no bidders during the auction that was held on 25.03.2021.
Since the date of auction was fixed to 25.03.2021, on which date there are no bidders, it can be construed that the situation was covered by the 1st instance under 2nd proviso to Rule 68B of the 2nd schedule to the Income Tax Act, 1961 i.e., where the immovable property is required to be resold due to the amount of highest pay being less than the reserve price fixed.
Therefore, the extension of the period for bringing the immovable property of the petitioner by one year by the Chief Commissioner of Income Tax vide order dated 02.11.2021 cannot be questioned as it is in consonance with the 2nd proviso to Rule 68B of the 2nd schedule to the Income Tax Act, 1961.
The argument of the petitioner that the respondent Income Tax Department was not authorised to extend the period of auction by one year to 31.03.2022 on the ground that the situation contemplated in Rule 57, Rule 58 Rule 61 of the 2nd schedule to the Income Tax Act, 1961 were not attracted cannot be countenanced.
Defence of the petitioner, claiming that the petitioner is a labourer and therefore the property of the petitioner was exempted from attachment by virtue of Rule 10 of the 2nd schedule to the Income Tax Act, 1961 read with section 60 of the Civil Procedure Code, 1908 - It has to be examined from the status of the petitioner at the time of the Assessment Order / Penalty Order which has given rise to the proceedings under the 2nd schedule to the Income Tax Act, 1961.
Change in the status of the petitioner after the rights accrued to the Income Tax Department to attach the property of the petitioner cannot be whittled down. Therefore, a reference to Rule 10 of the 2nd schedule to the Income Tax Act, 1961 cannot come to the rescue of the petitioner.
Challenge to the Impugned Order extending the time for bringing the immovable property of the petitioner to sale by auction by fixing the time till 31.03.2022 cannot be said to be beyond the period of limitation.
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2025 (1) TMI 1351
Validity of Notices of Demand and Orders u/s 206C - as submitted that the authorities have been tried to be impressed upon by filing application showing applicability of the judgment passed in the case of Ghanshyam Mishra and Sons Private Ltd. [2021 (4) TMI 613 - SUPREME COURT] but the authorities have not passed any order
As submitted that suffice will be at this stage if the direction will be issued upon the competent authority to take a decision on that, if not already taken.
Revenue, has submitted that if the application has not been decided, then the same will be decided in accordance with law within a reasonable period.
HELD THAT:- As without entering into the merit of the issues, the concerned respondent is hereby directed to decide the application dated 17.08.2024, if not already decided, within a period of three weeks from the date of receipt of copy of the order.
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2025 (1) TMI 1350
Non-payment of advance tax in accordance with section 249(4)(b) - Validity of ex-parte order - HELD THAT:- We are of the considered opinion that the advance tax if any payable as per section 249(4)(b) is to be determined at the behest of the assessee. If there is no advance tax liability according to the assessee, then he need not to deposit the same & CIT(A)/NFAC is required to admit the appeal of the assessee in such an event.
In the instant case, it is the claim of the assessee that since the assessee remained absent the assessment order was passed ex-parte & whatever deductions were legally available to the assessee were not allowed by the AO.
Contention of the assessee that being cooperative society the business income of the assessee was subject to deduction 80P(2)(a)(i) and 80P(2)(d) and due to ex-parte order the same deductions were not allowed which resulted in determination of unnecessary taxable income in the hands of the assessee - We find that the appeal of the assessee was dismissed in a summery manner without admitting the same for adjudication on merits of the case. It was the observation of Ld. CIT(A)/NFAC that the assessee was required to deposit advance tax in the light of section 249(4)(b) of the IT Act & when the assessee was issued show cause to explain this point he did not chose to file any application to exempt him from payment of advance tax in the light of the fact that no advance tax is payable by him.
Considering the totality of the facts of the case and without going into merits of the case, we deem it appropriate to set-aside the order passed by CIT(A)/NFAC and remand the matter back to him with a direction to admit the appeal of the assessee & adjudicate the same on merits of the case after providing reasonable opportunity of hearing to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2025 (1) TMI 1349
Rejection of books of accounts - estimation of income of the appellant @ 8% of gross contract receipts - HELD THAT:- The assessee participated in the assessment proceedings. Books of accounts of the assessee were produced which were verified by the AO on test check basis.
