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Showing 41 to 60 of 1482 Records
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2023 (6) TMI 1442
Income deemed to accrue or arise in India - Taxability of receipts towards sale of software products - income from sale of shrink-wrapped software is taxable in India, being in the nature of royalty under the provisions of section 9(1)(vi) as well as Article 12(3) of the DTAA between India and USA - HELD THAT:- The issue in this appeal is squarely covered by the judgment in Engineering Analysis Centre of Excellence Private Limited [2021 (3) TMI 138 - SUPREME COURT]. Nagraj submits that there is a review petition pending in the Supreme Court and therefore, Court may dispose the appeal with liberty to appellant to approach this Court to either revive the appeal or file a fresh appeal in case the review petition is allowed in favour of Revenue.
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2023 (6) TMI 1441
Disallowance of provision for pension - assessee made a claim for allowing provision towards pension liability without actually contributing to the fund - HELD THAT:- As decided in assessee own case [2020 (2) TMI 1350 - ITAT MUMBAI] provision towards pension is not a contingent liability. It is an ascertained liability and has been provided for in the books of account on a scientific basis, as per the actuarial valuation.
Further, it would also be contrary to the judgement of Metal Box Co. of India [1968 (8) TMI 53 - SUPREME COURT] wherein observed that contingent liabilities properly discounted were to be allowed as a deduction. In view of the above factual discussion, legal position based on various decisions, we are of the view that this deduction claimed by the assessee is allowable and hence, allowed. This issue of assessee’s appeal is allowed.
Depreciation on maturity securities - practice of the assessee to make provisions in respect of overdue debentures/bonds which matured but remain unpaid at the end of the accounting year. In the earlier assessment years, provision for impairment in the valuation of such investments, i.e. depreciation on matured securities, has not been allowed - HELD THAT:- As we find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India [2013 (8) TMI 520 - ITAT MUMBAI] held no such ad hoc deduction could be allowed against the amount receivable on redemption of securities which had matured and become due for payment before the close of the accounting year. Ground raised in assessee’s appeal is dismissed.
Depreciation on leased assets - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India (supra) for the assessment year 1996-97 [2016 (8) TMI 963 - BOMBAY HIGH COURT] hold that the transaction in question is finance lease and not operating lease. Accordingly, we uphold the orders of the authorities below qua this issue - Ground raised in assessee’s appeal is dismissed.
Disallowance of deduction u/s 36(1)(vii) in respect of non-rural advances - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] one established rule for interpretation of legislation is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. In the present case, the legislature stipulated a fixed date i.e. 01.04.2014 while inserting Explanation 2 to section 36(1)(vii) of the Act. In view of the above, we are of the view that assessee is entitled to deduction under section 36(1)(vii) of the Act being the amount of bad debts written off (other than in respect of rural advances). This issue of assessee appeal is allowed.
Depreciation on securities - assessee has been valuing investments in Available for Sale (“AFS”) and Held for Trading (“HFT”) after netting of classification-wise depreciation and appreciation, computed scrip-wise and provided for not depreciation in each classification while ignoring the depreciation, as per the RBI guidelines - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India (supra) for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] as held we are not concerned with a scenario where in the later year the depreciation provided in earlier years is reduced.
Decision in the case of Deutsche Bank A.G vs. DCIT [2002 (6) TMI 158 - ITAT BOMBAY-G] relied by the AO is in connection with valuation of foreign exchange forward contracts. In this case the assessee did not account for in the financial statement the anticipated/contingent profits from the contracts to the extent not settled as on the last day of the accounting year whereas any loss on such contracts was provided for by a charge in the profit and loss account on the best estimates. The Department brought to tax the profit on such forward exchange contracts and stated that one method for valuation of the entire stock of securities should be followed. This resulted in a situation of taxing appreciation of stock, which goes against the general and settled principle of non-taxation of notional income, as laid in the case of Sanjeev Wollen Mills [2005 (11) TMI 26 - SUPREME COURT] and others discussed supra. Hence, disallowance of depreciation/ reducing of depreciation on appreciation in the value of securities held as available for sale and held for trading category are allowable.This issue of assessee appeal is allowed.
Deduction claimed u/s 36(1)(viia) - HELD THAT:- Assessee is eligible for claim of deduction u/s 36(1)(viia) of the Act on standard assets and this issue is covered by Tribunal’ s decision in assessee’s own case for AY 2006-07 [2016 (10) TMI 164 - ITAT MUMBAI]
Taxation of interest income from Non–Performing Assets (“NPA”) - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India (supra) for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] held that this issue is squarely covered by the decision of American Express Bank Ltd [2015 (8) TMI 1584 - BOMBAY HIGH COURT] wherein it is held that there is no credit entry in the books of the account in respect of the interest on such NPAs, no addition can be made.
Even the Mumbai Tribunal in the case of American Express Bank Ltd. (supra) has considered this issue and held that where the AO has not contested that the policy adopted by the assessee is not in accordance with RBI guidelines, the incidence of taxation of interest on bad and doubtful debts will be either when the same is credited to the profit and loss account for the year or in the year in which it is actually received. Mere crediting of the interest to a reserve cannot be said to be an incidence by which the said interest could be charged to tax. Hence, we delete the addition of interest income and allow this issue of assessee’s appeal.
Taxation of Non–Performing Investment (“NPI”) - Since the overdue interest on investments and bills discounted was not recognised on the accrual basis, the assessee was asked to furnish the details of such interest and an explanation on this accounting treatment - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case in State Bank of India (supra) for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] deleted the addition of interest income from nonperforming Investments made by the AO as interest on inter corporate deposits recognised as NPA, in terms of the directions of RBI was not taxable. Decided in favour of assessee.
