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Showing 501 to 520 of 1642 Records
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2024 (7) TMI 1142
Nature of expenditure - expenses on power and fuel and lease rent for machines taken on hire - revenue u/s capital expenditure - ITAT held it capital expenditure incurred by the assessee in connection with the establishment of the cement manufacturing unit at Bilaspur - CIT(A) treated the same as revenue expenditure.
HELD THAT:- As perused the orders passed by this Court, we note that in fact for AY 1985-86 Division Bench of this Court dismissing the revenue’s appeal, observed that the Tribunal had passed an order based on the order passed by the Tribunal in regard to the earlier assessment year 1984-85 and for the assessment year 1985-86, the revenue was unable to state whether the Revenue had preferred any appeal against the said order or had filed any reference against the same. In this view of the matter, the Division Bench observed that as the issue involved was purely based on a finding of fact, no substantial question of law has arisen and accordingly dismissed the appeal.
Principle of consistency - We, find much substance in the contentions as urged on behalf of the assessee that the present proceedings would stand covered by not only the position taken by the revenue for AY 1984-85 subject matter of M/s. Raymond Woollen Mills Ltd. decided by the Tribunal, but also by the subsequent orders passed by this Court, for assessment years as noted by us hereinabove.
Supreme Court in Godrej and Boyce Manufacturing Company Ltd. [2017 (5) TMI 403 - SUPREME COURT]wherein the Supreme Court reiterated the principles when it was observed that the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out, which conspicuously was stated to be absent in the case in hand before the Supreme Court. The Supreme Court reitereated the principles as laid down in M/s. Radhasoami Satsang, Saomi Bagh, Agra [1991 (11) TMI 2 - SUPREME COURT] wherein as held observed that strictly speaking res judicata does not apply to income tax proceedings and that each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found, as a fact one way or the other, and parties have allowed that position to be sustained by not challenging the order, it would not at all be appropriate to allow the position to be changed in a subsequent year. Assessee appeal allowed.
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2024 (7) TMI 1141
Interest u/s 234A, 234B and 234C post Corporate Insolvency Resolution Process - as argued Tribunal which had authorised the Assessing Officer only to verify the inclusion of income tax due in the IRP, has without giving any notice to the Assessee unilaterally charged interest u/s 234A, 234B and 234C resulting in an enhancement of demand - HELD THAT:- In Ghanashyam Mishra & Sons Pvt. Ltd. vs. Edelweiss Asset Reconstruction Company Ltd. & Ors. [2021 (4) TMI 613 - SUPREME COURT] and M/S. Ruchi Soya Industries Ltd. v. Union Of India &Ors. [2022 (3) TMI 60 - SUPREME COURT] as held that once a resolution plan is duly approved by the adjudicating authority under Section 31(1), the claims as provided in the resolution plan shall stand frozen and will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders. On the date of approval of resolution plan by the adjudicating authority, all such claims, which are not a part of resolution plan, shall stand extinguished and no person will be entitled to initiate or continue any proceedings in respect to a claim, which is not part of the resolution plan
The amount has stood frozen by the operation of moratorium under IBC and also not part of the Resolution Plan. Hence, no claim can be made against the Petitioner. The charge of Interest amounting to Rs. 9,32,218.00 under section 234A, Rs. 10,79,21,201.00 under section 234B, Rs. 44,71,790.00 under Section 234C of the Income Tax Act does not survive.
The order passed under Section 254 of the Income Tax Act giving effect to the order of the ITAT and the Notice of Demand u/s 156 are hereby quashed and the Petitioner be refunded an amount which was paid pertaing to the Assessment Year 2010-11.
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2024 (7) TMI 1140
Estimation of income/NP - Determination of net profit in liquor trade - HELD THAT:- Insofar as the estimate is concerned AO placed reliance on the decision of M/s. Kanakadurga Wines [2012 (5) TMI 797 - ITAT HYDERABAD] and other cases. As observed by the Hon'ble High Court, the profit percentage to be adopted differs from case to case.
Apart from that fact, subsequently the privilege fees is introduced and according to the learned AR it reduced the profit margin. We are of the considered opinion that the estimate of net profit of the assessee at 3% of the turnover would meet the ends of justice. We accordingly direct the AO to recompute the income of the assessee. Appeal of assessee allowed.
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2024 (7) TMI 1139
Refund on account of excess DDT - payments by way of DDT were paid by the assessee company on distribution of dividend - HELD THAT:- It is the case of the assessee that while the assessee has paid DDT u/s 115-O of the Act at applicable rate under the Act which is 12.5% + surcharge + cess for A.Ys. 2005-06 and 2006-07 and 15% + surcharge + cess for remaining years in appeal, the assessee in terms of Article 10(2)(a) of DTAA between India and Mauritius is liable to pay lower rate of tax, i.e. 5% on dividend payable to the shareholder (tax resident of Mauritius) and consequently assessee is entitled to refund of excess tax collected by the revenue on dividend distributed and paid to the Holding company (a tax resident of Mauritius).
Assessee has thus alleged that the Revenue Authorities have wrongfully retained excess tax paid on remittance of dividend and thus wrongfully denied the benefit of treaty available to the assessee.
We straightaway take note of the special bench decision in the case of Total Oil [2023 (4) TMI 988 - ITAT MUMBAI (SB)] In that case, the assessee M/s Total Oil India Private Ltd., an Indian Co., declared/paid dividend for AY 2016-17. One of the shareholders to whom dividend was to be paid was a Non Resident (Tax resident of France).
Similar plea was raised in that case that the rate at which tax under 115-O of the Act had to be paid could not be more than the rate at which dividend could be taxed in the hands of the Non Resident shareholder in India under the DTAA between India and France as the rate of tax prescribed in the DTAA is generally less than the rate prescribed in section 115-O. On nuanced analysis, the Special bench formed a view that dividend declared by a domestic company to a non resident should be taxed at the rate given u/s 115-O and not the beneficial rates given under DTAA for Non Residents unless the contracting state to which the treaty intends to extend the treaty protection to the domestic company.
It thus observed that wherever the Contracting States to a tax treaty intend to extend the treaty protection to the domestic company paying dividend distribution tax, only then, the domestic company can claim benefit of the DTAA, if any. No such protection has been shown to be extended in the instant case.