As during the scrutiny proceedings, the Assessing Officer has observed that the assessee has filed self made vouchers/bills, which were paid in cash and which are not verifiable as not supported by evidences, which led to rejection of books of account u/s. 145(3) of the Act and net profit was computed @ 8% of the gross receipts.
Assessee is not able to demonstrate even before ITAT that the vouchers/bills were not self made and same can be subjected to verification/enquiry. Thus, the findings of the authorities below remained uncontroverted by the assessee even before the ITAT. It is equally true that the authorities below never made any attempt to quantify and specify with precision as to what are self made vouchers which could not be subjected to verification and their magnitude/quantification. The authorities below have not pin pointed the said self made cash vouchers and their quantification/identification, which were not supported by evidences and which remained unverifiable.
The turnover of the assessee during the year under consideration was Rs. 4,00,48,401/- while in the assessment year 2008-09, the turnover was Rs. 4,16,02,496/-. Thus, the turnover in this year is merely 4% lower than the turnover for the assessment year 2008-09, which is negligible difference, and Respectfully following the decision of ITAT for the assessment year 2008-09 and with a view to end this protracted litigation, confirm the addition of Rs. 1,00,000/- in the hands of the assessee keeping in view that the assessee has produced self made vouchers/bills before the authorities below which were not verifiable, and this finding could not be unsettled by the assessee even before ITAT by producing bills/vouchers and its verification, no doubt, it is true that the assessee produced books of account, tax audit report before the authorities below. The assessee has also claimed that these vouchers were receipted by the recipients. It is also claimed that the chartered accountant who did the tax-audit did not pointed any fault/defect in the accounts.
Addition of interest from JSPL - Assessee has claimed that he has reflected the said income in profit and loss account of Shakti Construction, and the same was accordingly brought to tax under the head income from business or profession. It is observed that the assessee has not brought the same to tax under the head income from other sources. The assessee has not demonstrated that the said interest income is earned keeping in view the business requirement and business exigencies, rather than investing the surplus fund lying with the assessee with JSPL. This requires investigation of facts and the matter is remanded back to the file of Assessing Officer for limited verification as to whether said funds were invested with JSPL keeping in view commercial/business expediency rather than merely investing surplus fund, on which interest was earned.
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2025 (1) TMI 1348
Disallowance u/s. 43B on account of GST payable - short contention of the assessee is that GST has not been routed through Profit and Loss account, therefore, no disallowance can be made - HELD THAT:- The amount disallowed u/s. 43B has not been routed through P&L account is not rebutted by the Revenue. No contrary material has been placed before us, by the Revenue to show that the assessee has claimed deduction in respect of GST.
The contention of the assessee that aforesaid amount has been reflected as GST payable under the head current liabilities is uncontroverted.
As in the case of CIT vs. Noble and Hewitt (I) P. Ltd. [2007 (9) TMI 238 - DELHI HIGH COURT] held that where the assessee has neither claimed deduction on account of Service Tax nor has debited the amount to Profit and Loss account, the provisions of section 43B of the Act do not get attracted. Hence, question of disallowance of deduction not claimed does not arise. Decided in favour of assessee.
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2025 (1) TMI 1347
Assessment order passed in violation of the principles of natural justice shorter time given for response to the draft assessment - HELD THAT:- Show cause/draft assessment order, was issued by the AO to assessee on 19.04.2021, with the request to respond or revert to the same by 21.04.2021, the same cannot be construed to be a reasonable time allowed to comply by the assessee, in terms of the mandate of law, as deliberated upon and interpreted in the cases referred further fortified by the decision of MM Wonder Park Private Limited [2022 (6) TMI 1523 - CHHATTISGARH HIGH COURT] while dealing with the issue of reasonable time to respond towards the show cause notice u/s 148A(b) of the Act, wherein Hon’ble High Court had observed that the time period of 7 days provided to the assessee company vide notice u/s 148A(b) of the Act was unreasonably short, and thus, violative of principles of natural justice.