Disallowance in respect of payment towards contribution to Retired Employees Medical Benefit Scheme - HELD THAT:- Tribunal in assessee’s own case for the assessment years 1997–98 and 1998–99 [2016 (4) TMI 1392 - ITAT MUMBAI] uphold the plea of the assessee and allow the contribution made to the Retired Employees Medical Benefit Scheme as provisions of section 40A(9) should not make any harm to the expenditure incurred bonafide, that the contribution by the assessee bank was not disputed by the AO, stating that the same was not bonafide, that the funds were not controlled by the assessee banks, that the bonafide contribution made by the assessee as an employer was not hit by section 9 of section 40A of the Act. In the case under consideration, there is no doubt about genuineness of payment nor it is the case of the AO or FAA that Trust was not bonafide or the expenditure was not incurred wholly and exclusively for the employees. Decided in favour of assessee.
Allowance of amount paid for setting up a chair in London School of Economics (“LSE”) - HELD THAT:- Sr. Counsel by referring to the additional evidence filed by the assessee vide application dated 30/09/2021 submitted that payment was made for setting up LSE India Observatory and I.G. Patel Chair in Contemporary Indian Society and Economy in LSE, London. It was further submitted that in this regard the assessee, RBI, and LSE entered into a Memorandum of Understanding, whereby both RBI and assessee each agreed to provide the LSE a sum of 1 lakh Sterling Pound per annum for a period of 10 years starting from 01/01/2007. The learned Sr. Counsel further submitted that the amount has been 37 stoppel during the course of the assessee’s ordinary banking business during the year and thus is allowable as such while computing its business income. Since these documents filed by the assessee by way of additional evidence were not available before the lower authorities, therefore, we deem it appropriate to remand this issue to the file of AO for de novo adjudication.
Taxability of recovery of bad debt written–off in earlier years - As submitted that recovery of bad debt written–off should not be allowed to tax under section 41(4) of the Act as it has not claimed deduction under section 36(1)(vii) - HELD THAT:- As respectfully following the judicial precedent in assessee’s own case for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] we uphold the plea of the assessee that provisions of section 41(4) of the Act is applicable only when recovery of bad debts are in relation to debts for which a deduction under section 36(1)(vii) is allowed. However, this issue is restored to the file of the AO to verify if the recovery of the amount, in the present case, is in respect of a write-off of the claim allowed as a deduction under section 36(1)(viia) or under section 36(1)(vii) of the Act in earlier years. Accordingly, ground no. 13, raised in assessee’s appeal is allowed for statistical purposes.
Non-taxability of income from foreign branches - scope of Notification no. 91 of 2008 was issued u/s 90(3) - HELD THAT:- As relying on Technimont (P.) Ltd. [2020 (2) TMI 1400 - ITAT MUMBAI] and Bank of India (supra) for the assessment year 2015-16, we see no substance in this plea either. The notification deals with connotations of the expression “may be taxed”, appearing in the tax treaties entered into by India, and there is absolutely no basis whatsoever to support the proposition that the effect of the notification has to be restricted in its application to non-business income only. No such differentiation in treatment of business and non-business income is envisaged in the said notification, nor to do we see any justification for inferring the same. Learned counsel does not have any material whatsoever in support of the proposition canvassed by him, nor does this proposition make any sense on the first principles- inasmuch as once the notification is issued without any such specific restriction for application to business income, we cannot infer a restriction in its application. We, therefore, reject the plea of the assessee, and thus decline to interfere in the matter. We uphold the action of the Assessing Officer in including the profits of the assessee’s overseas branches in its taxable income in India. Decided against assessee.
Taxability of interest on securities - Assessee excluding interest accrued but not due for income tax purposes - HELD THAT:- As decided in own case [2013 (8) TMI 520 - ITAT MUMBAI], for the assessment year 1996-97 we accept the assessee's claim and hold that the interest on Govt. securities cannot be assessed "de die in diem". We direct the A.O. to assess the interest on the basis of the coupon dates - Similarly, the Tribunal in the case of Housing Development and Finance Corporation [2005 (9) TMI 234 - ITAT BOMBAY-I] following the aforesaid decision of the Tribunal, has also held that Section 145 of the Act could not override the provisions of Section 5 and, therefore, no person could be assessed unless the income accrued to him and in the cases of Securities, interest accrued to the assessee on specified dates and not on day today basis as the assessee has no right to receive the income before fixed date, hence, interest was taxable on the due basis only. In this view of the matter, we accept this ground of the assessee.
Allowability of broken period interest - HELD THAT:- We find that the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2008-09 [2020 (2) TMI 1350 - ITAT MUMBAI] as noted that BPI refers to interest on Government and other approved securities relatable to the period from last due date (upto which interest was paid) till the date of purchase or sale. Thus, when the assessee purchases a security, it pays a price which is calculated having regard to two components, viz., the market price of security plus BPI to the seller. In this case, the assessee treats the BPI paid as expenditure. Similarly, when the assessee sells a security, such interest is treated as income of the assessee. This ground of appeal is covered in favour of the assessee.
Allowability of provision for wage revision - assessee’s contention is that the liability in respect of wage revision has accrued during the year under consideration, as the contracted wages is payable to the employee from 01.11.2007 - HELD THAT:- As decided in assessment year 2008-09 date of effective commencement of the agreement is relevant and not the date of signing of the agreement or date of approval by DRE. The Mumbai Tribunal allowed the claim of the assessee for the assessment year 2008-09 on the basis that the wage revision was certain and could have been reasonably estimated. We may mention that Bank of Baroda is also a part of the same Bipartite settlement as in the present case of the assessee. Hence, we are of the view that CIT(A) has rightly allowed the claim of assessee.
Allowance of staff welfare expenses, i.e. payment to schools towards reservation of seats for the children of the bank officers - HELD THAT:- As it is clear from the above order of the Tribunal that for the assessment year 1992-93 this issue was decided in favour of the assessee. The ground of disallowance for the year under consideration is treating the same as gratitudes payment. We note that as per the policy of the bank the arrangements are made for the reservation of seats in the schools for the children of the officer who are frequently transferred. Thus there is no discrimination in the policy as far as the officers subjected to transfer. A similar view has been taken by the Tribunal for the assessment year 1995-96 vide order dated 17.9.2009. Accordingly, following the order of this Tribunal for the assessment year 1992-93, we allow this claim of the assessee.
