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Income Tax - Case Laws
Showing 1 to 20 of 806 Records
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2015 (11) TMI 1898
Expenditure incurred on advertisement and sales promotion - Tribunal deleting the disallowance of 81.25% of the expenditure incurred as relying on of M/s. Star India Pvt. Ltd [2009 (3) TMI 990 - BOMBAY HIGH COURT] - as per revenue main liability to incur the said expenditure lay with the holding company of the assessee and that SLP filed by the Department has been admitted by the Hon'ble Supreme Court against the decision of this Court in the case of M/s. Star India (P) Ltd. relied on by the Tribunal
HELD THAT:- Revenue very fairly states that although the question as formulated proceeds on the basis the SLP filed by the Revenue against order of this Court in Star India Pvt. Ltd. (supra) has been admitted, in fact, it is not so. The Apex Court has only issued a notice before admission. In fact, the SLP is awaiting admission.
Be that as it may, no fault can be found with the impugned order of the Tribunal in having allowed the Respondent Assessee's appeal following the decision of this Court in Star India Pvt. Ltd. (supra). No distinguishing feature in the present facts from that existing in Star India Pvt. Ltd. (supra) has been pointed out to us which would warrant our taking a different view in the present appeal. No substantial question of law arise
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2015 (11) TMI 1897
Depreciation at 60% on telecom/computer equipment - 'whether telecom/computer equipment' cannot be classified as 'computer including computer software' - HELD THAT:- This issue is covered in respondent assessee's own case for the asst. year 2008-09 [2014 (9) TMI 45 - ITAT BANGALORE] held that a computer system would encompass a collection of devices including input and output support devices that perform functions including, but not limited to, logic, arithmetic, data storage and retrieval communication and control. CIT(A) has not erred in allowing the depreciation at 60% on telecom/computer equipment
Disallowance of deduction u/s 10A - assessee is not engaged in manufacturing and export of any article or thing or computer software as required for the purpose of computation of deduction u/s 10A - CIT(A) deleted addition - HELD THAT:- The issue is covered by the earlier order of this Hon'ble Tribunal in the assessee's own case for the assessment year 2008-09 [2014 (9) TMI 45 - ITAT BANGALORE] wherein as seen that the assessee satisfies the twin conditions of export of computer software and repatriation of exports proceeds in convertible foreign exchange as prescribed in section 10A of the Act. We, therefore, concur with the finding of the learned CIT (A) that the assessee is entitled for deduction u/s.10A.
Disallowance of deduction u/s 80JJAA - assessee is not involved in telecom services and such services cannot be termed as IT enabled services - CIT(A) deleted addition - HELD THAT:- As decided in assessee own case as the facts of the assessee in the case on hand are similar to the facts of the above cited case of Texas Instruments India P. Ltd. [2006 (12) TMI 405 - ITAT BANGALORE] deduction u/s.80JJAA of the Act is allowed on the basis of the following facts :-
i) The business of the assessee falls within the definition of the term "industrial undertaking"; ii) The assessee is engaged in providing Information Technology enabled services (computer software); iii) The assessee has claimed deduction of only those payments made to 'workmen' who are not employed in supervisory capacity.
In view of the above, we uphold the decision of the learned CIT (A) in allowing the assessee deduction u/s.80JJAA of the Act. Accordingly, the ground raised at S.No.3 by revenue is dismissed."
Disallowance of deduction u/s 35D - expenditure incurred on stamp duty increases the authorized share capital and is not an item of expenditure expressly allowable u/s 35D - CIT(A) deleted addition - HELD THAT:- This ground of appeal is restored to the file of AO with a direction to verify whether as a result of this expenditure, the share capital is increased or not. In case share capital is increased to treat the same as capital expenditure and if not, the share capital is increased to treat as Revenue expenditure.
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2015 (11) TMI 1895
TP Adjustment - working capital adjustment - as per Revenue was that no such working capital adjustment was claimed before the TPO and CIT(A) allowed the same without any verification - HELD THAT:- As order was passed by the TPO proposing an adjustment which was adopted by the AO while passing the order u/s 143(3) r.w.s.144C(4) - case of the assessee was that since the assessee was providing services to its associate enterprises, then it was working on lower prices for its services. On the other hand, if services were provided wherein the customers pays on later date, then the working capital adjustment is to be allowed to a company, which is providing the services on cash basis.
We find that similar issue of allowing working capital adjustment to the assessee has been held in favour of the assessee by series of decision on various in DCIT Vs. Emptoris Technologies India Pvt. Ltd. [2015 (10) TMI 738 - ITAT PUNE] - CIT(A) on the other hand had placed reliance on the decision in Vedaris Technologies Pvt. Ltd. [2010 (3) TMI 898 - ITAT DELHI] and the OECD Guidelines.