The issue is thus squarely covered in favour of the revenue and against the assessee. In the instant case, the treaty benefit is thus not available in relation to provisions of 115-O of the Act. The provisions of section 237 is thus of no avail. Appeals of the Assessee are thus dismissed.
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2024 (7) TMI 1138
Estimation of income - bogus purchases - HELD THAT:- After detailed discussion of the case and the legal position as well as precedents on the subject issue, the Tribunal sustained addition @ 6% of the bogus purchases. The facts of the present appeal are similar and hence, it is squarely covered by the order of the Tribunal in the case of Pankaj K. Choudhary [2021 (10) TMI 653 - ITAT SURAT]
Therefore, following the above decisions, we restrict the disallowance to 6% of the disputed bogus purchase. Decided in favour of assessee partly.
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2024 (7) TMI 1137
Disallowance of financial expenses in proportion of purchase from bogus companies - AO disallowed the expenditure to the extent of paper transaction not backed by actual business - HELD THAT:- CIT(A) had disallowed the loss on circular transaction holding it to be artificial and managed and losses are fabricated, but on the other hand, he found that the financial charges to be incurred for the purpose of business, hence, to be allowed. The assessee has pleaded that the funds were required for working capital. But in case of paper transaction, there is no requirement of capital at all because there was neither any purchase nor was there any sale. However, the assessee has adopted this route to raise higher finance from the circular transaction. Since the discounting charges on letter of credits have been paid to bank, the genuinity is sacrosanct. The funds so raised have been used to augment the working capital required for delivery based business. The assessee had used the platform of circular trading to draw higher finance from the bank. There is no instance of any diversion of funds as pointed out by the AO. The funds from the discounted letter of credits are used for the purpose of business and is allowable under section 36(1)(iii) of the Act. There is no ground to interfere with the conclusions of CIT(A). Hence, the ground raised by the Revenue is dismissed.
Assessment u/s 153A - Addition u/s 68 - In this case, the addition is not based on any incriminating evidences as evident from the assessment order. All the transactions were reflected in regular books of account. No incriminating evidences were unearthed. Neither there is any statement u/s 132(4) nor any corroborative evidences which goes against the assessee. Accordingly, no addition is sustainable in the absence of any incriminating document. DR pleaded that addition of ₹ 4 crore may be confirmed as transactions were not genuine. He, however, failed to pinpoint any incriminating evidence upon which the additions were made. Thus, all the grounds raised by the Revenue are dismissed.
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2024 (7) TMI 1136
Validity of adjustments made in the intimation u/s 143(1) - period of limitation - Addition of payment of employees’ contribution to PF and ESIC beyond the due date - only objection of the assessee is that the decision of the Apex Court Checkmate Services Private Limited. [2022 (10) TMI 617 - SUPREME COURT] was applicable only in the case of scrutiny assessment and that no adjustment can be made on the basis of this decision while processing the return of income u/s 143(1)
HELD THAT:- There is no dispute to the fact that return of the assessee for A.Y. 201920 was made with a refund claim. Thus, the extended time limit till 31.01.2024 was squarely applicable for processing the return of the assessee for this year. The return of the assessee was, in fact, processed on 31.03.2021, which was within the original extended time limit. Considering the fact that the CBDT had subsequently extended the time limit for processing the return till 31.01.2024; the intimation dated 31.03.2021, even though it was digitally signed and communicated on 01.04.2021, cannot be held as barred by limitation. Therefore, the legal ground raised by the assessee in this regard is rejected.
Type of adjustment, as stipulated in the clauses (i) to (vi) of Section 143(1) -There is no dispute to the fact that any incorrect claim, if it was apparent from any information in the return, was liable for adjustment while processing the return. From the intimation sheet as sent by the CPC, it is found that the adjustment was categorically indicated. In fact, this annexure contains details of all the claims made by the assessee in the return of income and the computation as made by the CPC under Section 143(1) of the Act and the variance if any, is also indicated in respect of each item. Thus, the nature of adjustment as made by the CPC was very much reflected in the intimation. Further, the nature/type of adjust was also mentioned in the prior intimation sent to the assessee by the CPC, which is reproduced later in the order. In view of these facts, the ground as taken by the assessee is dismissed.
No prior intimation given to the assessee before making the adjustment - There cannot be any doubt that the email ID account “[email protected]” on which this communication was sent belonged to the assessee and that the assessee was duly communicated about the adjustments before the processing of the return. In fact, the intimation dated 31.03.2021, which is subject matter of this appeal, was also sent on the same email ID “[email protected]”. Therefore the contention of the assessee that the email [email protected] was an unrelated email ID is not found correct.
CPC had all along made all communication with the assessee on this email ID only. Hence, the contention that the prior intimation sent on this email was not legally valid can’t be accepted.
The intimation u/s 143(1) sent to the assessee on this email ID was well received by the assessee. So the earlier communication regarding proposed adjustments u/s 143(1)(a) of the Act before processing of the return of income for the A.Y. 2019-20 sent on this email ID was legally valid intimation. In fact the assessee has not come clean before us and has tried to misrepresent the facts. Decided against assessee.
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2024 (7) TMI 1135
Revision u/s 263 - disallowance of payment made to Life insurance Corporation of India ('LIC') towards superannuation fund u/s 40A(9) - HELD THAT:- Tax Audit Report, in From 3CD, has mentioned that certain contribution made by the assessee would be disallowable u/s 40A(9). This was, in fact, one of the reasons to reopen the case of the assessee. In the queries raised by AO during re-assessment proceedings, It was objected to by AO that the bank statement furnished by the assessee do not identify the name of the holder of the bank account or bank number. The contribution receipts were in the name of M/s Invensys India Pvt. Ltd. and the same do not pertain to the assessee company. The evidences furnished by the assessee do not support the claim of the assessee.
Assessee clarified that erstwhile name of the company was changed from M/s Invensys India Pvt. Ltd. to present name as evidenced by certificate of ROC showing name change of the assessee company. Assessee also furnished bank statement highlighting two payments out of four payments. AO chose not to make any addition / disallowance, in this regard. However, the proposal made by the Tax Auditor apparently has not been considered and the issue whether the funds were approved fund or not was not addressed.
