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Showing 381 to 400 of 1526 Records
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2023 (10) TMI 1146
Seeking grant of bail - fraudulent availment of input tax credit - HELD THAT:- Vide order dated 19-1-2023, this Court had extended the interim bail subject to compliance of conditions mentioned therein. The petitioner’s Counsel stated that such order has been complied with. Thus, there would be no justification to keep this bail pending waiting for the proper investigation. The petitioner was granted interim protection, and during the interregnum, there is no allegation that he had intimidated the victim or victim’s family or the witnesses or that he had hampered the investigation, or despite being called to join the investigation, he did not appear before the investigator.
There would be no justification to discontinue the interim protection, and the same is made absolute subject to the petitioner complying with the terms of all the interim bail orders - Petition allowed.
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2023 (10) TMI 1145
Additions towards Undisclosed profit made on the basis of the seized documents - search and seizure operation - During the course of search books of account, loose papers and documents were also seized - ITAT deleted the addition - Presumption as to assets, books of account, etc u/s 292C - Decision by two bench judges - HELD THAT:- I. P. MUKERJI, J - As presumption may be rebuttable or irrebuttable. If it is irrebuttable, it is conclusive proof of the fact. The court will not admit any evidence to disprove the presumption.
The question is who has the onus of disproving the presumed fact. One who challenges the presumption has the onus to disprove the fact.
Adjudicating authority has two options, either not to presume that the papers and other documents seized during search and seizure belonged to the assessee, the contents are true and that the signatures appearing thereon are that of the assessee or not to presume so.
In this case, AO has made the presumption and proceeded accordingly.
Now, the drawing of a presumption by the assessing officer in terms of Section 292C, in our opinion, is based on assessment of facts and discretionary and should not ordinarily be interfered with by an appellate authority.
Once this presumption had been made, the onus squarely shifted to the respondent assessee to disprove those facts. The tribunal was enjoined with a duty to appreciate this law and to examine whether the assessee had been able to discharge the burden.
Now, look at the reasons given by the tribunal. It cast a duty on the Revenue to prove the handwriting of the assessee. It accepted the contention of the assessee that the documents did not belong to him instead of requiring him to prove it. It allowed the assessee to retract the admission made by him during the course of the proceedings, by a statement dated 9th March, 1999 that the trial balance for the period 1st April, 1997 to 31st March, 1998 “summarizes my entire business operation for 1997-1998”.
Since Income Tax officers are not police officials, the view of the Supreme Court in Surjeet Singh Chhabra vs. Union of India and Ors. [1996 (10) TMI 106 - SUPREME COURT] at even if a confession was retracted it was to be taken as an admission and binding on the maker is very relevant in this case. The tribunal ought not to have disregarded the admission merely on the ground that later on the assessee had withdrawn the admission, without scrupulously examining whether there were any substantial grounds enabling the assessee to resile from such admission.
The order of the tribunal with regard to the above issues is set aside. We remand the matter back to the tribunal with a direction upon it to reexamine the same on the basis of evidence on record by a detailed order within six months of communication of this order.
BISWAROOP CHOWDHURY, J. - Whether the Income Tax Authority acted correctly in putting question to assessee with regard to Trial balance and other accounts papers seized from the establishment of assessee? - It is a common practice that in a business establishment of a businessman business accounts are prepared by accountant or chartered accountant and the same are audited. The preparation of accounts requires special knowledge and skill. Thus it is the accountant or charactered accountant having special knowledge are entrusted with the preparation of accounts which are audited. Hence it is the accountant or chartered accountant who are in a position to give statement regarding statement of accounts or Trial balance. The business man who has engaged accountant or chartered accountant cannot be said to have knowledge and cannot be expected to make statement on the preparation of accounts, which are prepared by Accountant or Chartered Accountant. A business man can admit his signature if it appears on any accounts or other documents and anything prepared in his own handwriting. Apart from his own handwriting he cannot admit any document prepared by others. Thus the Income Tax Authority ought to have interrogated the Accountant of the establishment regarding documents seized. Thus there was an error on the part of the Assessing Officer. This issue was not considered by the Learned Tribunal.
Thus, this matter should be remitted to the Tribunal for reconsideration.
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2023 (10) TMI 1144
Assessment u/s 158BC - addition in respect of ICS and TT on the ground that payments made to the two concerns were inflated and in the nature of accommodation bill - CIT(A) deleting the additions/disallowance, observed that there were several documents, letters and correspondences filed by assessee, which clearly showed that ICS and TT were carrying out Container Freight Services ("CFS") operations for assessee - HELD THAT:- CIT(A) has recorded a finding that factually the work was being carried out by ICS and TT and just because books of accounts of ICS and TT was not produced, would not give the AO a reason to believe that the payments made to the two concerns were inflated. CIT(A) has rightly observed that assessee is only expected to produce its own books of accounts and records and not to ensure production of books of account of every party, who has supplied goods or rendered services to assessee. That would amount to impossible burden being placed on assessee. ITAT has accepted this finding and has made pertinent observation that findings of CIT(A) based on material on record has not been controverted by the Revenue by bringing any positive material on record.
Amounts paid to parties who did not appear before the AO and the bills were not supported by delivery challans - CIT(A) deleted the addition on the basis that delivery challans and test certificates were infact available. It is also recorded that the employee and director of Blue Ocean Marketing Private Limited had confirmed the transactions and the actual supply of material. So also the case of M/s. Sai Om Labour, assessee was accepted to have proved that the engagement of the labour contractor was essential considering the nature of the business carried on by it. This finding of CIT(A) was also acceptable to ITAT, who on facts have come to conclusions arrived at by CIT(A) were correct.