We, thus, in terms of aforesaid observations deem it appropriate to set aside the show cause notice/draft assessment order dated 19.04.2021 and remit the matter back to the file of Ld. AO to decide the issue afresh after affording reasonable opportunity of being heard to the assessee.
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2025 (1) TMI 1346
Revision u/s 263 - show cause notice issued on the basis of the 'audit objection' - Raising of New Issues by PCIT - HELD THAT:-There is a limitation of two years for the purposes of initiating the proceedings u/s 263, as per the Act as per the judgment of ‘Tulsi Tracom Private Limited [2017 (9) TMI 1041 - DELHI HIGH COURT] Notice issued by the PCIT on 17.2.2022 brining in new issues was beyond two years from the end of the assessment year in which the assessment was made. Therefore, the second notice of 17.2.2022 was not a valid one. Accordingly, the order as passed by the PCIT is quashed on this issue as well.
Unexplained investment in immovable property and the ICICI Bank account - Even on merits we find that the investment in immovable property and the deposit in the ICICI Bank account were subject matter of issue of notice u/s 148.
AO was well aware of the issues involved while framing the assessment, for which, he raised specific queries which were replied, along with documentary evidence, which were furnished before the A.O. further regarding the ICICI Bank account, AO did not agree with the audit objection and clarified that ICICI Bank account was part of the record lying in the other folder as per the annotated report reproduced above.
Thus, it is not a case of inadequate enquiry, rather the A.O. had made the enquiry and also by relying upon the various judgments of the 'Apex Court' and of the Chandigarh Bench, particularly of 'Loil Continental Foods' [2019 (12) TMI 263 - ITAT CHANDIGARH] we hold that even on merits, the issue of notice u/s 263 was bad in law as the A.O. had made the necessary enquiries on both the issues and, thus, the order as passed by the PCIT both on legal and merits of the case is quashed. Assessee’s appeal is allowed.
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2025 (1) TMI 1345
Validity of Reopening of assessment beyond limitation period - limitation period under TOLA for AY 2014-15 - time limit for issuance of re-assessment notice under new regime - HELD THAT:- As relying on ASHISH AGARWAL [2022 (5) TMI 240 - SUPREME COURT] notice u/s 148 of the Act was issued on 29/07/2022 whereas the original time limit for six years was 31/03/2021. Therefore, even under the TOLA, the time limit for issuance of notice u/s 148 of the Act had expired on 30/06/2021 and as per the concession made by the revenue, before the Hon’ble Supreme Court, all notices issued on or after 01/04/2021 will have to be dropped as they will not fall for concession during the period prescribed under TOLA. Hence, the impugned notice dated 29/07/2022 is admittedly barred by limitation and is accordingly set aside.Appeal of the assessee is allowed.
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2025 (1) TMI 1344
Validity of ex parte order passed by CIT(A) - as argued notice issued by the CIT(A) were never received or served upon the assessee and as such they could not present its case before the CIT(A) who proceeded ex parte and decided the appeal on merit without giving effective opportunity of hearing to the assessee - HELD THAT:- As per Section 250 sub section 2(a) the hearing to be given is not a formality but an effective hearing is sine qua non for the purpose of upholding the principal of natural justice.
Thus, as no effective opportunity of hearing has been given and there is no proof that the notice sent on various dates were duly served or brought to the notice of the appellant/assessee.
Matter needs to be restored to the file of the Ld. CIT(A) for giving effective hearing to the assessee who shall present its case before the Ld. CIT(A) within 60 days. Decided in favour of assessee for statistical purposes.
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2025 (1) TMI 1343
Short Term Capital Gain - assessee purchased and transferred development rights in her personal capacity - HELD THAT:- As in the case of Sowmya Sathyam [2020 (12) TMI 101 - ITAT BANGALORE] had held that the scope of section 50C was restricted only to two types of capital asset i.e. land or building or both. It was further held that the development rights in the land were not the land itself and, therefore, the provision of section 50C of the Act was not applicable on transfer of development rights in the land.