Therefore, it could be concluded that though a specific query was raised on the issue as flagged by revisionary authority, the same was not adjudicated by AO properly with full facts and with due application of mind as required. Firstly, AO overlooked the reporting made by Tax Auditor. Secondly, the assessee only furnished partial receipts in support of the claim. The issue whether the fund was approved fund was not examined / verified. Therefore, we would conclude that it was a case of inadequate enquiry which justifies invocation of revisionary powers u/s 263.
AR, has submitted that the claim could alternatively be allowed on merits u/s 37(1). Reliance has been placed on certain decisions, in this regard allowing similar claim of the assessee. AR also submitted that fund went out of control of the assessee and therefore, the deduction thereof could be allowed to the assessee.
Considering the same, we modify the directions given in the impugned order and direct Ld. AO to verify the claim of the assessee and examine deductibility of the expenditure. The assessee is directed to substantiate the same. All the issues are kept open. Our adjudication as aforesaid shall not be construed as any expression on the merits of the case.
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2024 (7) TMI 1134
Erroneous approval granted u/s 153D - addition made on account of seized jewellery treating the same as unexplained investment - HELD THAT:- Solemn object of entrusting the duty of Approval of assessment in search case is that the Additional CIT, with his experience and maturity of understanding should at least minimally scrutinize the seized documents and any other material forming the foundation of Assessment. It is elementary that whenever any statutory obligation is cast upon any statutory authority, such authority is required to discharge its obligation not mechanically, not even formally but after due application of mind.
Thus, the obligation of granting Approval acts as an inbuilt protection to the taxpayer against arbitrary or unjust exercise of discretion by the AO. The approval granted u/s 153D of the Act should necessarily reflect due application of mind and if the same is subjected to judicial scrutiny, it should stand for itself and should be self-defending. There are long line of judicial precedents which provides guidance in applying the law in this regard.
Approval granted by the superior authority in mechanical manner defeats the very purpose of obtaining approval u/s 153D of the Act. Such perfunctory approval has no legal sanctity in the eyes of the law.
In the case of Serajuddin and Co [2023 (11) TMI 1254 - SC ORDER] dismissed the Appeal filed by the Department of Revenue against the order [2023 (3) TMI 785 - ORISSA HIGH COURT] wherein the Hon’ble High Court had quashed the Assessment Order on the ground of inadequacy in procedure adopted for issuing approval u/s 153D of the Act by expressing discordant note on such mechanical exercise of responsibility placed on designated authority u/s 153D of the Act.
Hence, considering the above facts and circumstances, we find considerable force in the plea raised by the Assessees in the Ground No. 1 of the Appeal which is against erroneous approval granted u/s 153D of the Act.
In our opinion the approvals so granted under the shelter of section 153D does not pass the test of legitimacy. Thus, the impugned Assessment order in consequence to such inexplicable approval lacks legitimacy. The impugned assessment in captioned appeal is non-est and a nullity and hence liable to be quashed accordingly, the impugned assessment order and the order of the CIT(A) is hereby set aside by allowing Ground No. 1 of the Assessee.
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2024 (7) TMI 1133
Legal validity of the order u/s 143(3) - Period of limitation - reckoning of six years period - search was conducted for initiating proceeding u/s 153C - HELD THAT:- The date of recording of the satisfaction will be the deemed date for the possession of the seized documents, which is 30.06.2022 in the present case and the date of search and six years period would be reckoned from this date i.e. 30.06.2022. Therefore, there is merit in the submission of the assessee that the assessment year relevant for previous year in which search was conducted in the case of the assessee will be AY 2023-24 and the six assessment years immediately preceding the assessment year relevant for the previous year in which search was conducted for initiating proceeding u/s 153C of the Act will be AY 2018-19 to 2022-23.
Therefore, it is held that in the present case, the assessment for AY 2021-22 should have been carried out by issuing notice u/s 153C of the Act and not u/s 143(2) of the Act as done by the AO in this case. No other contrary facts or decision was brought on record by the Ld. DR Therefore, it is held that the assessment order dated 29.12.2022 passed u/s 143(3) of the Act by the issuance of notice u/s 143(2) of the Act dated 30.06.2022 is bad in law and hence the notice u/s 143(2) of the Act, dated 30.06.2022 and the consequent assessment order dated 29.12.2022 passed u/s 143(3) of the Act are hereby quashed. The additional grounds filed by the assessee are allowed.
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2024 (7) TMI 1132
Revision u/s 263 - Validity of order passed by the Ld. AO u/s 147 r.w.s 144B - course of action was required to be taken u/s 153C OR 148 - appellant was reopened u/s 147 after getting approval u/s 151 and notice u/s 148 was issued requiring the assessee to file income tax return -
HELD THAT:- We find that the whole case has been framed based on material found during the search. Meaning thereby, the course of action was required to be taken u/s 153C and not u/s 148. This view has been accepted Sri Dinakara Suvarna [2023 (6) TMI 1175 - SC ORDER] - In our view, the AO has erred in invoking the reassessment proceedings u/s 147 and as such, the subsequent cause of action based on invalid order is held to be without jurisdiction. Our view gets support from the judgment delivered in the case of Badal Prakash Jindal [2023 (3) TMI 268 - ORISSA HIGH COURT]
The revenue in the present case has not been able to prove as to how the order passed by the Assessing officer was erroneous and prejudicial to the interests of the revenue as the PCIT has not been able to prove non-application of mind by the AO particularly considering the fact that the order of Kapil Romanna was passed on 29.09.2021 and that the order of the appellant u/s 147 was passed on 24.03.2022 after considering the order of Kapil Romanna. It has been stated by the AO of Kapil Romanna in the said order passed u/s 153A that he has failed to identify the parties from whom the unsecured loan was raised. It is also mentioned that no PAN No, address and other details were furnished by Kapil Romanna.
Consequently, Kapil Romanna has never identified the parties from whom the loan was raised, and the addition has been made in his hands u/s 68. Mere allegation that the AO has passed the order without application of mind would not be legally justified to set aside the assessment order by way of invoking section 263 of the Act.