Since on facts two appellate Authorities have expressed satisfaction based on the material and documents produced before them, we see no reason to interfere. No question of law arises.
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2023 (10) TMI 1143
Unaccounted sales - 4000.806 MTs of finished goods were the product of excess scrap - For the purpose of calculating the percentage (%) of scrap generated during the year, the assessment worked out to 7.2% and not 6.8% as had been worked out by the assessee - HELD THAT:- The assessee has been selling semi-finished goods to its subsidiary entity since the assessment year 2009-2010 till 2014-2015. The additionwas made by the AO for the assessment year 2009-2010 and this was set aside by the CIT (Appeals).
For the assessment years 2010-2011, 2011-2012, 2012-2013, 2013-2014 and 2014-2015, no addition was made qua the semi finished goods manufactured and sold outside the books of accounts.
As per the stated chart, in all the subsequent years, assessment orders have been passed u/s 143 (3) - A perusal of the assessment orders shows that consistently the sales of semi finished goods made by the appellant to M/s Jai Suspension Systems as a sister concern have been accepted and account books to this extent have also been accepted by the Assessing Officer.
Revenue has not been able to dispute the correctness of the aforesaid orders passed u/s 143 (3). After 2009- 2010, no addition has been made in the income of the appellant towards the sales of semi-finished goods to M/s Jai Suspension Systems. No substantial question of law arises
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2023 (10) TMI 1142
Revision u/s 264 - delay in filing the application as alleged - Computation of long term capital gain arising from sale of flat in Mumbai - deduction of renovation expenses after indexing not claimed - petitioner consulted another Chartered Accountant, who advised petitioner that the other co-owner of the property had claimed a deduction of entire renovation expenses incurred in September 1990 in respect of the flat after indexing the same and petitioner should have also done the same while computing his share of capital gains - Petitioner advised to file an application u/s 154 which was rejected on the ground that such claim was made first time in the application under Section 154 of the Act and it was never brought to the notice of respondent no. 3 earlier or CIT(A) - HELD THAT:- As agreeable there was no delay in filing the application u/s 264 because the application u/s 264 of the Act was against the order passed u/s 154 of the Act and not Section 143(3) - The order under Section 154 of the Act was passed on 8th December 2015 and the application under Section 264 of the Act was filed on 18th January 2016, within one year.
The proceedings under Section 264 of the Act are intended to meet a situation faced by an aggrieved assessee, who is unable to approach the Appellate Authorities for relief and has no other alternate remedy available under the Act. The Commissioner is bound to apply his mind to the question whether petitioner was taxable on that income and his powers are not limited to correct the error committed by the subordinate authorities but could even be exercised where errors are committed by assessee. It would even cover situation where assessee because of an error has not put forth legitimate claim at the time of filing the return and the error is subsequently discovered and is raised for the first time in an application under Section 264.
In Asmita Damle [2014 (5) TMI 1230 - BOMBAY HIGH COURT] also held that the Commissioner while exercising revisionary powers u/s 264 has to ensure that there is relief provided to assessee where the law permits the same.
As submitted that assessee should produce documents to prove his share of the indexed renovation expenses. In our view, it is not required because in the assessment order dated 30th December 2010 passed under Section 143(3) of the Act in the case of Ravi R Agarwal, the other co-owner of the flat, the assessing officer has accepted the amount of Rs. 2,95,859/- as the cost of renovation of indexation. Therefore, this figure has to be accepted as correct and suitable allowance should be made while arriving at the long term capital gain.
We hereby quash and set aside the impugned order and remand the matter to PCIT for denovo consideration. Order to be passed shall be a reasoned order dealing with all submissions of assessee. The application under Section 264 of the Act shall be disposed within 8 weeks from today.
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2023 (10) TMI 1141
Levy of fee u/s 234E - TDS statement was filed under Section 200A - whether the late fee can be imposed u/s 234E while processing the statement of TDS under Section 200A of the Act for the subject assessment years? - HELD THAT:- Since, there was no provision for imposing the late fee under Section 234E of the Act while filing and processing the TDS returns under Section 200A of the Act, clause (c) to Sub-Section (1) to Section 200A was introduced with effect from 01.07.2012.
The respondent had had imposed the late fee only under Section 234E of the Act for the assessment years 2012-2013, 2013-2014, 2014-2015. However, Section 200A(1)(c) of the Act was not introduced during the said assessment years. In the absence of any provisions under Section 200A of the Act, when they have processed the application for TDS under Section 200A, no late fee can be imposed under Section 234E. Hence, in such view of the matter, this Court feels that the impugned orders are liable to be set aside - Decided in favour of assessee.
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2023 (10) TMI 1140
Validity of Reopening of assessment - order passed u/s 148A(d) - Period of limitation - Time limit for notice - scope of new regime as per section 148A - prescribed permissible timeline of six years - notices having been issued after passage of six years from the end of the relevant assessment year - HELD THAT:- As per the aforesaid amended section 149, notice under section 148 of the Act could be issued within three years from the end of the relevant assessment year. What is contemplated is that the assessing officer could reopen the case of the assessee beyond three years, but within 10 years from the end of the relevant assessment year. This could be done by the assessing officer within 10 years provided he is in possession of the books of accounts or documents or evidence revealing that income escaped assessment represented in form of asset was likely to exceed Rs. 50 lakhs. Further condition needed to be satisfied is the approval of the competent authority of the Income Tax under section 151 of the Act, which enable the assessing officer to assume the jurisdiction.
What is to be noticed with relevance is that the First Proviso to section 149 of the Act as introduced in Finance Act, 2021, inter alia stipulated that no notice under section 148 shall be issued at any time in a case for the relevant Assessment Year beginning on or before 1st day of April 2021, if such notice could not have been issued at that time on account of being beyond the time limit specified under the provision as it stood immediately before the commencement of the Finance Act, 2021.