Disallowance u/s 14A r/w Rule 8D - suo moto addition - HELD THAT:- It is the claim of the assessee that only those investments which yielded exempt income during the year should be considered for computation of disallowance under section 14A of the Act. We find that this claim of the assessee is supported by the decision of Vireet Investment (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it was held that only those investments are to be considered for computing average value of investments, which yield exempt income during the year. Accordingly, we direct the AO to only considered those investments for the purpose of computation of disallowance under section 14A read with Rule 8D(2)(iii) of the Rules, which yield exempt income during the year.
As undisputed that the assessee suo moto disallowed sum towards administrative expenses under section 14A of the Act, in the original as well as the revised computation of taxable income. Thus, we are of the considered view that in such a scenario, the expenditure offered by the assessee over and above the disallowance computed under section 14A read with Rule 8D, by applying the aforesaid directions, be examined for its allowability under the provisions of the Act by the AO.
Loss on revaluation of investments/provision for amortisation of premium paid on securities in Held to Maturity (“HTM”) category to be allowed following the Tribunal order in assessee’s own case for AYs 1995-96 to 1996-97 and the CIT(A) order for AYs 2002-03 to 2007-08.
Allowance of depreciation on foreign assets - HELD THAT:- During the hearing, as submitted that the assessee has filed a rectification application before the AO on this issue, which has still not been disposed off wherein as claimed that the assessee is entitled to depreciation - assessee has also furnished the working before the AO. Accordingly, we deem it appropriate to remand this issue to the file of the AO for de novo adjudication.
Set off of loss of erstwhile State Bank of Saurashtra - Direction to allow the benefit of set-off of loss to the assessee which is determined in the case of State Bank of Saurashtra, after necessary verification.
Discount on the issue of the Employee Stock Purchase Scheme - Discount on Employee Stock Purchase Scheme is an allowable deduction under section 37(1) in view of case of Biocon Ltd. [2013 (8) TMI 629 - ITAT BANGALORE] As this issue is squarely covered in favour of assessee.
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2023 (6) TMI 1440
Grant of bail - conscious possession of the 3000 grams of hashish which is of commercial quantity - concealment of contraband - offences punishable under Sections 8(c) read with Section 21 (c), 23 (C), 28 and 29 of N.D.P.S. Act read with Section 135A of Customs Act - quantitative analysis of the contraband was not carried out - principles of natural justice - HELD THAT:- On merits, the Co-ordinate Bench of this Court has already considered the petition filed by the petitioner and it has formed an opinion that the petitioner is not entitle for grant of bail. At this stage learned counsel for the petitioner contends that he is not seeking bail on merits of the case, but only on the ground of delay in trial. Petitioner was apprehended on 15.09.2019, the charge sheet came to be filed immediately during 2019. The prosecution has cited as many as 24 witnesses. A special Court is constituted to try the offences under NDPS Act. The pendency before the Court is about 1300. Invariably in many of these cases, the accused are in judicial custody. Under such circumstances, it is humanly impossible to dispose of all these matters in a time bound manner.
Even though a person is entitled for protection of life and personal liberty as guaranteed under Article 21 of the Constitution of India, the same is not an absolute right. Such right of protection of life and personal liberty could be taken away in accordance with the procedure established by law. The discussions made on the merits of the case where prima facie materials are placed to show the involvement of the accused it is felt that the accused is not entitled for grant of bail. Under such circumstances, applying Article 21 of the Constitution of India, the accused cannot be enlarged on bail, ignoring the societal interest which is the paramount for any civilized society.
The clinching materials placed before the Court prima facie connects the petitioner to the commercial quantity of the contraband that was being smuggled. After investigation a detailed charge sheet is also filed. Examination of the witnesses and disposing of the cases within few months or at-least within a year or two, is an ideal situation but with the infrastructure provided when compared to the pendency of the case, such early disposal of cases is not a reality. In such an event, if the accused is enlarged on bail only on the ground that the trial in the matter has not been completed, the same will have an adverse impact on the society as a whole and it will be like setting a bad precedent to be applied in all other heinous cases to get the accused released on bail.
Therefore looking at the seriousness of the offences and the materials that are placed before the Court, the accused is not entitled for grant of bail during trial - petition dismissed.
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2023 (6) TMI 1439
Permission to withdraw the petition - substantive order is passed - HELD THAT:- When the matter is taken up for hearing, Ms. Shrunjal Shah, learned advocate appearing for the petitioner under the instructions seeks permission to withdraw this petition in view of the fact that substantive order is passed and the petitioner would like to challenge the same before the appropriate forum. Hence, without expression any opinion on merits, permission as prayed for is granted. The present petition, stands disposed of as withdrawn.
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2023 (6) TMI 1438
Taxability of Excise Duty refund in view of notification and the amended section 2(24)(xviii) - assessee is following mercantile system of accounting and income is to be taxed on accrual basis and the assessee has passed this entry in the books of accounts maintained during the year under consideration - HELD THAT:- In the present case, the necessary entries were made in the books of account of the appellant company to represent only hypothetical/notional income and thus, the impugned amounts as brought to tax by the ITO did not represent the income which had really accrued to the assessee-company during the relevant Assessment Year. It is a settled law that passing of entries in the books of accounts is not conclusive to determine the income under the provisions of the law. Whether an amount is to be considered as income or not is to be determined on the basis of the Income Tax law and not on the basis of the entries made in the books of accounts. In our view, no tax can be charged on an amount which is not earned.
In the case of “Godhra Electricity Co. Ltd. Vs. CIT” [1997 (4) TMI 4 - SUPREME COURT] while adjudicating the question whether there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity observed that it has to be considered by taking the probability or improbability of realisation in a realistic manner. It is further observed that if the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity. Thus, affirmed the view of the Tribunal that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the ITO did not represent the income of the appellant company.