Considering the factual matrix and the judicial precedents, we do not concur with the PCIT that the AO did not verify the transactions appearing in the ledger account seized during search on Homeland group and that the order was passed without application of mind. Accordingly, we hold that the PCIT finding, and observation are infirm and perverse to the facts on record. Therefore, we hold that this is not a fit case for invoking the provisions of section 263 of the Act.
We hold that the order passed under section 263 is bad in law and it is quashed. Decided in favour of assessee.
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2024 (7) TMI 1131
Reopening of assessment - Bogus purchases - prima facie reason at the initial stage of reopening - HELD THAT:- In the present case, the AO has received credible information from the Investigation Wing and ED about money laundering and foreign outward remittances by twelve entities of Hassanfatta group from their bank accounts to Dubai and Hong Kong based companies on strength of fake documents.
Assessee had purchased from four of these companies. The assessee had also purchased from other three concerns of Hassanfatta group. Such details are given in the assessment order and have also been briefly discussed in the facts of the case of this order.
Even, CIT(A) has found that assessee had transaction with the Hasanfatta group. Therefore, the Assessing Officer had credible information which had live link with the “reason to believe”. The decisions relied upon by the Ld. AR are distinguishable on facts and in any case are of non-jurisdictional Tribunals and Hon’ble Courts.
On the other hand, we have direct decisions i.e., Keshav Diamonds Pvt. Ltd. [2021 (4) TMI 224 - GUJARAT HIGH COURT] Pushpak Bullion [2017 (8) TMI 961 - GUJARAT HIGH COURT], Peass Industrial Engineers Pvt. Ltd. [2016 (8) TMI 277 - GUJARAT HIGH COURT] and Sajani Jewels [2016 (6) TMI 741 - GUJARAT HIGH COURT] supporting case of Revenue. Revenue is further supported by the decisions of the Hon’ble Supreme Court Raymand Woolan Mills Ltd., [1997 (12) TMI 12 - SUPREME COURT] which is the law of land in view of Article 141 of the Constitution. In view of the above facts, and respectfully following the decisions cited (supra), the ground of the appeal raised by appellant is dismissed.
Estimation of income - Bogus purchases - It is clear that the issue is squarely covered by the decision Pankaj K. Chaudhary [2021 (10) TMI 653 - ITAT SURAT] and there is no change in facts and law and since Revenue is unable to produce any material to controvert the aforesaid findings, thus sustain addition @ 6% of the bogus purchase of the appellant.
Addition u/s 69 - unexplained loans given - Section 69 is related to unexplained investment, which are not recorded in the books of account maintained by the appellant. In the present case, these are duly recorded in the books of assessee and such finding by the CIT(A) has not been disproved by Revenue by adducing necessary evidence.
Hence, the advances cannot come under the purview of the Section 69 of the Act. We may also refer to the decision of Ayachi Chandrashekar Narsangji [2013 (12) TMI 372 - GUJARAT HIGH COURT] where the Hon’ble court held that where the department has accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit.
Addition of transactions in penny stock - assessee has submitted that the AO has made the addition without any basis or proper inquiry - HELD THAT:- The entire investment of Birla Pacific Madspa Ltd. and M/s Orissa Mineral Development Co.Ltd. has been added though payment was made from disclosed bank account. The assessee has made loss of Rs. 1,86,641/- in the transaction of Birla Pacific Madspa Ltd. but AO has added the total investment of Rs. 53,06,816/-. Similarly, there was loss of Rs. 35,11,427/- in the trading of M/s Orissa Mineral Development Co.Ltd. which is a PSU. We find that the Ld.CIT(A) has duly discussed the facts in proper perspective and given the decision which is proper and logical. We find no reason to interfere in the findings of Ld.CIT(A). Accordingly, both grounds of Revenue are dismissed.
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2024 (7) TMI 1130
Denial of deduction u/s. 80P(2)(d) - interest received - DR contended that interest income earned by a co-operative society on deposits made out of surplus funds with co-operative banks qualifies for deduction both u/s 80P(2)(a)(i) and section 80P(2)(d) - HELD THAT:- In the present case, the interest received by the Appellant from Punjab State Cooperative Agricultural Development Bank, Chandigarh, clearly falls within the ambit of Section 80P(2)(d). It is income derived by the Appellant from its investments with another cooperative society, namely, Punjab State Cooperative Agricultural Development Bank (SADB).
In our view, the statutory provision u/s 80P(2)(d) is unambiguous and explicit in its scope. It allows for a deduction in respect of interest income derived from investments with other cooperative societies. The interest received by the Appellant squarely meets this criterion and is therefore eligible for deduction u/s 80P(2)(d).Accordingly, the CIT(A) ought to have recognized the eligibility of the interest received by the Appellant for deduction u/s 80P(2)(d).
In the present case, the interest being received by the Appellant from Punjab State Cooperative Agricultural Development Bank, Chandigarh, which clearly falls within the ambit of Section 80P(2)(d). Thus, it is the income derived by the Appellant from its investments with another cooperative society, namely, Punjab State Cooperative Agricultural Development Bank (SADB).
We accept that the grievance of the appellant is justified and accordingly following the coordinate bench and judicial precedent, we hold that appellant is eligible for deduction u/s 80P(2)(d) of the Act and therefore, the addition is deleted.
Disallowance of payment to Gratuity Fund - CIT(A) has observed that Gratuity Fund allowable as per Rule at 8.33% and Excess contribution to Gratuity Fund has been disallowed - AR submitted that Id. CIT (Appeals) has ignored the fact that such payment of gratuity was according to the terms, conditions and directions of the Head office - HELD THAT:- As we hold that since the AO disallowed the excess contribution to gratuity fund contributed by the appellant during the Assessment Year 2020-21 amounting to Rs. 36,981/- and rightly added back to the total income of the appellant under the head income from other sources. We find no perversity in the order of the ld. CIT(A) on the issue of confirmation of amount of Rs. 36,981/- on account of excess payment of gratuity and thus, this ground of appeal is rejected.