An identical view was taken in the case of Smt. Vimal Baburaa Jadhav[2021 (9) TMI 860 - ITAT PUNE] wherein it was held that section 50C of the Act applied only in the case of transfer of land and does not apply to the case of rights in land.
We are of the considered view that the Ld. CIT(A) had rightly deleted the addition on account of STCG on deemed transfer of development rights in land.
No such addition was called for as the land belonged to the partnership firm only and the development rights was only notionally transferred by the assessee. Therefore, the order of the Ld. CIT(A), is upheld and the appeal of the revenue is rejected.
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2025 (1) TMI 1342
Addition u/s. 69A - cash deposits made by the assessee during the demonetization period unexplained - HELD THAT:- Assessee did not furnish the details of physical stock available in its hands before him. Admittedly, the assessee could make cash sales only if it could show that it was having sufficient quantity of physical stock. Hence the examination of availability of physical stock is essential to examine the claim of cash sales.
Accordingly, we are of the view that the details of stock summary furnished by the assessee before the Tribunal by way of additional evidence are very much necessary to adjudicate the issue before us. Accordingly, we admit the same.
If the AO had doubted the claim of availability of cash in the books of the assessee, which was claimed to have been generated out of cash sales, it is necessary for him to conduct proper enquiries to find out the veracity of the claim made by the assessee.
Without conducting necessary enquiries, the AO should not take any adverse view. Since the AO has not conducted any enquiry, we are of the view that the AO has made the impugned addition of Rs. 3.05 crores u/s. 69A of the Act under suspicion, which is not permitted under the law.
There is a lacunae on the part of the assessee also. We noticed that the assessee did not furnish details of physical stock before the AO, which is essential to prove the claim of cash sales. As noted earlier, the assessee could make cash sales only of gold, silver, precious stones etc., only if it was having sufficient quantity physical stock in its possession.
Hence, in order to examine the claim of cash sales, it is imperative for the AO to examine the availability of physical stock also. We noticed that the details of stock summary have been furnished for the first time before the Tribunal in the form of additional evidence. Hence, we are of the view that this issue needs to be examined afresh at the end of the AO. Appeal of the assessee is treated as allowed.
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2025 (1) TMI 1341
Denial of deduction claimed u/s. 80IA(4)(iii) - it is the income arising from ‘house property’ and not a ‘business income’ - also assessee has not satisfied the conditions for claiming the deduction u/s. 80IA(4)(iii) that there should be minimum 30 industrial units set up by the assessee for the purpose of claiming the said deduction - HELD THAT:- It is evident that this issue has been recurring in nature were the Tribunal has constantly granted relief to the assessee by holding that the assessee is entitled to claim deduction u/s. 80IA(4)(iii) of the Act. Even on the merits of the case, it is pertinent that the Industrial Park Scheme, 2002, notified by the GOI in exercise of powers u/s. 80IA(4)(iii) of the Act facilitates projects for setting up industrial parks which are eligible for claiming deduction u/s. 80IA(4)(iii) of the Act.
There is no iota of doubt that the assessee was entitled to get benefit under this provision, for the reason that the assessment order does not speak of any violation in the conditions specified in the scheme, though, the revenue has raised a specific ground of appeal that the minimum 30 industrial units requisite for claiming deduction has not been satisfied.
The assessment order nowhere has specified that the assessee has not complied with the said condition. In the absence of the same, we find no infirmity in the order of the ld. CIT(A) in allowing the deduction claimed by the assessee u/s. 80IA(4)(iii) of the Act. Decided against revenue.
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2025 (1) TMI 1340
Interest u/s 244A(1)(b) on refund arising out of self- assessment tax - scope of amendment introduced by Finance Act, 2016 - there was an inordinate delay of 68 months from December 2014 to July 2020 in granting refund due to the assessee, thus argued that the assessee is entitled to additional interest @3% per annum u/s 244A(1)(b) for the entire period - HELD THAT:- It is seen that section 244A dealing with interest on refund was amended by the Finance Act, 2016 and clause (aa) specifically providing for interest on self-assessment tax was introduced w.e.f. 01.06.2016.