In another case of ‘Satluj Cotton Mills [1978 (9) TMI 1 - SUPREME COURT] observed that it is now well settled that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee.
Thus we hold that since the necessary entries made in the books of account of the appellant company represents only hypothetical/notional income although it is following mercantile system of accounting and hence, the impugned amounts as brought to tax by the ITO did not represent the income of the appellant company. Therefore, the ground No. 2 of the department is rejected.
Allowance of 100% of the capital receipt when the assessee himself claimed entire amount as refundable from Excise Department - whether CIT(A) was in error in not appreciating (that as per) the amended section 2(24)(xviii) of the IT Act, 1961 any assistance in the form of subsidy, grant, etc. provided by the Government or any other authority is to be considered as income/revenue receipt taxed accordingly? - HELD THAT:- Government of India vide amended notification has made its intention clear that the assessee would be entitled to excise duty exemption only to the extent of 36%. The excess exemption from excise duty to the extent of 64% recognized by the assessee in its books of accounts is nothing but hypothetical income which has not accrued. This is also confirmed by Hon’ble Supreme Court by dismissing the SLP filed by the assessee. In view of that matter, the Ld. CIT(A) has rightly deleted the addition - Thus, ground no. 1 and ground no. 3 of revenue are rejected.
Addition u/s 2(24)(xviii) being 36% of Excise Duty Exemption availed by the assessee firm - As settled principal of law, to the interpretation of the Notification No.56/2002 dtd. 14.11.2002 as amended by Notification No.19/2008 dt. 27.03.2008, the assessee is granted exemption from payment of excise duty to the balance part of 36% of total excise duty collected. Since, the word ‘exemption’ in not included in the of ambit the Section 2(24)(xviii) of the Act, though it specifically includes the words subsidy, grant, cash incentive, duty drawback, waiver, concession & reimbursement. and hence, in the absence of inclusion of word ‘exemption’ under the said clause, we are of the considered view that the scope of this section cannot be enlarged to include exemption by interpreting that it is subsidy. Accordingly, the addition confirmed by Ld. CIT(A) is held to be unjustified and bad in law. As such, the part addition confirmed by Ld. CIT(A) is directed to be deleted. Thus, the ground of the assessee is allowed.
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2023 (6) TMI 1437
Seeking grant of Regular bail - involvement in sale, purchase, and possession of the contraband - requirements of fulfilment of section 42 NDPS Act - defect in the sampling procedure adopted by the investigating officer at the time when recovery and seizure - HELD THAT:- The Hon’ble Supreme Court in Noor Aga v. State of Punjab, [2008 (7) TMI 853 - SUPREME COURT] dealing with recovery of 1.4kg heroin from a cardboard container, considering the sanctity of Standing Order 1/89, held 'Perseverance of original wrappers, thus, comes within the purview of the direction issued in terms of Section 3.1 of the Standing Order No. 1 of 1989. Contravention of such guidelines could not be said to be an error which in a case of this nature can conveniently be overlooked by the Court.'
In Basant Rai [2012 (7) TMI 1115 - DELHI HIGH COURT] the accused was found carrying a polythene bag containing 8 smaller polythene bags having brown colour substance and the investigating officer took small pieces of charas from each packet, mixed the same and drew two sample parcels which were sent to FSL for analysis. While allowing the appeal of the accused, it was held 'when we mix the substances of all 8 packets into one or two; then definitely, the result would be of the total quantity and not of the two pieces. Therefore, the process adopted by the prosecution creates suspicion. In such a situation, as per settled law, the benefit thereof should go in favour of the accused. It does not matter the quantity. Proper procedure has to be followed, without that the results would be negative.'
On the issue of these Standing Order being not mandatory, as contended by the State, reference is sometimes made to Gurbax Singh v. State of Haryana, [2001 (2) TMI 1004 - SUPREME COURT] where the Supreme Court observed while acquitting the accused that Section 52 of NDPS Act is directory but held that the provisions cannot be ignored by the Investigating Officer, it was held 'It is true that provisions of Sections 52 and 57 are directory. Violation of these provisions would not ipso facto violate the trial or conviction. However, IO cannot totally ignore these provisions and such failure will have a bearing on appreciation of evidence regarding arrest of the accused or seizure of the article.'
From a careful assessment of the decisions cited and the perusal of the Standing Orders, this Court is of the considered opinion that the Standing Orders have to serve a certain purpose having been issued by the Narcotics Control Bureau, Government of India and cannot be rendered optional for compliance to the investigating agencies. The procedures prescribed in the said orders are based upon a certain logic which ought to be respected, or else it would be a worthless piece of paper.
The lack of compliance of these provisions necessarily imports an element of “doubt”, moreover a “reasonable doubt”. This, therefore will segway into the issue of proving guilt, considering that the guilt of any accused has to be proved beyond reasonable doubt. It would therefore not be enough to contend, as is done by the prosecution that issues of non-compliance were to be considered at the time of trial and what prejudice is caused to the accused, had to be shown by the accused - Pursuant to appreciation of contentions of the parties as well as documents on record, this Court is of the considered opinion that the petitioner is entitled to be enlarged on bail subject to certain conditions.
This Court is of the opinion that there are reasonable grounds to believe that the petitioner may not be guilty of the offence charged for, and further there is no material on record to show that she was likely to commit any offence while on bail. She has no previous involvements, and lives with her family including 3 minor children in Delhi.
The petitioner is directed to be released on bail on furnishing a personal bond in the sum of Rs. 50,000/- with one surety of the like amount subject to the satisfaction of the Ld. Trial Court, further subject to fulfilment of conditions imposed - bail application allowed.
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2023 (6) TMI 1436
Money Laundering - time limitation - refusal to provide copies of the seized records before filing of reply to the SCN.