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2024 (7) TMI 1129
Revision u/s 263 - allowability of carry forward losses and depreciation - HELD THAT:- Appellant’s contention that for the AY 2019-20 assessee company has a profit which is required to be set off against the business loss of AY 2018-19 and also the remaining quantum of profits from business deserves to be set off against brought forward unabsorbed depreciation from AY 2013-14 to AY 2018-19. It has been averred that once this setting off is carried out, then there remains no taxable income for AY 2019-20.
As mentioned earlier, the CIT(A) has laid considerable emphasis on the part of Section 263(1), explanation thereof whereby under Clause (a), it is mentioned that the reopening can be attracted in case an order has been passed without making inquiries or verification which should have been done.
On a careful consideration of this issue, it is evident that once the issue of carry forward of depreciation is no longer a debatable matter with the law laid down by the Hon'ble Apex Court [1995 (9) TMI 2 - SUPREME COURT], then there would be a considerable quantum of carried forward unabsorbed depreciation to merit a comfortable setting off of the income under consideration. It is felt that the Pr. CIT giving directions for revision u/s 263 of the Act merely for the sake of carrying out inquiries is an exercise in futility which deserves to be avoided. Considering this the order u/s 263 of the Act is hereby quashed. Appeal filed by the assessee is allowed.
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2024 (7) TMI 1128
Non grant of credit of TDS for want of Form 16A - tax was not deposited by the deductor to the account of the Central Government - HELD THAT:- No discrepancy or anomaly has been pointed out in the documents and submission placed on record by the assessee. No independent verification or inquiry has been made from the deductor with respect to the tax deducted at source of the assessee despite the fact that assessee had furnished the complete details – Name, TAN etc. to the AO as well as CIT(A). It is also not the case of the AO or CIT(A) that the corresponding income has not been declared by the assessee.
Now only because the tax was not deposited by the deductor to the account of the Central Government, the assessee has been denied the credit of tax deducted and a corresponding demand has been raised. Denial of such benefit of credit is complete contravention to provisions of Section 205 of the Act.
It is clear from the provisions of Section 205 of the Act that in cases where tax has been deducted from the income of the assessee, no further tax shall be called upon from the assessee. The natural corollary to same being that assessee has a right to get the credit of that TDS amount qua the demand against him. Reliance is placed on the following judicial pronouncements wherein it has been held that once tax has been deducted, it’s the responsibility of the deductor to deposit the same with the government, deductee cannot be penalized and demand can not be raised on short fall of TDS on deductee. See SANJAY SUDAN [2023 (2) TMI 1079 - DELHI HIGH COURT] INCREDIBLE UNIQUE BUILDCON PRIVATE LIMITED [2023 (10) TMI 625 - DELHI HIGH COURT] INCREDIBLE UNIQUE BUILDCON PRIVATE LIMITED [2023 (6) TMI 1135 - DELHI HIGH COURT], JASJIT SINGH [2023 (12) TMI 34 - DELHI HIGH COURT].
Thus we are of considered view that CIT(A) has fallen in error to misinterpret the judgement relied upon by the assessee by holding that there is merely bar on recovery of demand but does not lay down law for giving credit of TDS in respect of the amount which is not reflected in the 26AS form. The bar on recovery of such disputed TDS is specific and the credit of same to be given to assessee is natural consequence. Further, we are of firm view that inability of an assessee to procure form 16A, due to intentional mischief of the deductor cannot be basis to refuse grant of credit of TDS or the refund arising consequent to giving credit, if assessee is otherwise eligible for same. This issue in all the appeals is decided in favour of assessee.
Error in in computing the demand - As we find that issue requires examination of certain facts and consequential effects, which are of arithmetical nature. Accordingly, the second issue of AY 2017-18 is allowed for statistical purposes. The AO shall make necessary verification and pass an order accordingly.
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2024 (7) TMI 1127
Cash credit u/s 68 r.w.s. 115BBE - cash deposit during demonetization period - Assessee failure to maintain books of accounts u/s 44AD - HELD THAT:- In case of Surinder Pal Anand [2010 (6) TMI 404 - PUNJAB AND HARYANA HIGH COURT] as held that where under special provision of Section 44AD, exemption from maintaining of books of account has been provided and presumptive tax @ 8 per cent of the gross receipts itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts.
Assessee holds the drug licence for wholesale and retail sale of veterinary medicines and has filed his return of income declaring gross receipts u/s 44AD of the Act. The return of income so filed by the assessee has been accepted by the AO meaning thereby that both the applicability of section 44AD and non-maintenance of books of accounts as well as particulars in the return of income so filed has been accepted which includes the gross receipts from sale of medicines. At the same time, only thing which has to be satisfied by the assessee is that cash so deposited in the bank account has the necessary nexus with the sales and gross receipts so disclosed by the assessee.
We find that the assessee has shown cash sales in the month of October 2016 and cash sales of Rs 19,46,845/- in the month of November 2016 and cash of Rs 33,00,000/- has been deposited in the month of November 2016 and the fact that the source of cash so deposited is out of the sales made has been duly reported by the assessee to the Revenue authorities as mandated in terms of filings relating to acceptance of SBN Notes during the demonization period and thereafter, during the course of assessment proceedings, the assessee has also filed sales vouchers of cash sales along with copy of cash book for necessary verification of the AO.
The fact that the cash receipts for the month of October have been deposited in the very next month in November cannot be a reason to dispute rather it supports the case of the assessee by satisfying the proximity test and the nexus which the assessee has established between the sales and the deposits, this coupled with the fact that there was epidemic regarding FMD disease and winter season resulting in increase sales in these two months has not been totally discarded by the AO and the ld CIT(A) and the fact that the sales have been duly reported and forms part of VAT filing and VAT assessment shows that sales cannot be disputed.
The decision in case of J.M.J Essential Oil Company [2022 (7) TMI 1017 - HIMACHAL PRADESH HIGH COURT] doesn’t support the case of the Revenue as in that case, there were cash sales only in a particular month and there was sufficient material on record to show cash sales were fabricated unlike the present case, where the assessee is regularly undertaking cash sales and there are no material on record to establish the sales so reported are fabricated except suspicion due to high sales vis-à-vis other months and which cannot be a ground to dispute the sales, rather, in the instant case, the assessee has produced the necessary sale vouchers and cash book.