Thus, the assessee’s claim for interest on self-assessment tax is clearly covered under the provisions of clause (b) of section 244A(1).
Even though the self-assessment tax was not specifically mentioned therein, it has been held that the assessee is entitled to interest on refund arising out of excess amount paid as self- assessment tax.
Scope of amendment introduced by Finance Act, 2016 - The insertion of subsection (aa) in section 244A(1) was made by the Finance Act, 2016 to clarify the intent of revenue to grant interest on self- assessment tax. The issue is also covered by the decision of Stock Holding Corporation of India Ltd. [2014 (11) TMI 899 - BOMBAY HIGH COURT]. The contention of the revenue is that the decision was rendered prior to insertion of clause (aa) which was brought in with prospective effect is not acceptable. There have been numerous decisions, both before and after the insertion of clause (aa) on this issue, granting the assessee’s claim for interest u/s 244A on excess self-assessment tax.
Accordingly, we hold that the assessee is entitled to interest on refund arising out of excess self-assessment tax from the date of payment of self-assessment tax till the date of grant of refund.
Interest on delayed grant of refund - claim for additional interest - it is seen that there has been an inordinate delay of more than five years in giving effect to the order of Ld. CIT(A) by the AO - Since a specific provision to grant interest on delayed refunds was introduced by the Finance Act, 2016 by inserting subsection (IA) in section 244 w.e.f. 01.06.2016, we are of the view that the assessee is entitled to get interest on the delayed refund from the date of introduction of this provision i.e. 01.06.2016 till the date of grant of refund.
Decision of Nima Specific Family Trust [2018 (10) TMI 441 - GUJARAT HIGH COURT] is squarely applicable to the facts of this case. It was held therein that the assessee would be entitled to get additional interest w.e.f. 01.06.2016 in view of the insertion of subsection (1)(A) by finance Act, 2016 w.e.f. 01.06.2016 prospectively.
Assessee’s appeal with regard to the claim of additional interest on delay refund is partly allowed and revenue’s appeal is dismissed.
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2025 (1) TMI 1339
TDS u/s 194A - payment of interest to JV - as per the AO the assessee was liable to deduct tax at source on the interest payment made by it to the JV on the mobilisation advance, which it had failed to do - CIT (A) directed the Ld. AO that the assessee cannot be considered as assessee-in-default u/s 201(1)/ 201(1A) and consequently demand was deleted - HELD THAT:- As per CBDT Circular No.07/2016 dated 07/03/201, where consortium arrangement is made for executing the EPC/ Turnkey contracts in which each member is independently responsible for executing its part of work through its own resources and also bears the risk of its scope of work, i.e., there is clear demarcation in the work and costs between the consortium members and each member incurs expenditure only in its specified area of work, such a consortium may not be treated as an AOP.
Thus, once in the case of the assessee, no work is performed by the JV or the other constituent member i.e. AGE, but only by the assessee, the AOP does not exist and therefore, we accept the contention of the assessee about non-applicability of Chapter XVII of the Act and no TDS was allowable to be deducted. Accordingly, the order of the ld. CIT(A) is confirmed and the grounds raised by the Revenue in both the years are dismissed.
Disallowance of deduction u/s 80IA - infrastructure facility should not only be developed but also operated by the assessee so as to make the profits derived from the infrastructure facility qualify for deduction u/s. 80IA - HELD THAT:- Assessee is a developer of each of the infrastructure facility mentioned and considering the scope of work undertaken by the assessee in each of the contracts, the work carried out by the assessee cannot be said to be works simplicitor. Hence, in our view all the conditions required to be claimed and the deduction u/s. 80IA for all the projects are fulfilled. Accordingly, the order of the ld. CIT(A) on this ground is upheld and the appeal of the Revenue is dismissed.