We find merit in the order of CIT(A) in directing the AO to grant working capital adjustment to the assessee on the basis of average credit/debit period for the year and commercial rate of interest. We find no merit in the grounds of appeal raised by the Revenue and the same are dismissed.
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2015 (11) TMI 1894
Unexplained investment in Gold and diamond jewelleries - jewellery found during search belonging to the assessee was less than 500 gms - HELD THAT:- Considering Assessee status and the normal practice in Hindu families as such, and as per the CBDT Circular No.1916 dated 11.05.1994 such jewellery cannot be treated as unexplained jewellery and added to the income of the assessee. See Ratanlal Vyaparilal Jain [2010 (7) TMI 769 - GUJARAT HIGH COURT] deleted the whole addition on the ground that the jewellery held by each of the family members was below the limits specified in the said circular.
Although the circular had been issued for the purpose of non-seizure of jewellery during the course of search, the basis for the same recognizes customs prevailing in Hindu society - unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. Decided in favour of assessee.
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2015 (11) TMI 1893
Nature of expenses - software expenses - revenue or capital expenses - assessee is in the business of media planning, executing and buying in the field of advertising and marketing and other related services - HELD THAT:- We find that these software license costs which has been paid by the assessee is for using of software for its day-to-day business requirements, as stated by the assessee before the AO. These softwares keep are ever changing from time to time and did not have a useful life for very long period and at one point of time it becomes obsolete. Thus, it cannot be held that they are capital in nature on account of enduring benefit.
As decided in Asahi India Safety Glass Ltd [2011 (11) TMI 2 - DELHI HIGH COURT] and Raychem RPG Ltd, [2011 (7) TMI 953 - BOMBAY HIGH COURT] have held that, these softwares do not form part of the profit making apparatus and merely facilitate the assessee’s trading operation or enabled the management to conduct the assessee’s business more efficiently and more profitable. Thus, they have to be treated as revenue expenditure.
TDS u/s 195 - disallowance being the provision made for the expenditure to be reimbursed in connection with the software allocation cost by the foreign AE/group company, “Mindshare Asia Pacific” - AO observed that, such a payment on account of reimbursement of software cost amounts to “royalty” within the meaning of Explanation to section 9(1)(vi) and TDS should have been deducted by the assessee while making the payment - assessee contended that it is merely reimbursement of cost of software expenses incurred by the Group company which has been allotted to the assessee and is not a “Royalty” within the meaning of Explanation 2 to Section 9(1)(vi) - HELD THAT:- These softwares have not been developed by the Parent Company or any AE, but have been centrally procured so that same can be allotted and given to the various Group entities in order to ensure proper functioning; proper coordination and quality.
Whatever cost had been incurred for procuring the software from third parties has been allocated among the group entities on the proportionate basis. Such an allocation has not been disputed except for holding that the reimbursement of cost paid by the assessee to the Parent/ AE Company amounts to “Royalty”. Such a reimbursement of cost cannot be held to be for any transfer of any right or giving any right to use within the ambit and scope of any of the definition as given in Explanation 2 to section 9(1)(vi).
Once such a payment does not fall within any of the parameters set out in Explanation 2, then it cannot be held that, it is in the nature of “royalty”. ‘Mindshare Asia Pacific’ is procuring the software from somewhere else and loading the cost on proportionate basis to various group entities without any mark-up hence on reimbursement of such a cost, assessee was not liable to deduct TDS on account of “royalty” - Decided in favour of assessee.
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2015 (11) TMI 1890
Characterization of receipts - Membership contribution received from its new members for life time in lieu of offering effluent disposal facility - AO taxed the entire sum in the impugned assessment year of receipt by following his line of action adopted in assessment year 2001-02, 2004-05 to 2008-09 thereby rejecting assessee’s accounting treatment treating the same as a capital receipt on the ground that it was yet to perform its part of obligation - HELD THAT:- It emanates from the case file that a co-ordinate bench of a tribunal in similar cross appeals [2015 (7) TMI 932 - ITAT AHMEDABAD for assessment year 2008-09 decided on 24-07-2015 remits back the issue of assessment of assessee’s above stated capital receipt contribution back to the assessing authority for reworking as per earlier order in assessment year 2001-02.
It further observes that the receipts received during the relevant accounting period are to be spread over for a period of five years instead of assessing the same in one assessment year. The second issue of enhancement stands decided against assessee. We follow suit in these facts and want of distinction being pointed out in the above stated decision. The assessee’s first ground accordingly is remitted back to Assessing Officer. Second substantive ground fail .