In respect of the notice u/s 148 of the Act relating to the assessment year beginning on or before 01.04.2021, the operational conditions in the provision as they stood before 01.04.2021 were maintained. It thus included the factor of prescription of time limit-the limitation.
The Supreme Court in Ashish Agarwal [2022 (5) TMI 240 - SUPREME COURT] striking balance between the notices issued by the Department under the old regime and the provisions brought into force under the new regime held that all notices issued under Section 148 of the Act between 01.04.2021 to 30.06.2021 shall be deemed to have been issued under section 148A of the Act to be treated as show-cause notices under section 148A(b) of the Act. The Supreme Court observed that new provisions substituted by the Finance Act, 2021 were remedial and benevolent in nature, came to be inserted with an object to protect the right and interests of the assessee as well to sub-serve the public interest.
Thus, one of the direction and clarification in Ashish Agarwal (supra), is that all the defences that were available to the Assessee under section 149 under the Finance Act, 2021 and in law whatever rights are available to the assessing officer under the Finance Act, 2021 are kept open to be continued to be available.
The notice which could not have been issued in the old regime period due to becoming time barred as per then operating provision, would also not be permissible to be issued post-01.04.2021.
As already noticed, Section 149 as it stood immediately before commencement of Finance Act, 2021, that is before 01.04.2021 in the old regime inter alia provided for time limit for notice. It stated inter alia that no notice under section 148 shall be issued for the relevant assessment year, as per clause (b), if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to one lakh rupees or more for that year.
Limitation of six years from the end of relevant assessment year operated as timeline in the old regime for issuance of notice u/s 148 beyond which period, it was not competent for the assessing officer to issue notice for reassessment. This embargo is made to continue in the new regime also.
Now the reopening notices which related to the period prior to 01.04.2021, but issued between 01.04.2021 to 30.06.2021 came to be challenged before the Division Bench of this Court in Keenara Industries Pvt. Ltd [2023 (3) TMI 104 - GUJARAT HIGH COURT] proceeded to hold that enacting the provisions in Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020, was not the permissible device whereby the time limit could be legitimately extended for the purpose of issuing Notices under Section 148, which were otherwise barred in terms of Section 149, as it exists in the old regime.
The Taxation and Other Laws Act, 2020 was rightly viewed to be a secondary legislation. It was therefore held that secondary legislation would not override the principal legislation-the Finance Act, 2021. Also negatived by the Division Bench in Keenara Industries Pvt. Ltd. (supra) as per observations in paragraph 36 of the judgment, the concept of freezing the time limit. It was held that it was not permissible in law for the Revenue to travel back in time. Nor does the Taxation and Other Laws Act endorse to such concept. It was held that Notifications extending the due dates under the old provisions could not breath any more after the repeal of the old provisions.
Therefore, the point is no more res integra that all original notices under section 148 of the Act referable to the old regime and issued between 01.04.2021 to 30.06.2021 would stand beyond the prescribed permissible timeline of six years from the end of Assessment Year 2013-14 and Assessment Year 2014-15. Therefore, all such notices when they would relate to Assessment Year 2013-14 or Assessment Year 2014-15 would be time barred as per the provisions of the Act as applicable in the old regime prior to 01.04.2021. Furthermore, these notices cannot be issued as per the amended provision of the Act.
All the impugned notices in the respective petitions u/s 148 of the Act relatable to Assessment year 2013-14 or the assessment year 2014-15, as the case may be, are beyond the permissible time limit, therefore, liable to be treated illegal and without jurisdiction.
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2023 (10) TMI 1139
Stay of demand - revenue directed the petitioner to pay 20% of the demand as a pre-condition for stay of demand - HELD THAT:- It is trite law that when an income tax authority exercises jurisdiction under Section 220(6) of the Act, he exercises quasi judicial power. While exercising quasi judicial powers, the authority is not bound or confined by departmental instructions. He has to apply his mind which must be reflected in the order. This position has been clarified by the Supreme Court in the case of Principal Commissioner of Income Tax Vs. M/s. L.G. Electronics India Private Limited [2018 (7) TMI 1905 - SC ORDER]
That being the position, we set aside the order dated 02.02.2023 and remand the matter back to the file of the first respondent for passing fresh order(s) in accordance with law after giving due opportunity of hearing to the petitioner to be done within a period of six (6) weeks from the date of receipt of copy of this order.
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2023 (10) TMI 1138
Taxability of receipts from airlines in India - PE in India - profits attributable to the PE - Whether the booking fee received by the assessee from CRS is in the nature of royalty income taxable in India? - Whether the receipts from Altea Reservation System are in the nature of royalty/FTS taxable in India? - HELD THAT:- We find that the impugned issue is squarely covered in favour of the Revenue by series of Tribunal’s order from AYs 1996-97 to 2019-20 in assessee’s own case which has been affirmed by the Hon’ble Delhi High Court [2022 (9) TMI 709 - ITAT DELHI] confirming that 15% of the revenue earned by the assessee is taxable in India.
Attribution of profit to the PE, the Ld. AO computed income from bookings made in India after adding back development costs, distribution fees and attributed 75% to the alleged PE - It is undisputed that the facts of the AY under consideration (i.e. AY 2020-21) and that of the earlier years are same. We find that the Hon’ble Supreme Court in its decision [2023 (5) TMI 227 - SUPREME COURT] has upheld the order(s) of the Hon’ble Delhi High Court that 15% of the revenue earned by the assessee is taxable in India and that since the assessee pays 33% of the booking fees to the distributors, no income is attributable to tax in India.