Taxing Capital gain @20% on sale of depreciable long-term capital asset - HELD THAT:- Both the parties agreed that this issue now stands covered by the judgment of SKF Ltd. [2024 (10) TMI 477 - ITAT MUMBAI] as held that in case of long-term capital asset, which are depreciable asset in terms of Section 50, even though are deemed to be taxed as short term capital gain, however, the tax rate u/s. 112 would be 20%. Thus, order of the ld. CIT (A) is upheld and the grounds raised by the Revenue are dismissed.
Additions u/s 35D on account of AIR reconciliation while computing the Book Profit u/s 115JB - HELD THAT:- A perusal of the audited accounts would show that there is no adverse comment by the auditor regarding the preparation of accounts in accordance with the provisions of Schedule III to the Companies Act, 2013. Moreover, there is no such allegation by the AO and the hence the audited accounts comply with the requirements of section 115JB(2) of the Act.
A perusal of Explanation 1 regarding adjustments to be made in the computation of the Book profits would show that the adjustments made by the AO fall in none of clauses stated therein and since AO has limited power u/s 115JB to make adjustment to book profit only in respect of items provided in Explanation 1 to section 115 JB(1) - Decided against revenue.
Disallowance of Prior Period Expenses - HELD THAT:- Though the payment of expenses were made during the next assessment year i.e. A.Y.2018-19, the said expenses have bene incurred for the period pertaining to impugned assessment year. Since, assessee follows mercantile system of accounting; the said expenses are to be allowed in the year in which they pertained. Accordingly, the said claim of prior period expenses which has been incurred pertain to this year even though the payment has been made in the next assessment year, then also same has to be allowed. Accordingly, grounds raised by the assessee are allowed.
Addition on account of difference in reconciliation as per 26AS - HELD THAT:- The income returned by the parties and income reflected by the assessee was different except in one case with AGE PATEL Joint Venture (JV) which is for the amount of Rs. 1,48,34,838/- rest are all minor accounts. Once the assessee had produced books of accounts which have been accepted, then if there is any reconciliation amount and assessee had claimed that assessee had shown the correct income, then ld. AO should have at least verified from those parties reflecting the payment.
Looking to the fact that assessee has already reconciled almost every item except for 0.10% of total reported entries, therefore, we agree with the contention of the assessee that addition should not be made and this view is supported by the decision of the Co-ordinate Bench in the case of TUV India (P) Ltd. [2019 (8) TMI 1050 - ITAT MUMBAI]
Allowability of interest on delayed payments of TDS - AO held that interest of late payment of TDS is not an allowable expenditure whereas, CIT (A) has allowed the same - HELD THAT:- Claim of the assessee regarding interest expenditure and delayed deposit of TDS, cannot be held to be an allowable expenditure.
This issue has been discussed in detail in the case of DLF Ltd. [2019 (6) TMI 1288 - ITAT DELHI] held that depositing TDS in time is responsibility of assessee and interest in delay in deposit of TDS cannot be allowed as business expenditure. Accordingly, ground No.1 raised by the Revenue are allowed and the claim of the assessee is rejected.
Disallowance made u/s. 40 (a) (ia) - Assessee indemnified the JV and AGE from all contractual responsibilities and liabilities arising out of the contract - HELD THAT:- JV had ceased to exist as it was merely a pass through entity which shall not be executed any work independently. Apart from that, ld. AO of JV had accepted that entire contract receipts are taxed in the hands of the assessee only and JV is only a pass through entity. The assessee during the year had paid interest on mobilization advances received from IRCON wherein ld. AO has held that assessee did not deduct TDS u/s. 194A(3)(iii).
As already given a detailed finding after relying upon the judgment of the Hon’ble Bombay High Court and CBDT Circular. Thus, we hold that no TDS is to be deducted, accordingly, disallowance u/s. 40(a)(ia) deleted by the ld. CIT(A) is confirmed.
Write off of bad debt relating to Patel Engineering Resources Ltd. (PERL) - Allegations of the AO that interest accrued on loan given to PERL has been added to the loan itself and, therefore, the writing off of such interest is nothing but writing off of loans - HELD THAT:- Once there is a categorical finding that interest income has been considered as business income in the earlies years which has been written off by the assessee during the year under consideration, the conditions provided in Section 36(1)(vii) r.w.s. 36(i) stands satisfied and therefore, the finding and observation of the ld. CIT(A) is upheld and the grounds raised by the Revenue are dismissed.