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2015 (11) TMI 1887
Addition on account of trade creditors - Addition u/s 68 - HELD THAT:- All the parties have confirmed these purchase transactions but the AO wanted their creditworthiness. These are simply trade creditors and all of them supplied machinery to the assessee. Supply of machinery is not in doubt. These are not unsecured loans. Once this is the position, the AO cannot invoke the provisions of section 68 - All the parties have confirmed having made sales to assessee in response to notice u/s. 133(6) - In the case of trade creditors, at the best, first of all, the AO has to doubt the purchases and sales and without going into these facts, the AO applied the provisions of section 68 of the Act in the absence of creditworthiness of these parties and made addition.
No reason to sustain the same, as the very basis is not doubted by the AO, and assessee has discharged its onus by filing all the details before the AO. Accordingly, we confirm the order of CIT(A) and this issue of revenue’s appeal is dismissed.
Addition of unsecured loans - HELD THAT:- As both the creditors have confirmed the transaction and also filed details of their assessment particulars and these credits are given out of their bank account but the AO did not carry out any exercise whatsoever to verify these unsecured loans as is clearly evidenced from the assessment order. Even CIT(A)’s finding is that AO has not conducted any further enquiry despite the fact that assessee has discharged its onus by filling the details. Once this is the position, we have no hesitation in confirming the order of CIT(A) and this issue of revenue’s appeal is dismissed.
Addition on account of purchase of spare parts - HELD THAT:- From the order of CIT(A), we find that complete details were available before him and on the basis of the same he has allowed the claim of the assessee. Even the sales arising out of the same purchases have not been doubted by the AO. Here in the present case only exception is M/s. Vishal Enterprises wherein it has not verified the veracity of the transaction. Hence, qua this only, we set aside the matter to the file of the AO so that assessee can prove the veracity of the transaction and for the balance purchases, we confirm the order of CIT(A) and this issue of revenue’s appeal is partly allowed.
Disproportionate payment of expenses made to persons specified u/s. 40A(2)(b) - HELD THAT:- AO has just made ad-hoc disallowance without going into the expenses or the reasonableness of the payment as mentioned in the provision of section 40A(2)(b) - Assessee has produced complete supporting bills and vouchers to prove the genuineness of the claim of expenditure which is not doubted but he has made ad hoc disallowance for the reason that these payments are made to the persons specified u/s. 40A(2)(b) of the Act for invocation of provision of section 40A(2)(b) of the Act. First of all, there should be a finding recorded by the AO that the expenses are unreasonable and how? But from the order of the AO, it is not coming out that what is the basis for disallowance. Just simply ad hoc disallowance cannot be made. Accordingly, we confirm the order of CIT(A) deleting the addition. This issue of revenue’s appeal is dismissed.
TDS u/s 194C - disallowance on account of truck hire charges for non-deduction of TDS - HELD THAT:- From the decision of Vipin Mehta [2011 (5) TMI 503 - ITAT MUMBAI] and the fact in this case is that the assessee has received Form 15- I from the respective payees to whom truck hire charges were paid, the AO has no authority to make any disallowance for non deduction of TDS u/s 40(a)(ia) of the Act. Accordingly this issue of revenue’s appeal is dismissed.
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2015 (11) TMI 1886
Reopening of assessment u/s 147 - Reason to believe - necessity of independent application of mind by AO - HELD THAT:- A plain reading of the reasons recorded demonstrate that the A.O. has not applied his mind to the material/information received from the Director (Investigations). Without such independent application of mind, it is not possible for the A.O. to come to a conclusion that he has reason to believe that income assessable to tax has escaped assessment. Thus, respectfully following the propositions of law laid down by the Hon’ble Delhi High Court in the case of Pr.CIT vs. G & G Pharma India Ltd. (2015 (10) TMI 754 - DELHI HIGH COURT] hold that the reopening is bad in law. Assessee’s appeal is allowed.
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2015 (11) TMI 1884
TP adjustment u/s 92CA(3) - Pass-through costs/operating costs inclusion computing the ALP of the international transaction - HELD THAT:- All the costs in providing the services are to be borne by the assessee alone and the AE has no relation with that. The assessee has made out a case that the expenses incurred in providing such services to the tourists amounting to Rs.13.93 crore are pass through costs and hence the same be ignored in computing the ALP of the international transaction. We find this contention to ill-founded and devoid of any merit. Pass-through costs, in the context of transfer pricing provisions, are ordinarily the costs for which payment is made by an Indian entity to third party on behalf of its foreign AE and the amount so paid to third party is recovered from the foreign AE and in this process there is no assumption of risk of nonpayment by the foreign AE. These are non value-adding costs, which are incidental to the primary business activity of the assessee for which it neither performs any significant functions nor assumes any risks. That is the reason for which such costs are not considered as operating costs.