Whether the provisions of Section 21(2) of PMLA gives any scope for flexibility as to the timeline for giving copies of the seized records to the person from whom such records are seized? - HELD THAT:- The seized records can only be retained for the maximum of 365 days for the cases which are under investigation or for longer period i.e. till the pendency of the proceedings relating to money laundering offence before the Court. Furthermore, if such seized records are sent within 30 days of the seizure to the Adjudicating Authority under sub-section 17(4) along with the Original Application, the provisions of retention for 180 days by the Investigating Officer on his own reasons to believe under sub-section 21(1) becomes redundant and also takes away the time required by him for conducting investigation. Therefore, it again follows that the seized records are not included in the word "material" as referred to under the provisions of the Act and Rules thereunder.
Whether refusal to provide copies of the seized records before filing of reply to the Show Cause Notice issued by the Office of the Ld. Adjudicating Authority u/s 8(1) of PMLA causes prejudice to the appellants herein? - HELD THAT:- The provisions of section 8(1) require that the Adjudicating Authority on receipt of an application under sub-section 17(4) has to issue a notice, if he has reason to believe that any person has committed an offence u/s 3 of PMLA or is in possession of proceeds of crime, to such person as to indicate the sources of his income, earning or assets, out of which or by means of which such person has acquired the property attached under section 5(1) or seized under section 17 along with the evidence on which such person relies and other relevant information. The Adjudicating Authority has issued Show Cause Notice to the appellants on 2-3-2023 under section 8(1) - It is observed that section 8(1) only mentions the issuing of a notice where the property has been attached or seized. The provisions of section 8(1) do not refer to seized records. The definition of property under section 2(v) of the Act includes deeds and instruments evidencing title/interest in such property or assets.
The mere mention of the seized records in the Show Cause Notice so as to disclose the purpose of issuing the Show Cause Notice so as to make it clear that it is for the decision with regard to further retention of the seized records does not make such records as relied upon documents. From the reading of the order dated 26-5-2023 of the Adjudicating Authority it is clear that he does not intend to rely upon the seized record for the determination of further retention of seized records. In fact, he has not even received such records. It is, therefore, obvious that the Ld. Adjudicating Authority for the aforementioned adjudication proposes to rely upon the material for which copies thereof has already been supplied to the appellants - there does not appear to be any contravention of the principles of natural justice as the Ld. Adjudicating Authority has ensured supply of all documents on which he intends to rely upon for the adjudication proceedings.
The documents which are in the form of material before the Ld. Adjudicating Authority are those on which he will be relying upon to adjudicate the proceedings relating to retention of the seized records beyond 180 days. Whether such records will be sufficient for the adjudication process is a question of subjective satisfaction of the Ld. Adjudicating Authority. In any case the appellants have chosen to challenge the interim order dated 26-5-2023 without allowing the Show Cause Notice dated 2-3-2023 to be finally adjudicated - The plea by the appellants that their reply to the Show Cause Notice for retention of seized records, cannot be effective in defending them in the proceedings before the Adjudicating Authority in the absence of the copies of the seized records, is not sustainable.
Appeal dismissed.
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2023 (6) TMI 1435
Addition u/s 36(1)(va) r.w.s. 2(24)(x)/ 43B - delayed deposit of employees’ contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments - HELD THAT:- Issue raised by the assessee has come to rest by the recent verdict of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] wherein it has been held that deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees’ contribution to PF cannot be claimed even though deposited within the due date of filing of return even when r.w.s. 43B of the Income-tax Act, 1961.
The Hon’ble Supreme Court has held that by virtue of section 2(24)(x) of the Act, the amounts received or deducted by an employer u/s 36(1)(va), it retains its character as an income (albeit deemed) by virtue of section 2(24)(x), unless the condition stipulated by Explanation to section 36(1)(va) are satisfied i.e. depositing such amount received or deducted from the employee on or before the due date.
There is a marked distinction between the nature and character of the two amounts – the employer’s liability is to be paid out of its income, whereas, the second is deemed an income, by definition, since it is the deduction from the employee’s income and held in trust by the employer. Conditions of section 43B prescribing the due date as the date of filing of return of income in case the employers’ contribution towards ESI/PF would not be applicable in case the employees’ contribution as provided u/s 36(1)(va) of the Act and that the due date in respect of deposit of employees’ contribution would be such as prescribed u/s 36(1)(va) - Appeal of the assessee stands dismissed.
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2023 (6) TMI 1434
Disallowance u/s 36(1)(va) r.w.s. 2(24)(x) - delayed deposit of employees’ contribution to PF/ESI i.e. after the due date as provided under the respective welfare enactments - HELD THAT:- The issue herein is covered by the Coordinate Kolkata Bench of the Tribunal in the case of Siddhi Vinayaka Graphics Pvt. Ltd [2023 (5) TMI 1322 - ITAT KOLKATA] wherein, the decision of case of ‘Checkmate Services Pvt. Ltd [2022 (10) TMI 617 - SUPREME COURT] has been duly considered and other contentions relating to the validity of the adjustments made on account of disallowance of delayed deposit of employees’ contribution to PF/ESI while processing the return u/s 143(1) of the Act, have also been duly discussed - Decided against assessee.
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2023 (6) TMI 1433
Disallowance of deduction claimed u/s 24(b) - AO had disallowed the claim on the basis of the Inspector’s report that the premises were demolished and the construction work was being done - HELD THAT:- Report of the Inspector was for the FY 2011-12 whereas the claim pertained to the self occupation of the property during the FY 2008-09 when the premises was under self occupation: The CIT(A) has allowed the claim duly appreciating this fact.
Appellant has made his point with supporting evidences that the property was inhabitable condition during the period relevant to A.Y. 2009-10 and therefore, the appellant has correctly claimed the deduction. In these facts and circumstances, the claim of the appellant is found to be correct and therefore, the AO is hereby directed to allow the deduction as claimed by the appellant in his income tax return, as per the provisions of Section 24(b). Decided against revenue.