Write off of loan advanced to DEPL and advance to wholly step down subsidiary - HELD THAT:- CIT (A) has given a finding of fact that advances were given to its subsidiaries in furtherance of the business objects of the Assessee and, therefore, were given in the course of routine business transactions. The revenue has not controverted the said factual finding. Write off of advances made during routine business activity are allowable as a deduction, as the same are incidental to carrying on of business activity.
The utilisation of advances by the borrower in no manner dictates the allowability of the loss in the hands of the Assessee. The Assessee, here in this case had advanced the loans in furtherance of its business objective and, therefore, the loss suffered while writing off the advances/loans is a business loss and eligible for a deduction. If the contention of the Ld. AO is accepted it would lead to an absurd result since for instance a sale of machinery by a dealer, which is a capital asset in the hands of the purchaser, would have to be treated as capital receipt in the hands of the seller also.
We are of the opinion that the utilisation of the loan by the subsidiary is not determinative of allowability of the expenditure in the hands of the Assessee. Once the loan has been given out of commercial expediency, it is allowable as deductions, this issue is covered by the decisions in CIT vs. Colgate Palmolive (India) Ltd. [2014 (12) TMI 846 - BOMBAY HIGH COURT] and CIT vs. BDA Limited [2024 (2) TMI 1342 - BOMBAY HIGH COURT] Accordingly this issue is decided in favour of the assessee.
Taxing capital gain @20% on the sale of depreciable long-term Capital asset - HELD THAT:- As already decided in favour of the assessee following the judgment of SKF Ltd. [2024 (10) TMI 477 - ITAT MUMBAI] wherein held that in case of long-term capital asset, which are depreciable asset in terms of Section 50, even though are deemed to be taxed as short term capital gain, however, the tax rate u/s. 112 would be 20%.
Write off of advance/deposit is not acceptable as bad debt, as a such advance/deposits have not been offered as income in the earlier years - HELD THAT:- If the advance has been given during the course of business and if any loss has been suffered on account of writing off of the advance granted during the course of carrying out of business then it is an allowable loss under section 28 read with section 29 of the Act. This fact has not been disputed at all. It is not a case of claim of bad debts albeit claim of loss incurred during the course of business. Accordingly, Ld. AO is directed to allow the deduction.
Nature of expenditure - Disallowance of compensation paid by the assessee to promoters for invocation of shares pledged by the Promoters to lenders - AO contended that the compensation given to promoters for invocation of pledged shares was on loan account and, hence, held to be capital expenditure - HELD THAT:- The manner in which the Promoters have been recompensated, i.e., by issuance of further shares, is not a relevant criteria for determining whether the expenditure incurred by the Assessee is revenue in nature or not. If the contention of the Ld. AO is accepted then it leads to an absurd result inasmuch as if a capital asset is acquired out of accumulated/ working profits, then such acquisition would not be treated as capital expenditure but a revenue expenditure since it was incurred out of accumulated profits. The mode of discharge of consideration is not germane for deciding the nature of expenditure.
Thus, we hold that the compensation payable to promoters is allowable as a deduction u/s 37(1) of the Act.
AIR Reconciliation assessed as business income - Assessee is not able to substantiate the amount has already been offered to tax in its return of income, therefore, the addition made by AO is upheld - HELD THAT:- We find that assessee was able to reconcile the AIR transactions with the income of the Assessee running into voluminous number of entries. Only un-reconciled entries were 0.03% of the total reported entries which is miniscule difference.
If the assessee has shown all the entries in the books of account duly supported by invoices then no addition can be made merely upon the basis of entries getting reflected in the AIR report. Moreover, the books of accounts of the Assessee have been accepted by the Ld. AO. In such a case we agree with the ld. Counsel and the addition is directed to be deleted. Accordingly, ground raised by the assessee is allowed.
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