We fail to appreciate as to how the sum incurred by the assessee can at all be construed as `Pass through costs’ inasmuch as these are not the costs incurred by the assessee for and on behalf of FAB to be recovered as such, but are the costs to be borne by it alone. Such costs are direct charge against its revenue.
Pass-through costs do not involve any type of risk on the entity incurring them, as these are recoverable as such from its AE. At the cost of repetition, we reiterate that the assessee is liable to certain risks as discussed above, which has been noted from its own Transfer pricing study report. Under such circumstances, the argument of the ld. AR that a sum of Rs.13.93 crore represents pass-through costs is incapable of acceptance and ergo jettisoned.
Whether the ld. CIT(A) was justified in comparing the assessee’s net profit rate to total costs at 25.87% based on its service fees of Rs.71.54 lac minus indirect expenses of Rs.56.84 lac with the similar rate of two other comparable companies in determining the ALP of the international transaction of `Tours and Travel Related and Customer Handling Services’? - The international transaction as per the assessee’s audit report in Form No. 3CEB is `Tours and Travel Related and Customer Handling Services’ with transacted value of Rs.14.65 crore. This amount is a sum total of direct costs incurred in providing services amounting to Rs.13.93 crore and service fee of Rs.71.54 lac. This is the total amount received by the assessee from its AE. It is this international transaction of Rs.14.65 crore whose ALP is required to be computed. The action of the ld. CIT(A) has resulted in restricting the international transaction to a sum of Rs.71.54 lac, being the amount of service fee alone, which is again contrary to the statutory provisions. We, therefore, hold that both the direct and indirect cost are required to be considered in determining the ALP under the `Cost plus method’.
Action of the ld. CIT(A) in accepting the ratio of `Net profit to total costs’ as a profit level indicator has led to the devising of a new method in its own, which has no sanction of law. As the most appropriate method in this case is undisputedly the `Cost plus method’, we fail to appreciate as to how the decision of the ld. first appellate authority in accepting such a ratio as a Profit level indicator under this method can be sustained. The comparison of this ratio is alien to the Cost plus method.
Selection of only two companies is in sharp contrast to the assessee earlier choosing 14 companies as comparable in its Transfer pricing study report. By directing to do an analysis of `some’ and not `all’ the comparable companies, CIT(A) allowed the assessee to do cherry-picking by choosing only such companies which suit its purpose. Neither, there is an indication in the impugned order that the CIT(A) himself ensured that no comparable company was left out, nor did he ask the AO to find out other comparable companies. This has put the exercise done by the assessee during the course of first appellate proceedings, open to question.
AO has worked out addition by way of transfer pricing adjustment amounting to Rs.91.80 lac by applying the arithmetic mean of the ratio of `Net profit to Total costs’ of the comparables at 11.72% to the direct and indirect costs incurred by the assessee. As against this, the Cost plus method contemplates applying the ratio of `Gross Profit to Total costs’ and not `Net profit to Total costs’. Again to this extent also, the action of the AO is unsustainable.
In the given circumstances, we are of the considered opinion that the ends of justice would meet adequately if the impugned order is set aside and the matter is restored to the file of the AO. We order accordingly and direct him to compute the ALP of the international transaction afresh under the Cost plus method in conformity with our above discussion. Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings.
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2015 (11) TMI 1882
Nature of receipt - Addition towards Sales Tax Incentive Scheme - Whether as per the Scheme, the assessee need not collect and pay any Sales Tax during the specified period, and allowing deduction towards notional tax liability tantamount to wrong deduction? - HELD THAT:- An investment in the initial fixed capital was made at Rs.283.01 lacs. An application was made to the District Industries Centre for issue of eligibility certificate for exemption from payment of sales tax under 1990 Scheme. The appellant was granted the eligibility certificate on 09-06-2000. As per the said eligibility certificate; the assessee was entitled for exemption from payment of sales tax up to Rs.254.70 lacs for a period of ten years from 15th July, 2000 to 14th July, 2010. Later on, further investment was enhanced and accordingly renewed eligibility certificate was granted.
We have also considered the object of 1993 Scheme and the main feature was to grant incentive to the industries established in the backward areas for development of under-developed region of Maharastra State. We have also examined the legal aspect whether the subsidy in question is capital in nature or revenue in nature.
After going through the decisions cited before us and few of them already discussed by the learned CIT (A), we are of the considered opinion that the issue is squarely covered by those decisions especially by the decision of Reliance Industries Ltd. [2003 (10) TMI 255 - ITAT BOMBAY-J] - We are not discussing all the decision delivered on this issue although discussed during the course of hearing.