Enhancement of Gross Profit by rejecting books of accounts - AO compared the combined GP rates achieved by the assessee and called for explanation on the fall in GP - AO rejected the books of account and estimated the GP for the current year at 9% - HELD THAT:- AO’s effort throughout the assessment order has only been to point out supposed deficiencies in the appellant’s explanations. He had not find any suppression of sales or inflation of expenditure from the details available before him. Even though all the details of the parties for purchase and sales as well as purchase and sales register and all the relevant documents were produced before him, the AO did not make any enquiries with the suppliers or with the buyers. It is submitted that all the observations made by the AO have been found to be defective and made on the basis of wrong assumptions - be it on the lowering of the margin in order to achieve higher sales margin or non-availability of discount details or on method of valuation of closing stock or on the comparison of GP Rates of concerns of Shri Satish Kumar Gupta or of appellant’s husband or the supposed mismatch between the quality and quantity of goods purchased by appellant and as per books of her husband etc. The AO has rejected the books based on wrong details and based on wrong observations such as observing the closing stock at average price of opening stock and purchases instead of at cost or net realizable value. AO has rejected the book on the basis of wrong comparables whose business profile as well as supplier and customer base were not comparable to that of the appellan
We find no mistake in the order of the ld. CIT(A) in deleting the addition made erroneously on account of the GP.
Disallowance u/s 40(a)(ia) - payment of Repairs and maintenance, Printing and stationary, Packing charges, Watch and ward and Rent expenses - HELD THAT:- We find that the Ld. CIT(A) has rightly appreciated that the payments made by the Appellant mentioned at “a, b and c” above were in the nature of purchase of materials and the payment mentioned at “d” and “e” were made to different persons and were below the limits prescribed under section 192B and 194I of the Act.
Addition u/s 40(a)(ia) owing to the threshold of payments made on account of freight expenses, postage & courier expenses and legal & professional charges are directed to be deleted.
Penalty levied u/s 271(1)(c) is liable to be deleted.
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2023 (6) TMI 1432
Unexplained cash credit u/s 68 - onus to prove - HELD THAT:- Since the assessee has discharged the primary onus cast upon it under the provisions of section 68 of the Act, whereas, no further inquiry based on the information or documents submitted by the assessee were conducted by the AO, to arrive at a conclusion that unsecured loan received by the assessee during the year were bogus and are subject to addition by invoking the provisions of section 68 of the Act was bad in law, based on presumptions, suspect and therefore, the additions u/s 68 of the Act is liable to be deleted.
CIT(A) has discussed the issue and decided the same lawfully. We, therefore, are in agreement with the decisions of the ld. CIT(A) on this issue and do not have any different view on the same. Thus, we refrain ourselves to interfere with the findings recorded by the ld. CIT(A) and, thus uphold the same. Accordingly, Ground number 1 of the appeal of the revenue is dismissed.
Cash deposit during demonetisation treated as bogus sales - When the assessee has sufficient opening cash balance at the time of pronouncement of demonetization which was not disputed by the department, if the same is being deposited by the assessee in its bank accounts, the same cannot be treated as unexplained or bogus unless any contrary observations borne from available records or otherwise brought on by the revenue against the assessee.
CIT(A) has appreciated the facts of the case, considered all the aspects correctly and has appropriately allowed the appeal of the assessee.
The case of the Vaishnavi Bullion [2022 (12) TMI 1309 - ITAT HYDERABAD] since has distinguishing facts and circumstances not comparable with the present case, the same cannot be applied to rescue the contention of the revenue. The department was unable to brought before us anything which inspires us to agree with the contentions of the department to substantiate their claim that the deposits made by the assessee out of its cash sales were not explained or are bogus, we therefore having no distinguished view then the view taken by ld. CIT(A), upheld the finding of the ld. CIT(A) and therefore, decided this issue against the revenue.
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2023 (6) TMI 1431
Delayed deposit of PF/ESI - adjustment u/s 36(i)(va) - HELD THAT:- We find that Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] has held that the contribution by the employees to the relevant funds is the employer’s income u/s 2(24)(x) of the Act and the deduction for the same can be allowed only if such amount is deposited in the employee’s account in the relevant fund before the date stipulated under the respective Acts. Thus the deduction u/s 36(1)(va) of the Act can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts.
We find that identical issue of disallowance of delayed deposit of PF/ESI dues in the intimation issued u/s 143(1) of the Act arose before case of Cemetile Industries [2022 (12) TMI 354 - ITAT PUNE] wherein held CIT(A) was justified in sustaining the adjustment u/s 143(1)(a) by means of disallowance made in these cases for late deposit of employees’ share to the relevant funds beyond the date prescribed under the respective Acts. - Decided against assessee.
Addition of club expenses u/s 37 - expenditure being incurred as fee subscription under form 3CD at tax audit report - HELD THAT:- While processing of return of income, adjustment could be made of the disallowance of expenditure indicated in the audit report but which is not taken into account in computing the total income in the return.
In the present case, we find force with the argument of AR as the copy of the tax audit report placed reveals that the auditor has given the details of payment made to various clubs during the year under consideration which are in the nature of subscription and the auditor has nowhere pointed that the expenditure is disallowable. In such a situation, we are of the view that no adjustment with respect to the disallowance payment made to club could have been made by AO. We, therefore, set aside the order of CIT(A) on this ground. Decided in favour of assessee.
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2023 (6) TMI 1430
TDS u/s 195 - disallowance of reinsurance premium paid to non-resident reinsurers u/s.40(i)(a) for non-deduction of TDS - HELD THAT:- As decided in assessee own case [2022 (8) TMI 1533 - ITAT CHENNAI] reinsurance premium paid to NRRs cannot be disallowed u/s.40(a)(i) of the Act, for failure to deduct TDS u/s.195, because, reinsurance ceded to non-resident reinsurers is not taxable in India under Income Tax Act, 1961 or under DTAA between India, and respective countries. CIT(A) after considering relevant facts has rightly deleted the additions made by the AO, and thus, we are inclined to up held the findings of the CIT(A), and reject the ground taken by the Revenue for all assessment years.