Accordingly, we deem it fit to remit this issue to the file of the Ld. AO to decide it afresh in light of the decision (supra) of the Hon’ble Supreme Court.
Disallowance of expenses incurred by the assessee while computing the income attributable to the PE - AO disallowed the expenditure of Euro 45,917,375/- claimed by the assessee under the head “Distribution fee” following the assessment order for AY 2007-08 - HELD THAT:- It is not in dispute that facts of the present case and business model of the assessee and its PE in India are identical to the earlier years. We find that Tribunal has consistently decided the impugned issue in favour of the assessee in series of its orders for AYs 2007-08 to 2019-20 against which Revenue has not preferred any appeal before the Higher Forum. It can very well be inferred that the Revenue has accepted the said decision of the Delhi Tribunal which is evident from the fact that the Revenue has not challenged the impugned issue before the Delhi High Court in its appeals for earlier AYs 2007-08 till 2016-17 - we hereby allow ground of the assessee.
Nature of receipts - CRS income - Royalty - taxability in India of booking fee received by the assessee as ‘royalty’ both u/s 9(i)(vi) of the Act as well as under Article 13(3) of the India- Spain DTAA - AO, on an alternate basis, held that the 'booking fee' received by the assessee from various airlines is payment for use of process and scientific equipment - AR argued that in terms of section 44DA of the Act and Article 13(5) of the India-Spain DTAA payment in the nature of royalty which is effectively connected with the PE of the non-resident is required to be taxed as business income - HELD THAT:- We find that the impugned issue is squarely covered by the decision of the Hon’ble Delhi High Court in assessee’s favour wherein it has been held that the booking fee received by the assessee is taxable as ‘business income’ and not as ‘royalty’. See order dated 04.05.2023 for AY 2013-14 to 2016-17 [2023 (5) TMI 1249 - DELHI HIGH COURT] , order for AY 2009-10 and for AY 2012-13 - Decided in favour of assessee.
Addition of payments received from various airlines in relation to the use of Altea System as "royalty” both u/s 9(1)(vi) and Article 13(3) of the India-Spain DTAA on the ground that the payment received by the assessee is for use of process and scientific equipment - HELD THAT:- Following the order passed by the coordinate bench of the Tribunal in AYS 2007-08 to 2012-13 [2021 (2) TMI 358 - ITAT DELHI] we are of the considered view that payment received by the taxpayer from British Airways in relation to alleged use of 'Altea system' cannot be characterized as 'royalty' either under the Act or under the Indo- Spain Treaty because Altea system was installed at the airport and was accessed only by the airlines and not by the Amadeus's agents viz. Resbird, Amadeus India and that during the year, the said system was available to British Airways for the aforesaid purpose and that too only at the airport counter and the said software was not available outside the Indian airport or to any of the agents of the taxpayer since the agents were booking the tickets only through the CRS of the taxpayer.
Levy of interest u/s 234A and 234B - HELD THAT:- As regards levy of interest under section 234A of the Act, we observe that the Tribunal in its decision [2022 (9) TMI 709 - ITAT DELHI] for AY 2017-18 to 2019-20 remitted the matter back to the file of Ld. AO for verification and decide the matter afresh in accordance with law. Thus we deem it fit and proper to restore this issue to the file of Ld. AO for verification as to the filing date of return viz-a viz the due date of filing of return for the year under consideration in the light of the CBDT Circular dated 30.12.2020.
Levy of interest under section 234B - As in the absence of any liability for payment of advance tax since tax is deductible at source on the income of the assessee held liable to tax in India, the levy of interest under section 234B of the Act is not warranted. Further, in the present case the income has been received by the assessee after deduction of tax at source. Thus levy of interest under section 234B of the Act is not called for.
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2023 (10) TMI 1137
Bogus advances receipts - advances against sale of flats which have been shown under the head unsecured loans and advances from the parties - AO held that the advances from these parties were not proved - HELD THAT:- We have perused and examined the profit and loss account for the FY ending 31.03.2012 and found that the assessee has shown sales of flats which is in agreement with the details furnished by the assessee in which the amount received from party was duly adjusted and shown as sale.
We note that the assessee has sold these flats in the subsequent years and the sale has duly been shown in the books of accounts and due taxes have also been paid. We are surprised to note that the AO has treated the advances as bogus in respect of which the sale deeds were executed in the subsequent years. We direct the AO to delete the addition.
Project expenses disallowed - addition by CIT(A) as made by the AO on estimated basis by adding 25% of the total project expenses claimed by the assessee - HELD THAT:- After examining profit and loss account, the vouchers filed by the assessee, we note that these were expenses incurred in connection with the construction of the flats project which were duly supported with the bills and vouchers and has been correctly shown in the expenses side of the profit and loss account. We note that the substantial part of the project expenses has gone into closing work-in-progress which was carried forward to the subsequent year as closing stock as there were 14 unsold flats in hand.
We note that the AO has not given any reason for disallowing 25% of the project expenses and only cited the non-production of bills and vouchers whereas on the other hand the assessee has filed all the evidences before us and we note that all these expenses were genuinely incurred for the project of construction of flats. Accordingly, we are not in a position to sustain the ad-hoc disallowance of expenses that too without any basis - Decided in favour of assessee.
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2023 (10) TMI 1136
Penalty u/s 271C - period of limitation - whether Notice time barred and beyond the jurisdiction of the ld. AO? - long time revenue was totally inaction and not levied the penalty - HELD THAT:- The notice u/s 274/271C was duly issued to the assessee by the ACIT, Circle-1, Jodhpur on dated 08.01.2015, the liable for imposition of penalty was duly crossed the limit by violating the provision of section 275(1)(c).The levying the penalty U/s 271C is time barred and beyond the jurisdiction of the ld. AO.