Assessee company was justified in claiming the sales tax incentives as exempt and not to be taken into account in computing the taxable income. The view taken by the CIT (A) is accordingly confirmed. The ground of appeal raised by the Revenue is dismissed.
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2015 (11) TMI 1881
Validity of Revision u/s 263 by CIT - Addition u/s 68 - Limitation period for passing order HELD THAT:- As decided in Subhlakshmi Vanijya Pvt. Ltd. [2015 (8) TMI 174 - ITAT KOLKATA] contention of the assessee that since the AO of the assesseecompany was not empowered to examine or make any addition on account of receipt of share capital with or without premium before amendment to section 68 by the Finance Act, 2012 w.e.f. A.Y. 2013-14 and hence the CIT by means of impugned order u/s 263 could not have directed the AO to do so, is unsustainable.
Failure of the AO to give a logical conclusion to the enquiry conducted by him gives power to the CIT to revise such assessment order - notices u/s 263 were properly served through affixture or otherwise. Further the law does not require the service of notice u/s 263 strictly as per the terms of section 282 of the Act. The only requirement enshrined in the provision is to give an opportunity of hearing to the assessee, which has been complied with in all such cases
Limitation period for passing order is to be counted from the date of passing the order u/s 147 read with sec. 143(3) and not the date of Intimation issued u/s 143(1) of the Act, which is not an order for the purposes of section 263. In all the cases, the orders have been passed within the time limit.
CIT having jurisdiction over the AO who passed order u/s 147 read with section 143(3), has the territorial jurisdiction to pass the order u/s 263 and not other CIT. Addition in the hands of a company can be made u/s 68 in its first year of incorporation.
After amalgamation, no order can be passed u/s 263 in the name of the amalgamating company. But, where the intention of the assessee is to defraud the Revenue by either filing returns, after amalgamation, in the old name or otherwise, then the order passed in the old name is valid.Order passed u/s 263 on a non-working day does not become invalid, when the proceedings involving the participation of the assessee were completed on an earlier working day. Order u/s 263 cannot be declared as a nullity for the notice having not been signed by the CIT, when opportunity of hearing was otherwise given by the CIT.
Refusal by the Revenue to accept the written submissions of the assessee sent after the conclusion of hearing cannot render the order void ab initio. At any rate, it is an irregularity. Search proceedings do not debar the CIT from revising order u/s passed u/s 147 of the Act.
All the appeals are dismissed.
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2015 (11) TMI 1880
Nature of expenditure - claim of expenditure for covering storm water drain - Revenue oe capital expenditure - HELD THAT:- There is no dispute that the drain was running on the side of hotel building of the assessee and the other side of the drain was used by the assessee for parking of vehicles. Revenue had also not disputed the finding of the CIT (A) that Asst. Engineer of BBMP while permitting the assessee to lay slabs over the drain restrained the assessee from using it for any business purpose.
Drain was owned by BBMP. By virtue of slabs laid by the assessee what assessee gained was improved functioning of its hotel. Assessee, if it had not covered the drain with the slabs would have been consistently pestered by its guests complaining of bad smell and mosquito menace. In our opinion, though it was a one-time outgo, it did not bring into existence any new profit making apparatus. It simply improved the functioning efficiency of the assessee. When the facts are considered in totality we cannot but agree with the view taken by the CIT (A). Ground 2 of the Revenue stands dismissed
TDS u/s 194H - credit card commission - assessee had paid to the bank for credit / debit card payment realisation - AO was of the opinion that such payments fell within the ambit of commission and therefore Section 194H of the Act stood attracted - HELD THAT:- Grounds raised by the Revenue relies on CBDT notification No.56/2012, dt.31.12.2012 which exempts certain types of payment from deduction of tax at source. Said notification has been issued under powers vested on the central government vide Section 197A(1D) - No doubt one of the type of payments mentioned in the above circular is credit card/ debit card commission on transactions between merchant establishment and acquirer bank. Notification was effective from 01.01.2013. But in our opinion this notification cannot be construed in a manner to say that prior to 01.01.2013 charges deducted by the bank from credit card payments received from customers of the assessee fell within the purview of Section 194H for warranting a deduction of tax at source.
As mentioned by CIT (A), coordinate bench in the case of Tata Teleservices [2013 (1) TMI 480 - ITAT BANGALORE] had clearly held that such payments were more in the nature of bank charges than in the nature of commission and Section 194H of the Act would not be attracted. In such circumstances, we do not find any reason to interfere with the order of CIT (A). Ground 3 stands dismissed.