Addition of profit on sale of investment - HELD THAT:- This issue also covered in favour of the assessee by the decision of the Hon’ble Madras High Court in the case of CIT v. United India Insurance Co. [2019 (7) TMI 387 - MADRAS HIGH COURT] and further, from the decision of Cholamandalam MS General Insurance Co. [2021 (11) TMI 1200 - MADRAS HIGH COURT] where it has been held that income from profit on sale of investment by insurance companies is not taxable after deletion of sub-rule (b) of Rule 5 of first schedule to Income Tax Rules, 1962. Decided in favour of assessee.
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2023 (6) TMI 1429
Rejection of Stay of demand - assessee has neither filed ROI in response to the notice u/s. 148 nor furnished any reply / submission.
HELD THAT:- Admittedly the petitioner filed an appeal against the order in original passed by the first respondent before the third respondent which remained pending and a stay petition dated 01.02.2023 was filed before the first respondent seeking stay of collection of demand. However, the first respondent while entertaining the stay application directed the petitioner to pay 20% of the demand amount, which was passed elaborately on merits keeping in mind the economic condition of the petitioner.
The order being a reasoned one and assessing the status and financial condition of the petitioner, as only 20% of the entire demand amount is directed to be deposited, this Court is of the view that the said discretion of the first respondent order is just and reasonable, which cannot be interfered with. Hence, this Court in not inclined to grant any affirmative direction in favour of the petitioner.
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2023 (6) TMI 1428
Taxability of income in India - Royalty and Fee for Technical Services (FTS) receipts - network fee received by the assessee from Damco India - assessee company M/s Maersk Logistics & Services International B.V. (Erstwhile DAMCO International B.V.) is incorporated in Netherland and was engaged in the business of logistics and freight forwarding across the globe - HELD THAT:- As decided in assessee own case for assessment year 2018-19 [2023 (3) TMI 1519 - ITAT MUMBAI] a bare perusal of Article -12 of the DTAA defining the term "Royalty" would show that the nature of payment received by the assessee does not fall within the meaning of Royalty.
The clause -5 of Article 12 defines FTS. A reading of clause -5 shows that FTS is with respect to rendering of any technical or consultancy services. It does not include managerial services. Further, sub-clause (b) to clause (5) refers to “make available” condition. In the present case nothing has been brought on record by the Revenue to substantiate that any technical knowhow has been “made available” to Damco India by the assessee.
Thus, in view of our above observations we hold that network fee received by the assessee from Damco India is neither in the nature of Royalty nor FTS. Consequently, the aforesaid amount received by the assessee is not exigible to tax under the provisions of the Act or India – Netherlands DTAA
We uphold the plea of the assessee and direct the AO to delete the impugned addition on account of receipt of network fees from Damco India Private Ltd. Decided in favour of assessee.
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2023 (6) TMI 1427
Rectification of order on subsequent Supreme Court decision - Disallowance of employees contribution to superannuation fund under section 36(1)(va) r/w section 2(24) -
Tribunal, allowed ground raised in assessee’s appeal, pertaining to the disallowance of employees‟ contribution to superannuation fund by following the decision of Ghatge Patil Transport Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] but D.R. further submitted that the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. [2022 (10) TMI 617 - SUPREME COURT] up held the disallowance made u/s 36(1)(va) - HELD THAT:- We find that the Hon'ble Supreme Court in ACIT v/s Saurashtra Kutch Stock Exchange [2008 (9) TMI 11 - SUPREME COURT] held that non–consideration of the decision of the Hon'ble Jurisdictional High Court or the Hon'ble Supreme Court can be said to be a “mistake apparent from record” which can be rectified under section 254(2) of the Act.
We further find that the Hon'ble Supreme Court in Saurashtra Kutch Stock Exchange [2008 (9) TMI 11 - SUPREME COURT] also held that the judicial decision acts retrospectively and it is not the function of the Court to pronounce a “new rule”, but to maintain and expound the “old one”.
The facts before the Hon’ble Supreme Court in Saurashtra Kutch Stock Exchange (supra) were that the decision of the Hon'ble Jurisdictional High Court was available, however, the attention of the Tribunal was not invited to the said decision at the time of the disposal of the appeal. Thus, in these circumstances, the aforesaid findings were rendered by the Hon'ble Supreme Court and the decision of the Tribunal under section 254(2) of the Act, in recalling its earlier order, was affirmed.
Where the Larger Bench of the Hon'ble Supreme Court overrules its earlier decision on which the Tribunal relied on, the said decision of the Tribunal can be rectified under section 254(2) of the Act since the decision of the Hon'ble Supreme Court operates retrospectively.
Thus, we find merit in the present M.A. filed by the Revenue seeking recall of the Tribunal’s order limited to the extent of ground No. 22, raised in assessee’s appeal, on the basis of the subsequent decision of the Hon'ble Supreme Court in Checkmate Services Pvt. Ltd. (supra). Accordingly, the order dated 05/08/2022, passed by the Co–ordinate Bench of the Tribunal in assessee’s appeal for the assessment year 2006-07 is hereby recalled limited to the extent of adjudication of ground no.22.
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2023 (6) TMI 1426
Revision u/s 263 - As per CIT income from interest on FD was required to be added to the total income of the assessee under the head income from other source as no inquiry was made by the Assessing Officer during the assessment proceedings and not routed through Profit & Loss account and the same was directly shown in the Balance Sheet as Capital Fund, under the head Reserve and Surplus -assessee claimed the exemption u/s 10(20)
HELD THAT:- PCIT has directed to the assessing officer to examine those issues ‘as may have been already considered’ by the assessing officer, and those issues were not the subject matter of revision proceedings u/s 263 by ld PCIT, hence such direction given by ld PCIT is bad in law.
On merits, the solitary grievance of ld DR for the Revenue is that interest on fixed deposit is assessable under the head ‘income from other sources’, and such interest income has been earned by the assessee, by way of making fixed deposit, from the surplus and unutilized contribution received from its members. Therefore, as per ld DR contribution received from members is exempted from tax u/s 10(20) of the Act, and not the interest on fixed deposit which was earned by the assessee by parking the exempted contribution in the bank by way of fixed deposit and said interest on fixed deposit was not routed through profit and loss account therefore it is a violation of the accounting principles. We do not agree with the proposition canvassed by ld DR for the Revenue. First of all, the bare section 10(20) of the Act, it self includes “income from other sources”.