We therefore find that the assessee has made the necessary and timely disclosure regarding the source of cash deposited in the SBN notes during the demonetization period and the nexus has been duly established between the sales and cash deposits and in view of the same, we find that there is no justifiable basis to make addition of Rs 23 lacs which already stand disclosed and reported as part of gross receipts u/s 44AD and accepted by the AO resulting in double addition which clearly can’t be sustained in the eyes of law. In the result, the addition so made is hereby directed to be deleted. Appeal of the assessee is allowed.
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2024 (7) TMI 1126
TP adjustment - notional interest on receivables on account of issuance of Non-Convertible Cumulative Redeemable Preference Shares - Recharacterizing transaction of Non-Convertible Cumulative Redeemable Preference Shares (NCCRPS) as quasi equity - HELD THAT:- Since it is already considered as the capital finance transaction as per the definition of international transaction u/s 92B, we are inclined to accept partial finding of the Transfer Pricing Officer that it is a quasi-capital and its cost has to be benchmarked in the international market.
In the given case, the Transfer Pricing Officer has already observed that the cost of capital of the assessee is at 9.945% based on the Balance Sheet submitted by the assessee.
Since it is an international transaction we cannot benchmark the same at the Indian market rate and as held in the various judicial pronouncements, the international transactions have to be benchmarked at the cost of capital based on the respective Libor rate. In this case, the preference shares are issued for a period of 7 years, however, it is redeemed within 3 years. Therefore, the bench-marking has to be undertaken by adopting the 3 years LIBOR rate.
It is normal on the part of the various banks to charge the interest on the basis of Libor rate plus certain basis points considering the risk factors involved in financing the same. However, in the given case assessee has taken financing from its own AE. Therefore, the benchmark has to be done based on the Libor rate i.e., LIBOR + basis points + adjustment of risk factor, considering the fact that the AE has invested in India without any collateral securities.
In this case, the cost involved in the capital financing is 8.5% of dividend. Therefore, it has to be benchmarked on the basis of Libor rate available on the date of issue of preference shares. Accordingly, we direct the Assessing Officer to benchmark the same by adopting the Libor rate (3 years quote) basis as indicated above. Since assessee has incurred the cost of 8.5% in comparison to the LIBOR rate, accordingly, we direct the Assessing Officer / Transfer Pricing Officer to benchmark the same and determine the ALP i.e., the difference of dividend of 8.5% and the LIBOR rate as per above discussion. Accordingly, we are inclined to allow the Ground No.1 raised by the assessee for statistical purpose.
Accounting of lease - Deduction under the head “any other amount liable as deduction” in schedule BP of the returned income, which included principle lease payment of finance - considering the submissions that assessee is not the owner and assessee has to return the assets after the completion of the lease period, tax authorities held that the assessee has claimed portion of principal amount of the installment paid against the assets taken on Finance Lease. Therefore, the principal amount component is a capital in nature and not allowable as revenue expenses u/s 37(1) - HELD THAT:- As discussed the various aspects of recognizing the Leases and the case law relied by the assessee are relating to operating lease which is distinct from finance lease, where the main distinction is that in operating lease, the ownership remains with the lessor whereas in the finance lease, the ownership passes on to lessee.
Assessee has to explain the various values declared in the depreciation schedule as well as the value adopted in the Computation sheet before AO, even we are not in a position to understand since it was not explained at the time of hearing. In our view, the method adopted by the assessee in following the Accounting standard and calculating the depreciation seems to be right however, the method to claim differently for computation of Income tax i.e., claim the principal repayment instead of relevant depreciation may not be right method. Therefore, it needs proper explanation and verification of various figures declared by the assessee in Depreciation schedule and computation sheet. The right method is to claim only the depreciation as per the depreciation schedule prepared under Income Tax Act because the assessee is the deemed owner of the assets and it has rightly recognized in its books of account. The assessee cannot bifurcate the claim under the I.T. Act separately for interest & depreciation. Therefore, we direct A.O to allow only the depreciation on the assets under I.T. Act.
Accordingly, we deem it fit and proper to remit this issue back to the file of the Assessing Officer to recheck the claim of assessee as per IND-AS – 17 [AS-19] and at the same time we also direct the assessee to explain the accounting of leases properly before the AO and we direct AO to verify the same, after verifying the same allow the depreciation as per the above direction after providing adequate opportunity of being heard to the assessee. Accordingly, this ground of appeal is allowed for statistical purpose.
Employees Share Option Scheme [ESOP] - AO rejected the submissions of the assessee and observed that ESOP expenses debited by the assessee in its profit and loss account is not crystalized in the previous year as the same is contingent, notional and capital in nature, hence he rejected the claim of the assessee - HELD THAT:- Hon’ble Karnataka High Court in the case of CIT v. Biocon Ltd [2020 (11) TMI 779 - KARNATAKA HIGH COURT] has decided the issue in favour of assessee and respectfully following the above decision the Coordinate Bench of this Tribunal in assessee’s own case for the A.Y. 2015-16 [2023 (5) TMI 1354 - ITAT MUMBAI] has decided the issue in favour of assessee as held that incurring of the expenditure by the assessee entitles him for deduction under Section 37(1) of the Act subject to fulfillment of the condition.The deduction of discount on ESOP over the vesting period is in accordance with the accounting in the books of accounts, which has been prepared in accordance with Securities And Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.
Additional claim on ESOP raised by the assessee the similar issue was considered by the Coordinate Bench in A.Y. 2015-16 [2023 (5) TMI 1354 - ITAT MUMBAI] and remitted the issue back to the file of the Assessing Officer / Ld. DRP to verify claim of the assessee.
Disallowance u/s 14A - assessee has invested substantial amount in investments yielding exempt income in “equities and mutual funds” - HELD THAT:- As we observe that Assessing Officer has invoked the provisions of section 14A r.w. Rule 8D of I.T. Rules and determined the disallowance by applying 1% of the annual average of the monthly average of opening and closing balance of value of investments mechanically. We observe that AO has taken total value of average investments which may include those investments which has not generated any exempt income in the above said total investments made by the assessee, however, it is settled position of law that the AO has to consider only those investments which has actually yielded exempt income - remit this issue back to the file of the AO to consider those investments which has actually yielded the exempt income. Accordingly, Ground allowed for statistical purpose.