We do not intervene the appeal order. The appeal order is upheld. Accordingly, the penalty U/s 271C is quashed. Decided in favour of assessee.
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2023 (10) TMI 1135
TP Adjustment on notional interest on advances - HELD THAT:- The issue has already been decided against the assessee for A.Y. 2012-13 [2022 (7) TMI 888 - ITAT AHMEDABAD] holding that advances were not in the nature of quasi capital.
The main argument of the assessee against the transfer pricing adjustment made on account of the short term advances given to its subsidiaries in Mauritius and Nigeria, fails. The assessee being unable to demonstrate that the advances were not in the nature of loan/advance but were quasi capital in nature and for commercially expedient purposes of the assessee and hence the LIBOR rate could not be applied to them for the purposes of making ALP adjustment on the interest to be charged, the decision of the Ahmedabad Bench in the case of Micro Inks Ltd. is not applicable to the assessee - Decided against assessee.
Disallowance u/s 14A - strategic investment made in SPV - HELD THAT:- As relying on own case for A.Y. 2012- 13 [2022 (7) TMI 888 - ITAT AHMEDABAD] assessee seeking exclusion of strategic investments while computing disallowance as per Rule 8D of the Rules is dismissed.
TP Adjustment on Liason Support Services - company has benchmarked the transaction by applying CUP as MAM using US Census Bureau annual data relating to commission on sales made by agents, wherein the rate determined was at 4.1% - TPO made downward adjustment by applying rate of 2% instead of 3% following the order for A.Y. 2012-13 - HELD THAT:- The issue is decided in favour of the assessee in A.Y. 2012-13 [2022 (7) TMI 888 - ITAT AHMEDABAD] wherein it is held that the assessee has applied appropriate comparables for determining the ALP and benchmarking the transaction. TPO has selected the comparables which are functionally different from the assessee. Decided against revenue.
Nature of receipt - profit on sale of carbon credit - capital receipt or revenue receipt - HELD THAT:- Issue is decided in favour of the assessee in A.Y. 2012-13 & 2013-14 [2022 (7) TMI 888 - ITAT AHMEDABAD] as held CER receipts as capital in nature and income earned there from also being capital receipt.
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2023 (10) TMI 1134
LTCG invoking the provisions of Section 50C - property transferred through Sale Deed - as argued land was transferred by the assessee to his daughter-in-law without any consideration whatsoever - Whether case of family arrangement not liable to capital gain? - as submitted that the gift given to relative is not considered as a “transfer” as per Section 47(iii) and said transfer is not taxable in the hands of the daughter-in-law in view of the provisions of Section 56(2)(vii) - HELD THAT:- We observe that this issue has been directly dealt with in the case of Smt. Balwant Kaur Mangat [2017 (8) TMI 1129 - ITAT DELHI] as held transaction is clearly through sale deed and submission that it was a gift is not borne out from the deed of transfer - mode of receipt of consideration not mentioned. Since the consideration has not received through cheque, there is no question of it being reflected in the bank account of the daughter.
The provisions of section 50C are clearly applicable in this case as it is a case of transfer of property through sale deed at a price lower than the value adopted for stamp duty valuation. Section 47(iii) comes to play only in cases of transfer through gift or will or an irrevocable trust. Transfer in the present case is not through these modes.
The transaction has been held to be gift in the hands of the daughter, the transferee, and therefore it should be held so in the case of the assessee also is not tenable because in case of the daughter the consideration as per stamp duty valuation is not taxable as per proviso to section 56(2)(vii). However, the provisions of capital gains taxation and the income from other sources are independent of each other. The income in the hands of the daughter having been held to be exempt, does not absolve the assessee from the capital gain liability.
Also decided in the case of Shri Jay Atulbhai Mody [2022 (12) TMI 1260 - ITAT RAJKOT] held that property transferred to Mother through Sale Deed is a sale and not Gift, taxable as capital gain. Decided against assessee.
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2023 (10) TMI 1133
Short credit of tax deducted at source - HELD THAT:- As we find that this was not the part of the draft assessment order and therefore the assessee came to know only about this adjustment at the time of making of the final assessment order, hence, in the interest of justice, we set-aside it to the file of AO to verify the credit claimed by the assessee in the return of income - Thus, ground is allowed with above direction.
MAT computation - not granting assessee the lower of brought forward losses or unabsorbed decision while computing book profit u/s 115JB - HELD THAT:- In this case as the unabsorbed depreciation is rupees nil whereas the unabsorbed business losses are ₹ 201.76 crores and therefore the assessee is entitled to deduction of rupees nil.
The view of the AO is also supported by the decision of MILAN INTERMEDIATES LLP [2018 (7) TMI 1724 - ITAT AHMEDABAD] no infirmity was shown to us that how the order of the AO is erroneous. It was also not shown to us that the decision of the coordinate benches relied upon by the learned assessing officer is incorrect or upset by the decision of the honourable High Court. We are not inclined to set aside back to the file of the learned assessing officer because there is no purpose. Accordingly, we dismiss ground of the appeal confirming the action of AO that assessee has already been granted deduction while computing book profit under section 115JB of the act of lower of unabsorbed business losses or unabsorbed depreciation.
Adjustment of the book profit u/s 115JB - addition on account of the foreclosure cost was made by AO - As assessee has debited capital expenditure and did not reduce it book profit - when company provides for premium on redemption out of the profits of the company whether it needs to be debited as expenses in the statement of profit and loss account or it is to be deducted from balance of surplus in the balance sheet? - HELD THAT:- In the present case, in form number 3CD, assessee has classified the above expenditure as capital expenditure. Form number 3CD is always prepared by the assessee. The report is given by an accountant in form number 3CA or Form No. 3CB. Thus, there is a basic contradiction in the claim of the assessee that tax audit report (form number 3CD) cannot be used by the learned assessing officer for making adjustment under section 115JB.