Interest income on fixed deposit is to be shown under the head income from other sources, however, such interest income, as per assessee, is to be utilized for achieving the main object of the assessee, hence it is exempted under section 10(20) of the Act.
Said interest on fixed deposit was not routed through profit and loss account therefore it is a violation of the accounting principles - We agree with Ld. DR for the Revenue that there is violation of accounting principles reason being the ‘interest’ being a revenue receipt should be routed through profit and loss account. However, at the same time, we also note that there is no loss to the revenue. Had such interest income been routed through profit and loss account, then also it would have been exempted from income tax u/s 10(20) - We do agree that there is violation of accounting principles but there is no avoidance of true tax liability. The assessee is working within the four corners of the Income Tax Act and just because the assessee has not followed correct principle of accounting does not mean that assessee is engaged in tax evading practices.
Hon’ble Supreme Court in the case of Malabar Industries [2000 (2) TMI 10 - SUPREME COURT] held that this phrase i.e. “prejudicial to the interest of the revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the AO is unsustainable in law”.
The impugned order of the PCIT has to be quashed for the reason that order of the AO sought to be revised in the impugned order was neither erroneous nor prejudicial to the interest of the revenue for the reason of any lack of inquiry that the AO ought to have made in the given facts and circumstances of the case - Decided in favour of assessee.
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2023 (6) TMI 1425
LTCG - deduction u/s 54B - purchase of the agricultural land - transfer of agriculture land and purchased of another parcel of land - Claim of assessee is not acceptable for simple reason that purchase deed of the new land has not been shown and it is not being shown that land parcel belongs only to the assessee - Reason given by the assessee before the AO was that two of the co-owners were minor due to which application had been filed in the appropriate court for permission to purchase land and sell land in their name. The assessee was acting as a guardian for these minors.
HELD THAT:- We state that registration of the purchased land was pending due to court permission because of the reason that two of the co-sellers were minor at the time of purchase of the said land but now at present both the above two parties became major and they have executed a notarized declaration of accepting the transactions and confirmed the enforceability of the documents in form of Satakhat/sale agreement and possession letter signed by their guardians on their behalf and therefore a documents on which basis, assessee had purchased is valid and enforceable in law.
The assessee had claimed the amount already paid for the purchase of a new agriculture land which is confirmed by the above parties and also confirmed the enforceable of transaction and documentation in assessee’s favour and hence assessee’s claim u/s 54B of the Act is allowable as the transaction is enforceable in the eyes of the law.
On the identical facts, in the case of Balraj [2001 (12) TMI 51 - DELHI HIGH COURT] held that section 54 of the Act speaks of purchase only and for availing benefit under this section, it is not necessary that assessee should become owner of property. Where assessee paid a sum at time of entering into an agreement for purchase of a property within a year from sale of another property, he would be entitled to benefit provided under section 54 even though there was no registration within said period.
We note that assessee`s issue under consideration is also squarely covered by a decision of the Apex Court in CIT v. T.N. Aravinda Reddy [1979 (10) TMI 1 - SUPREME COURT] where it has been held that the word 'purchase' occurring in section 54(1) of the Act had to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration.
Each release in this case was a transfer of the releasor's share for consideration to the release and the transferee, the assessee, "purchased" the share of property therefore, assessee is entitled to the relief under section 54(1) of the Act. In normal circumstances by executing an agreement to sell in respect of immovable property, a right in personam is created in favour of the transferee/vendee and when such a right is created, the vendor is restrained to sell the said property to someone else because the transferee has got a legitimate right to enforce specific performance of said agreement to sell.
Hence, we direct the AO to give the benefit of deduction u/s 54B of the Act, to the assessee. Assessee appeal allowed.
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2023 (6) TMI 1424
Revision u/s 263 - deduction u/s 80IC - HELD THAT:- CIT has to come to the conclusion and himself decide that order is erroneous by conducting necessary enquiry, if required, before passing the order u/s. 263 of the Act. It is an important fact that Pr. CIT is able to establish and show the error or mistake making the assessment order indisputably in law.
Accordingly, we find it proper to remit the matter back to the file of Pr. CIT to consider the material placed on record for proper application of mind and conduct the enquiry or cause to be conducted any enquiry, if required, to draw conclusion as to order being erroneous insofar as prejudicial to the interest of revenue - Appeal of the assessee is allowed for statistical purposes.
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2023 (6) TMI 1423
Loss from derivative trading - non adjustment of loss with assessee’s normal income - CIT(A) held loss in trading in currency as speculative loss - assessee submitted that the assessee had entered into derivative transactions in foreign currency through SEBI registered broker who is a member of United Stock Exchange of India Limited (USEL) and these derivative transactions are carried out through USEL which is a recognized stock exchange and these transactions are backed by time stamped contract notes carrying unique client identity number along with PAN and it is outside the ambit of the definition of speculative transaction defined u/s 43(5)
HELD THAT:- We find that the impugned order passed by the ld. CIT(A) by which sustaining the order passed by the AO did not allow the claim of the assessee to adjust loss with assessee’s normal income is not in accordance with law. Since, the insertion of clause (d) to the provision of section 43(5) of the Act, the transaction in respect of trading in derivative as prescribed in clause (d) inserted in provision of section 43(5) would not be a speculative transaction in view of the judgement of Snow Ten Investment Ltd. [2019 (5) TMI 1165 - SUPREME COURT]
Therefore, the view taken by the authorities below is here by not in accordance with law. Accordingly we set aside the order passed by the ld. CIT(A) and direct the AO to allow the claim of assessee to set off loss suffered by the assessee in the said transaction in derivative against the normal business of the assessee. Assessee appeal allowed.
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