Adjustment made in the book profit u/s 115JB for disallowance u/s 14A - Section 14A disallowance cannot be part of clause (f) of Explanation (ii) of section 115JB of the Act. We observe that in the case of ACIT v. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s. 14A r.w. Rule 8D of the I.T Rules, 1962. Thus we direct assessing officer to delete the above adjustment made in the book profit u/s 115JB.
Adjustment of dividend distribution tax - As at the time of hearing, assessee submitted that this issue is decided by the Tribunal against the assessee. Therefore, we dismiss the ground raised by the assessee.
Short grant of TDS credit - Since this issue is factual matter which needs verification on the part of the Assessing Officer, we deem it fit and proper to remit this issue back to the file of the Assessing Officer to verify the claim of the assessee and allow the same as per law. Accordingly, this ground of appeal is allowed for statistical purpose.
Addition u/s 68 - cash deposit in Specified Bank Note (SBN) during demonetization period - HELD THAT:- Since assessee is in the business of travel agent and tourism where it is dealing in foreign exchange conversion and relevant remittances being authorized dealer across India. As discussed earlier it has 39 branches across India and during demonetization period it has deposited huge cash generated by the 39 branches of the specific bank notes. Since the assessee is in this line of business and dealing in cash transactions it may have carried cash balances which was subsequently deposited through 39 branches in the respective banks.
Since it is an authorised dealer assessee is required to maintain books of accounts and details of cash deposits and remittances across the branches and it has to report back to the RBI in regular intervals. Therefore, assessee must be having details of closing cash balances across the branches. These details may be submitted before AO for verification to prove that assessee had sufficient cash balances in the above said specific bank notes and which assessee has deposited across the branches. Ground raised by the assessee allowed for statistical purpose.
Determine the value of assets for the purpose of Finance Lease in the books of accounts of the assessee - cars on Finance Lease from Lessors - HELD THAT:- Since the assessee has already recognize the values of vehicle in their books, there is no need to revalue or valuation report, the assessee has already adopted the value of the assets, it needs to continue to adopt the same and at the time of foreclosure, the assessee has to settle the value based on the value of assets along with the penalty if there is any as per the lease agreement. Therefore, we are directing the Assessing Officer to adopt the value as per the Balance sheet and reject the valuation submitted by the assessee. Still the Assessing Officer has to verify the recording of lease transaction and relevant adoption of depreciation claim as per the law and adopt the same here for the value for recognizing the value for foreclosure, as such there should not be any difference to the value in the depreciation schedule. Therefore, the controversy of valuation of vehicle will be addressed and the value of assets as on the date of foreclosure in the Balance Sheet of the assessee will be the actual value as per depreciation schedule on the date of foreclosure. Therefore, this ground of appeal also remitted back.
Depreciation claim on property Let out - AO observed that premises were let out by the assessee, then how is that depreciation is allowable on the same under the Profits and Gains from Business or Profession - period of addition was considered as less than 180 days the depreciation is worked out as 50% of allowable depreciation - tenant has vacated the portion of office premises and the assessee has occupied the building and claimed the depreciation for the period of reoccupation by the assessee - HELD THAT:- The tenancy rights were surrendered at the fag end of the previous year. However, the ownership of the building is still with the assessee and it is not relevant whether assessee occupies the building for the purpose of business or not.
It is evident that assessee is owner of the property and it has renovated for the purpose of utilizing the same for its own business, as such assessee is in possession of the building which is under renovation that itself shows that it is under the control of the assessee and it will be used for the purpose of business. Once it has become ready to be occupied by the assessee for running its own business and with that it fulfills the conditions of sec 32, the depreciation is automatically applicable. Therefore, the assessee has claimed only the depreciation for the period after surrender of the tenancy rights by the tenant. Therefore, it is not relevant whether actually utilizes for the remaining period, as long as it is in its position and the depreciation can be claimed for utilization as well as based on the concept of passage of time during which the property was in its control and possession. Therefore, the above said depreciation cannot be denied to the assessee. Accordingly, this ground of appeal is allowed.
Claim of indexation while computing book profit - assessee has reduced the indexation cost acquisition of transfer of shares while calculating the book profit u/s 115JB - HELD THAT:- While claiming the benefit, the assessee acknowledged that this transfer of shares is exempt from tax u/s 10(38) of the Act and relied on the decision of Hon’ble Karnataka High Court in the case of Best Trading and Agencies Ltd (supra) wherein it was held that indexation benefit should be allowed. It was held that the indexation benefit was allowed for the reason that the assessee company was established as SPV for transfer of Land and Building. Further it was held that indexed cost of acquisition is a claim allowed by sec.48 to arrive at the income taxable as per sec.45 at the rates provided u/s 112. Further, it was held that the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taking the income other than actual/real income. Since the Hon’ble court allowed the indexation while determining the book profit u/s 115JB.
As decided in Karnataka State Industrial [2017 (1) TMI 675 - ITAT BANGALORE] assessee-company is entitled to the benefit of indexation while calculating long-term capital gains which are to be considered for the purpose of computing tax liability u/s 115JB.
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2024 (7) TMI 1125
Rejection of registration u/s 12A and approval u/s 80G(5) - earlier registration was granted to the assessee was withdrawn on the ground of involvement of money laundering and Violation of the law on account of non-payment of loan to the bank, short fall of TDS as per the audit report, outstanding/belated payment of PF & ESIC, non-payment of GST on rent receipt and the retirement benefit of employee’s are not accounted as per AS-15 - meantime due to amendment in the provisions of section 12A of the Act the assessee again applied for registration under the new law and provisional registration u/s 12AB and approval u/s 80G(5)
HELD THAT:- As regards the cancelation of the registration granted earlier u/s 12AA of the Act. we find that the said cancelation order has been set aside by this tribunal vide order [2023 (6) TMI 1404 - ITAT RAIPUR] as considered rival submissions since the cancellation of registration u/s 12A is restored we are of the considered view that since, the provisional registration u/s 12AA(i)(ac)(vi) and 80G(v)(iv) of I.T. Act has already been granted by ld. PCIT on 10.03.2022, therefore, the activities of the assessee societies are considered as genuine. We are inclined to set aside the order of ld. CIT(E) withdrawing the approval to the assessee society u/s 10(23C)(vi) and direct ld. CIT(E) to restore approval u/s 10(23C)(vi) to the assessee society.