The fact shows that in form number 3CD assessee is stating that foreclosure cost is in the form of premium paid on redemption of redeemable preference shares and is capital expenditure, whereas while computing book profit, assessee pleads that it is a revenue expenditure which can be debited to the profit and loss account.
In the result we do not find any infirmity in the order of the lower authorities in making addition of Rs 200 crores to the book profit u/s 115 JB of The Act holding that it is statement of assessee that it is a capital expenditure. Thus Ground no 2 to 9 of the appeal are dismissed.
Nature of expenses - share issue expenses - revenue or capital expenditure - HELD THAT:- As per provisions of section 37 (1) any capital expenditure is not allowable as deduction. Assessee has incurred this expenditure only for the share issue and capital reduction. In view of this, we do not find any infirmity in the order of the lower authorities in holding that expense is capital in nature. Further in form number 3CD assessee itself is qualified it to be a capital expenditure and therefore now assessee cannot argue otherwise as form number 3CD is also prepared by the assessee. The claim of assessee is contradictory on the same issue. Therefore, no infirmity in the orders of the lower authorities in holding that expenditure incurred by the assessee is a capital expenditure relying on assessee's own claim in Form no 3 CD. Accordingly ground number 10 – 12 of the appeal are dismissed.
TPA - sale of fuel stock and purchase of fuel stock - MAM selection - assessee concluded that comparable Uncontrolled Price Method (CUP) cannot be applied due to non-availability of transaction level data through both internal and external sources - TPO rejected the benchmarking analysis and held that Comparable Uncontrolled Price [CUP] method is the most appropriate method, he used TIPS database to benchmark the transaction by using that method and accordingly he benchmarked the purchase and sale of fuel stock transaction - HELD THAT:- The product Transacted is coal. On careful look at Rule 10 AB of the ITA Rules 1962 introducing “Other method”, it merely facilitates considers the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. As assessee has failed follow mandate of section 92CA (3) of the Act, the ld. TPO adopted the Uncontrolled Comparable price Method [CUP], adopted TIPS data base and held part of transaction of purchase and sale at Arm’s length price – and without respect of few transactions made the adjustment. The ld. DRP also upheld the TP approach of ld. TPO.
TPO found the comparable prices of the transacted goods and then made adjustment wherever the prices are found not comparable. No infirmity pointed out in the transactions compared, timing of transactions and on any other parameter of transaction. Therefore, we do not have any hesitation in confirming the adjustment on account of Arm’s length price of specified domestic transaction.
It is not the case that TIPS database is not reliable. No evidence was produced before us that there is any infirmity in the database used by the TPO. Many coordinate bench decisions have held that TIPS database is the appropriate database in determining comparable uncontrolled prices of products.
No infirmity was pointed out in approach of ld. TPO before us other than above, hence transfer pricing adjustment on account of sale of fuel stock and on account of purchase of fuel stock are confirmed. Decided against assessee.
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2023 (10) TMI 1132
TP Adjustment - exclusion of Eclerx Services Limited from the set of comparable companies while determining Arm’s Length Price (ALP) - HELD THAT:- Assessee is rendering back office support service to its AE. There is no change in the services performed by the assessee right from the AY 2007-08 onwards. We find that this Tribunal in assessee’s own case for AY 2007-08 [2017 (1) TMI 1546 - ITAT DELHI] had excluded Eclerx from the list of comparable companies as functionally not comparable with the assessee.
Hence, we direct the Ld. AO to exclude Eclerx Service Limited from the final list of comparables while determining the ALP of International Transactions of the assessee. Accordingly, Ground raised by the assessee is allowed.
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2023 (10) TMI 1131
Revision u/s 263 - addition u/s 40A(3) - assessee by paying huge cash in excess of Rs. 20,000/- alleged to have violated the provision of Section 40A(3) - PCIT is of the opinion that the AO failed to enquire the above aspect in the books of accounts including the cash book and vouchers while completing the assessment in the case of the assessee - case of the assessee is this that the cash payment made is nothing but the withdrawal of the partners of the firm and the partners’ capital account has also been produced before the Ld. PCIT - HELD THAT:- We find substance in such arguments made by the Ld. DR. Furthermore, it is a settled principle that the capital cannot be attributable as expenses and in the instant case part of the old capital had been withdrawn by the partners of the firm, which is not liable to be subjected to the provisions of Section 40A(3).
Moreso, when the entire materials were placed before the Ld. AO during the course of assessment proceeding and only upon verification of the same, the return of income was accepted, which is also reflecting from the order passed by the Ld. AO mentioned therein, in our considered opinion, assessment cannot be reopened by exercising power conferred u/s 263 of the Act by the Ld. PCIT in the manner it has been done.
We find that the issue raised by the Ld. PCIT was already adjudicated upon due application of mind by the Ld. AO in the assessment proceedings under Section 143(3) of the act and return was accepted.
The copy of the partners’ capital account, payment vouchers made to the partners, the ledger of cash book alongwith narration for the period 01/04/2016 to 31/03/2017 were duly placed before the Ld. AO during the original assessment proceeding and only upon verification of the same, the assessment was finalized.
It is relevant to mention that the Ld. PCIT referred Explanation (2) to Section 263(1) of the Act while holding the order of assessment erroneous and prejudicial to the interest of the Revenue and exercising power in passing direction for re-assessment by the Ld. AO which in our considered opinion is not having any manner of application as the examination and/or verification of the issue involved in the PCIT’s order were duly been made by the Ld. AO which is also reflected in the order so passed by the Ld. AO.