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2015 (11) TMI 1879
Disallowance u/s. 40(a)(ia) - non deduction of tds on commission payment - payment of commission is not fully established by the assessee as meant for business purposes - HELD THAT:- We find that the issue of paid/payable as decided by the ITAT Special Bench, Vishakapatnam [2012 (3) TMI 402 - ITAT VISAKHAPATNAM] in the context of applicability of section 40(a)(ia) has been reversed by the decision of the Hon’ble Jurisdictional Calcutta High Court in the case of CIT Vs. Crescent Export Syndicate [2013 (5) TMI 510 - CALCUTTA HIGH COURT] wherein their Lordships of Calcutta High Court held that the provisions of section 40(a)(ia) could be invoked even in respect of amounts paid before the end of the financial year.
We also find that there is an amendment in section 40(a)(ia) by insertion of second proviso w.e.f 1-4-2013, wherein if the payee had considered the subject mentioned receipts including the sum in his return, then the payer ( the asssessee herein) should not be invited with the disallowance of section 40(a)(ia) of the Act. This amendment has been held to be retrospective in operation by recent decision of the Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT]
Thus we set aside this issue to the file of the ld.AO to decide the same in the light of the aforesaid judgment( as stated supra). Accordingly, we direct the ld.AO to verify whether the payee(s) has included the subject mentioned receipts in his respective return and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of the assessee. Accordingly, the ground nos. 1 & 2 raised by the revenue are allowed for statistical purposes.
Addition towards carriage outward - AO found that no details were filed by the assessee before him regarding the same and also found that the assessee has not charged any expenditure relating to vehicle except fuel charge - CIT(A) restricted the disallowance to 50% and granted relief - HELD THAT:- We find that in the facts and circumstances of the case, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the ld.AO for deciding the same afresh, in accordance with law, after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to co-operate with the ld.AO in furnishing necessary evidences in support of his claim. Accordingly, ground no.3 raised by the revenue is allowed for statistical purpose.
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2015 (11) TMI 1878
Validity of assessment u/s. 153A - requirement of issue and service of notice u/s 143(2) - HELD THAT:- We find that the judgment of Hon'ble Allahabad High Court in the case of Rajeev Sharma [2010 (5) TMI 600 - ALLAHABAD HIGH COURT] is in the context of assessment u/s 147 whereas the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha [2011 (7) TMI 252 - DELHI HIGH COURT] is in the context of assessment u/s 153A and in this judgment, it was held that the requirement of issue and service of notice u/s 143(2) is not applicable in the assessment made in compliance to notice u/s 153A.
We also find that in the case of Rajeev Sharma [2010 (5) TMI 600 - ALLAHABAD HIGH COURT] the decision of Hon'ble Allahabad High Court is in favour of the assessee but the same is in the context of section 147 of the Act - Thus in the present case also, we follow the judgment of Hon'ble Delhi High Court and decide the issue against the assessee. Accordingly, ground No. 3 & 4 of the assessee are also rejected.
Whether no incriminating material having been found during the course of search & seizure action under section 132(1)? - We find that it was held by Hon'ble Allahabad High Court in the case of Raj Kumar Arora [2014 (10) TMI 255 - ALLAHABAD HIGH COURT] that the reasons given by the Tribunal that no material was found during search cannot be sustained and it is also held by Hon'ble Allahabad High Court that the Assessing Officer has the power to reassess the income of the assessee not only for the undisclosed income which was found during search but also with regard to the material that was available at the time of original assessment. Respectfully following this judgment of Hon'ble Allahabad High Court, we hold that there is no merit in ground and the same is also rejected.
Addition of sums as had been borrowed from various persons - HELD THAT:- This is undisputed fact that as per the assessment order, it is held by the A.O. that deduction being interest on this very loan is allowable and he made addition of only ₹ 83,058/- after reducing this amount from the amount of ₹ 2.40 Lacs brought to tax by him as notional interest on loan given by the assessee of ₹ 20 Lacs. We are aware that it is held by learned CIT (A) that this notional interest of ₹ 2.40 Lacs cannot be brought to tax but this is immaterial because if the assessee actually received interest on this loan given by the assessee at any point of time, the same can be taxed only after reducing deduction allowed by the A.O. himself on account of interest paid by the assessee on this very loan. Having allowed deduction on account of interest on this very loan of ₹ 20 Lacs, the A.O. cannot say that the loan is unexplained and add the same u/s 68 because the A.O. cannot blow hot and cold together. We, therefore, delete this addition.
Addition on alleged ''low withdrawals" for meeting household expenses - HELD THAT:- Neither the Assessing Officer nor the CIT(A) has given any basis for holding that the house hold withdrawal shown by the assessee is not sufficient. Hence, we delete this addition - This ground is allowed.