Non-payment of interest on outstanding loans to Central Bank of India - Non-payment of loan to the bank is clearly a default on the part of the assessee of its contractual obligation however, that default of repayment of loan itself would not be considered as a non-compliance of any other law time being in force in terms of section 12AB(1)(b)(i). To understand the violation of non-compliance of any other law time being in force it has to be seen in the context of violation of provisions of law governing the activities of the institution or trust for achieving its objects or violation of the provisions of law which governs or regulates the institution or trust itself. The non-payment of the loan of the bank does amount to violation of any law which governs or regulates the activities of the assesse in achieving the objects. A non-performance of contractual obligation would not constitute non- compliance of such requirement of any other law for time being in force. Since the matter of recovery of outstanding loan is still pending for adjudication before DRT therefore, neither it is undisputed violation nor has this default of payment attained finality. Therefore, this ground of rejecting the application has no legs to stand.
Non- deduction or payment of TDS - Though there was non-payment of TDS and short deduction of TDS by the assessee on certain payments of interest however, the said deficient payment was made good in the subsequent year and there is no outstanding in the subsequent years. Even otherwise the short deduction of TDS and belated payment of TDS does not amount to non-compliance with the requirement of any other law time being in force which is material for achieve the objects of the assessee. These noncompliance of deduction and payment of TDS are having their own remedies under the income Tax Act and subject matter of assessments. Hence, non-deduction or short deduction of TDS cannot be a ground for refusal of registration.
Non deposit of PF and ESIC - Non-payment/delayed payment to the contribution to PF and ESI has consequential disallowance as per the provisions of income tax Act and are subject matter of assessment. Hence, the belated payments of PF & ESIC cannot be held as non-compliance with the requirement of any other law time being in force as per the provisions of section 12AB(1)(b)(i). We may clarify that these default or delayed payments of PF & ESIC as well as TDS are not in the nature of violation of provisions of law governing activity of the assessee or governing/regulating the assessee society itself are material for achieving the objects of assesse.
Not making provisions for retirement benefit of the employees as per AS-15 - Though as a prudent employer it is required to make timely provision for retirement benefit of the employees so as to avoid the default in timely payment of retirement benefits. However, this is only an accounting requirement as per AS -15 issued by ICAI and there is no statutory requirement for making such provision by the assessee society. The only requirement is to pay the retiral benefit to the employees at the time of retirement. Therefore, non- making of the provisions of retirement benefit cannot be held as a non- compliance of requirement of any other law time being in force which is material for the purpose of achieving its objects.
Not charging GST by the assessee on the rental income and thereby it was considered as non-compliance of requirement of other law time being in force - Government of India as vide this notification has exempted the entities registration u/s 12AA from GST hence, the assesse was not required to pay the GST and even was not required to register under the GST. Accordingly the said ground of CIT(E) is contrary to the notification no.12 of 2017 dated 13.06.2017 of Government of India.
The registration granted u/s 12AA to the assesse society vide order dated 07.03.2003 and subsequent cancelled vide order dated 14.11.2018 has been restored by the tribunal and therefore, the said registration was still subsisting till the impugned order was passed by the CIT(E). Hence the assesse being registered u/s 12AA was exempt from the GST registered as per notification of Government of India and consequently no violation of any law time being in force.
There is no dispute regarding the charitable objects of the assesse society and genuineness of the activity being already registered u/s 12A since 2003. Thus we set aside the impugned order of the CIT(A) and direct the CIT(E) to grant registration to assessee u/s 12AB as well as approval u/s 80G(5) of the Act. Assessee appeal allowed.
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2024 (7) TMI 1124
Export of non-Basmati White Rice - grievance of the petitioner- Company is that it has already entered into contract for supply of aforesaid rice to various foreign entities prior to issuance of notification (Annexure P-1) and if terms of the contract are not fulfilled, then of-course same will be create various hardship to the petitioner alongwith goodwill of his business - it was held by High Court that 'The respondents are directed to permit the petitioner to export the Non-basmati White Rice to foreign entities in compliance of contract entered into between them, to which letter of credit has been issued by the petitioner for supply of quantity' - HELD THAT:- Since, the impugned orders are interim orders, no interference required.
SLP dismissed.
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2024 (7) TMI 1123
Classificaton of goods - Violation of principles of natural justice - challenge to assessment order - contentions raised by the petitioner were not taken into consideration - order is non-speaking with regard to certain heads of claim - exercise of discretionary jurisdiction -
Whether the impugned order warrants interference in exercise of discretionary jurisdiction? - HELD THAT:- The judgments relied upon by learned Additional Government Pleader in Bhagath Raja v. Union of India & Ors [1967 (3) TMI 105 - SUPREME COURT] and S.N.Mukherjee v. Union of India [1990 (8) TMI 345 - SUPREME COURT] indicate that a quasi-judicial authority is required to record reasons. The rationale behind insisting on reasons is also set out in the said judgments. The judgments also add that such reasons need not be as elaborate as those in judgments of courts of law. By taking note of these principles, whether the order impugned herein contains reasons and whether the contentions raised by the petitioner were dealt with therein should be examined.
Classification of goods - to be classified under CTH 8301 of the Customs Tariff Act or not - HELD THAT:- The reasons were specified in support of the conclusion, but vital contentions regarding GRI and the Explanatory Notes were not considered. In order to balance revenue interest, the impugned order dated 04.04.2024 is set aside on condition that the petitioner remits a sum of Rs. 1.75 crore as agreed to within four weeks from the date of receipt of a copy of this order. The sum of Rs. 1,75,00,000 exceeds 5% of the disputed tax demand under this head. The other heads of tax demand are not being reckoned in this regard because unreasoned conclusions were recorded - Subject to being satisfied that the said amount was received, the assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, and thereafter issue a fresh order within three months from the date of receipt of the petitioner's reply.
Petition disposed off.
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