Thus, prima facie finding made by the Ld. PCIT holding the order passed by the ld. AO dated 10.12.2019 is erroneous and prejudicial to the interest of the Revenue, in our considered opinion, is found to be wrong and direction for re- assessment by the Ld. AO is, thus, found to be not sustainable. The entire proceeding is, thus, void ab initio and quashed. Assessee’s appeal is allowed.
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2023 (10) TMI 1130
Disallowance u/s 14A r.w.r. 8D - assessee is NBFC - whether addition could be made if the assessee had not earned any exempt income during the year under consideration? - HELD THAT:- There is no dispute that the assessee is a non-banking finance company, making investment in the group companies to meet their business requirements. In such a situation, it is beyond doubt that whenever the investee company declares dividend, such dividend would invariably be earned by the assessee and the assessee alone.
It is not a case where only by chance the shares would be in the hands of the assessee when such a dividend is declared. If the assessee holds these shares as stock-in-trade, to be liquidated whenever the share price goes up in order to earn profits, then it would be possible that during such holding, the investee company may declare dividend.
Purpose of assessee holding the shares is not to liquidate when the share price goes up and thereby to earn profit, but the assessee holds such shares in the group companies to meet the business requirements of such companies. Assessee is bound to receive the dividend when it is declared. Therefore, the decision of Maxopp Investment Ltd [2018 (3) TMI 805 - SUPREME COURT] as followed by Kingfisher Finvest India Ltd [2020 (10) TMI 518 - KARNATAKA HIGH COURT] is applicable to the facts of the case.
Argument of the learned Counsel that the issue is held in favour of the assessee in assessee’s own case for earlier assessment years does not hold much water. A careful reading of order cited makes it clear that for the earlier assessment years, this fact of assessee investing in group companies for the business requirements was not brought to the notice of the Bench by either side. When once it has come to the notice of the Bench, it is not possible to perpetuate the mistake occurred on earlier occasion. It is the settled principle of law, as observed in the case of Distributors (Baroda) (P.) Ltd. vs. Union of India [1985 (7) TMI 1 - SUPREME COURT] that there is no heroism to perpetuate an error and to rectify such an error is a compulsion of the judicial conscious. Errors cannot be perpetuated on the name of consistency.
We find it difficult to follow the view taken in the appeals for the assessment years 2016-17 & 2017-18 - Decided in favour of revenue.
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2023 (10) TMI 1129
Interest receivable relatable to Non-Performing Assets - CIT(A) allowed the relief related to interest receivable on NPA - HELD THAT:- The issue is well adjudicated by the ld. CIT(A). The entire issue is covered by the RBI guideline in respect of accounting of policies on NPA which is duly covered by the AS-9. In our considered view, we do not intervene in the order of the ld. CIT(A). Accordingly, the ground of the revenue is dismissed.
Not allowing the net claim made in ROI on account of adjustment in income and expenditure through Memorandum of Changes (MOC’s) made by the Statutory Auditors during finalisation of financial statements - CIT(A) had not adjudicated details related to claim of deduction submitted as assessee has not submitted formal application under Rule 46-A of the Income Tax Rules, 1962 for admission of additional evidence and accordingly confirmed the additions made by the ld. AO - HELD THAT:- In the interest of substantial justice and fairness to both the rival parties, as also that adjudication of this issue will require enquiries and verification of the facts, we are inclined to set aside the appellate order passed by ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for fresh adjudication on merits and in accordance with law. The ld. CIT(A) is directed to pass detailed, reasoned and speaking order after making such enquiries and verifications as he may deem fit. CIT(A) shall give proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law, and evidence/explanations submitted by assessee in its defence shall be admitted by ld. CIT(A) in the interest of justice
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2023 (10) TMI 1128
Disallowance of sales and marketing expenses u/s. 37(1) - Assessee has incurred sale promotion expenses in relation to brand reminders, Medical Camp expenses, Professional fees-Medical Advisory, Market Research / Survey and Travel & Accommodation relating to advisors attending conferences - assessee has declared certain percentage of disallowance of respective expenses incurred for marketing expenses before ITSC in order settle the disputes raised during the search proceedings - CIT(A) accepted the Assessee's contention that in view of orders passed by ITAT in Assessee's own case for Brand Reminders and there being assessment order for other heads where in the AO has himself applied a lower rate the same rate of disallowance could not be applied for the three (3) months and on an adhoc basis, made additional disallowance in the range of 2-5% for different heads - HELD THAT:- The offer before ITSC to settle the dispute amicably cannot be the basis of making any regular assessment without their being any proper material on record to substantiate the relevant disallowances. In the given case, the assessing officer merely followed the percentage of disallowance adopted by the ITSC without their being any material to support the disallowances for the impugned assessment year. Similarly, the Ld.CIT(A) even though agreed that the percentage declared before ITSC cannot be adopted but proceeded to adopt percentage on adhoc basis.
Therefore, in our considered view, the reasons given by the Ld CIT(A) to adopt the respective percentage are mere assumptions and there is no basis. Assessee adopted the relevant percentage of disallowance based on the findings of appellate authorities particularly the ITAT.
Therefore, we are inclined to direct AO to verify the percentage proposed by the assessee and the relevant findings of the coordinate bench in each and every expense. Before we depart, for the distribution of Brand Reminder, being less than ₹ 1,000/- (below the threshold provided by MCI), this particular marketing expenses are within the threshold limit prescribed by the MCI and the coordinate benches have allowed this expense and also the revenue allowed the same in the subsequent assessment years. Therefore, in over all the disallowance proposed by the Ld CIT(A) is without basis and mere assumptions.