Addition of cash payment - as per a hand written signed agreement between the assessee and Shri Ashok Dayal (partner Sunder Talkies) and Shri Shailendra Kumar Singh regarding deal the assessee has made cash payment - HELD THAT:- The cash in hand available on 24/07/2004 in the cash book of the assessee was ₹ 5,34,145/-. But on subsequent dates, the cash balance as per cash book has fallen and the minimum balance was ₹ 3,95,885/- on 03/03/2005 as can be seen on page No. 43 of the paper book. In the cash of HUF also, the balance has gone down. Under these facts, the assessee does not deserve any benefit on this account because, the cash balance has fallen down on later dates and therefore, if the same cash was used for paying ₹ 6.25 Lacs, then from where the subsequent payments were made as noted in the cash books. Moreover, even for the lowest balance in cash books after search date, the assessee says that this much cash was available with him on that date after the search date. Then how it can be accepted that the same cash was used to pay ₹ 6.25 lacs before search date. Hence, this ground is rejected.
Addition on account of receipts from guest house - HELD THAT:- A clear finding has been given by CIT(A) that this addition was made by the Assessing Officer on the basis of suspicion, conjectures and surmises and this categorical finding of CIT(A) could not be controverted by Learned D. R. of the Revenue. We also find that this finding is also given by learned CIT(A) that even as per the seized material, receipt of ₹ 1.50 lac is seen. This receipt of ₹ 1.50 lac has been duly shown by the assessee in its income but the Assessing Officer has stated that the receipts from Gopalaya has to be considered at ₹ 6 lac without giving any basis for such estimation. Considering these facts, we find no reason to interfere in the order of CIT(A). Ground No. 1 is rejected.
Addition on account of interest accrued from ICICI Bond - HELD THAT:- We find that this addition has been deleted by learned CIT(A) on the basis that as per Notification No.F.4(9)-W & M of 2003 dated 13/03/2003 reported interest on 6.5% savings bonds 2003 is tax exempt. In view of this factual and legal position, no interference is called for in the order of CIT(A) on this issue. Accordingly, ground No. 2 is rejected.
Unexplained cash payment - CIT-A deleted the addition admitting the additional evidence produced before him during the course of appellate proceedings - whether it is violation of Rule 46A of the IT Rule 1962 and without affording any opportunity to the AO or calling for a remand report? - HELD THAT:- We find force in the submissions of Learned D. R. of the Revenue that CIT(A) should not have given such direction to Assessing Officer for making verification and deleting the addition and instead of this, he should have obtained remand report and should have decided the issue. But considering this fact that already more than 2½ years have passed after the date of order of CIT(A) being 05/03/2013, no useful purpose will be served by obtaining remand report from the Assessing Officer by Tribunal or restoring the matter back to CIT(A) for fresh decision after obtaining remand report from the Assessing Officer and therefore, under these facts, we hold that the Assessing Officer should verify this contention of the assessee that this payment has apparently been made by cheque by Smt. Laxmi Agarwal vide cheque dated 14/07/2005 and if this contention is found correct then this addition should be deleted. Accordingly, ground No. 3 stands disposed of.
Income from house property - because of encroachment, the property is not even identifiable at the site and no income has been realized nor realizable in relation to the said property and therefore, no income is assessable u/s 22 - CIT(A) has accepted these claims of the assessee and deleted the addition made by the Assessing Officer - HELD THAT:- Revenue could not show that these contentions of the assessee accepted by CIT(A) are not correct. Under these facts, we find no reason to interfere in the order of CIT(A). Accordingly, ground No. 4 is also rejected.
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2015 (11) TMI 1877
Assessment u/s 153A - requirement of issue and service of notice u/s 143(2) - HELD THAT:- We find that the judgment of Hon'ble Allahabad High Court in the case of Rajeev Sharma [2010 (5) TMI 600 - ALLAHABAD HIGH COURT] is in the context of assessment u/s 147 whereas the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha [2011 (7) TMI 252 - DELHI HIGH COURT] is in the context of assessment u/s 153A and in this judgment, it was held that the requirement of issue and service of notice u/s 143(2) is not applicable in the assessment made in compliance to notice u/s 153A.
We also find that in the case of Rajeev Sharma [2010 (5) TMI 600 - ALLAHABAD HIGH COURT] the decision of Hon'ble Allahabad High Court is in favour of the assessee but the same is in the context of section 147 of the Act - Thus in the present case also, we follow the judgment of Hon'ble Delhi High Court and decide the issue against the assessee. Accordingly, ground of the assessee are also rejected.