With regard to DR submissions regarding applicability of decision in Apex Laboratories [2022 (2) TMI 1114 - SUPREME COURT], we observe that this is not case of either AO nor CIT(A). We cannot stretch the issues beyond assessment order. Accordingly, we direct the Assessing Officer to delete the additions sustained by the Ld CIT(A) and verify the percentage offered by the assessee with the subsequent orders of appellate proceedings. Accordingly, the grounds raised by the assessee are allowed and revenue is dismissed.
Weighted deduction u/s. 35(2AB) - AO rejected the submission made by the Assessee, based on amount quantified by the DSIR in the certificates for previous year made disallowance of weighted deduction claimed u/s. 35(2AB) thereby granting only 100% deduction and rejected additional 50% of following R&D expenses - HELD THAT:- With regard to Clinical Trials we observe that in assessee’s own case the Coordinate Bench for AY 2008-2009 & 2009-2010 [2015 (2) TMI 1348 - ITAT MUMBAI] relying upon decision in CIT v. Cadila Healthcare [2013 (3) TMI 539 - GUJARAT HIGH COURT] held that expenses incurred for clinical trials were eligible for deduction u/s. 35(2AB) though incurred outside the R & D facility and thus the view of DSIR came to be rejected.
Consultancy and professional fees - As in own case the Coordinate Bench for the A.Y. 2007-08 [2012 (9) TMI 43 - ITAT MUMBAI] these expenditures have been incurred towards research expenses and not towards any patent filing. Further, it is also observed that the expenditure incurred in respect of patent application filed under The Patent Act, 1970. Explanation to section 35(2AB), as reproduced herein above, specifically provides that the expenditure on scientific research for the purpose of section 35(2AB) of the Act shall include filing of application for a patent under The Patent Act, 1970, in relation to drugs and pharmaceuticals. Any application for patent foreign country has to be filed in India as per section 7 of The Patent Act, 1970, according to patent cooperation treaty. Therefore, we hold that the Commissioner (Appeals) has rightly held that the said expenditure incurred by the assessee towards patent filing charges is eligible for weighted deduction u/s 35(2AB).
Rent taxes and repairs to building - As decided in assessee’s own case [2012 (9) TMI 43 - ITAT MUMBAI] held that the repairs, rent, etc., the expenditure incurred relating to R&D premises cannot form part of cost of land or building. In the absence of any fact that the said claim of the assessee aggregating to 62,00,689, is not the expenditure on rents, rates and taxes relating to R&D premises, we are of the considered view that the said expenditure has to form part of weighted deduction as per section 35(2AB) of the Act. Therefore, we, by reversing the orders of the authorities below, hold that the assessee is entitled to weighted deduction on the said amount @ 150% as per section 35(2AB) of the Act.
Netting off of sale proceeds of fixed assets against the expenses - As issue has diverse views. We are inclined to remit this issue back to the file of Assessing Officer to follow the decision of Wockhardt Ltd [2012 (5) TMI 823 - ITAT MUMBAI] Accordingly, the grounds raised by the revenue are dismissed except the issue of netting of sales proceeds, which we are inclined to allow for statistical purpose.
Analysis and testing charges - Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the inhouse facility and those can were incurred outside, in our opinion, by itself would not be sufficient to deny the benefit to the assessee under section35(2AB) of the Act. It is not as if that the said authority was addressing the issue for deduction under section 35(2AB) of the Act in relation to the question on hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules. See Cadila Healthcare [2013 (3) TMI 539 - GUJARAT HIGH COURT].
Also decided in assessee own case A.Y. 2014-15 [2022 (10) TMI 214 - ITAT MUMBAI] held no infirmity in the order passed by the CIT(A) in allowing weighted deduction at the rate of 200% in respect of Quality Control/Testing Expenses.
Set-off of brought forward business loss and unabsorbed depreciation of Bharavi Laboratories - HELD THAT:- We observe that the company Bharavi Laboratories was merged with the assessee company and as per the provisions and in line with the NCLT directions, the assessee is eligible to set off the losses carried forward by the Bharavi Laboratories at the appointed date. Therefore, we direct AO to verify the claim of the assessee alongwith the order of NCLT dated 06.07.2017. It is directed to allow the claim as per law. Accordingly, the additional ground raised by the assessee is allowed for statistical purpose.
Inclusion of surcharge and cess while computing MAT Credit - HELD THAT:- We observe that the issue of giving MAT credit in the subsequent assessment years are already well settled that the tax paid as per provisions of sec.115JB always includes surcharge and cess. Similarly, while giving credit in the subsequent year shall include the surcharge and cess. One cannot separate the tax liability differently while calculating tax due and tax credit. Therefore, we are inclined to dismiss the grounds raised by the revenue.
Education Cess claim u/s 37(1) - HELD THAT:- We note that by way of Finance Act 2022 Explanation 3 has been inserted in Section 40(a)(ii) of the Act with retrospective effect from 01.04.2005 which clearly provides that the term "tax' includes and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Therefore, in view of the same no deduction is allowable in respect of Education Cess for the Assessment Year 2014-15 in terms of Section 40(a)(ii) of the Act read with Explanation 3 thereto - we observe that this issue of claim on account of education cess is held to be against the assessee. Accordingly, the ground raised by the revenue is allowed.
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2023 (10) TMI 1127
Maintainability of SLP - Seeking permission to avail of the appellate remedy - HELD THAT:- The Special Leave Petition is disposed of by reserving liberty to the petitioner herein to seek permission to avail of the appellate remedy, if so advised - If any appellate remedy is availed of by the petitioner herein, the same shall be considered by the Appellate Authority on merits.
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