Whether no incriminating material having been found during the course of search & seizure action under section 132(1)? - We find that it was held by Hon'ble Allahabad High Court in the case of Raj Kumar Arora [2014 (10) TMI 255 - ALLAHABAD HIGH COURT] that the reasons given by the Tribunal that no material was found during search cannot be sustained and it is also held by Hon'ble Allahabad High Court that the Assessing Officer has the power to reassess the income of the assessee not only for the undisclosed income which was found during search but also with regard to the material that was available at the time of original assessment. Respectfully following this judgment of Hon'ble Allahabad High Court, we hold that there is no merit in ground and the same is also rejected.
Undisclosed expenditure of 7% in respect of India Millennium Bond of 50,000 US$ - As seen that this issue is covered in favour of the assessee by the judgment of Hon'ble Allahabad High Court rendered in the case of Kanchan Singh[2008 (5) TMI 641 - ALLAHABAD HIGH COURT] held there is no reason to doubt the genuineness of gift by Shri K. C. Kapadia to the assessee and therefore, the assessee was able to establish the nature and source of the money because the same were the maturity proceeds of four bonds purchased by Shri K. C. Kapadia on 1st October 1998 and therefore, no addition can be made in assessment year 2004-05.
In the present case also, India Millennium Bond of US$ 50,000 were gifted by Jayesh Arvind Bhai Patel of Dubai to the assessee as gift letter dated 18/06/2001. This IMD Bond Certificate was issued by SBI on 05/01/2001 in US$. This date falls in previous year 2000-2001 relevant to assessment year 2001-02 and therefore, as per this judgment of Hon'ble Allahabad High Court cited by Learned A. R. of the assessee, no addition can be made in the present assessment year being assessment year 2002- 03. Hence, respectfully following this judgment of Hon'ble Allahabad High Court, this addition regarding India Millennium Bond is deleted and as a result the second addition of ₹ 17,564/- being alleged undisclosed expenditure of 7% in respect of India Millennium Bond of 50,000 US$ equal to ₹ 24,50,918/- is also deleted. Accordingly ground of assessee are allowed.
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2015 (11) TMI 1876
TDS u/s 192 to 195 - re-insurer remittance made in three financial year to non-resident reinsurer (NRRs) @ 41.82% - AO charged interest u/s.201(1)/201(1A) on these remittance - whether non-resident insurers from the non treaty countries have no business connection in India without appreciating that the source of income is in India and the property in the form of reinsured assets are in India? - as pleaded that the assessee is not liable to make any deduction on the reinsurance remittance to NRRs - HELD THAT:- As carefully gone through the orders of the authorities below and found that detailed finding has been recorded by the CIT(A) to the effect that assessee is an independent broker and not an agent. The assessee does not carry out any activity on behalf of anyone in India and has no authority to enter into any contract in India. In these circumstances, the provisions of Section 192 to 195 relating to tax deduction at source are not applicable to the assessee. The provisions of Section 9(1)(i) specifically excludes an independent broker, neither the non-resident reinsurer nor any independent insurance company have any control over the assessee.
AO has also accepted in order u/s.201/201(1)(A) of the Act that the countries with which India do not have a DTAA, the income of NRRs could be taxed in India only if the NRRs has permanent establishment in India. Since the assessee has no business activity on behalf of the NRRs, the provision of Section 192 to 195 are not applicable, hence, the question of tax deduction at source does not arise at all. It is pertinent to mention that none of the earlier/subsequent years, the assessee was found to be liable for deduction of tax u/s.192 to 195 of the IT Act. - Decided against revenue.
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2015 (11) TMI 1875
Addition u/s 14A r.w.r. 8D - Expenditure incurred on earning exempt - HELD THAT:- In the instant case, the income from dividend has been shown at Rs. 9,23,660/-, disallowance u/s 14 A read with Rule 8 D worked out by the AO comes to Rs. 24,53,928/-. Thus it is clear that the AO has disallowed the entire ‘tax exempt income’ which is not permissible in view of the judgment of JOINT INVESTMENTS PVT LTD VERSUS COMMISSIONER OF INCOME TAX [2015 (3) TMI 155 - DELHI HIGH COURT]. The Hon’ble Delhi High Court held that the window for disallowance is indicated in section14 A, and is only to the extent of disallowing expenditure “ incurred by he assessee in relation to the tax exempt income”. The disallowance under section 14 A read with Rule 8 D as worked out by the AO is not in accordance with law and as such working is not sustainable.
In view of the above we uphold the order of the Ld. CIT(A) restricting the disallowance u/s 14A to Rs. 9,23,660/-.
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2015 (11) TMI 1874
Addition u/s 68 - Assessee purchased tapioca from various farmers - as per CIT-A there is no reference about the middlemen for purchasing tapioca - As per AO transaction was not genuine, the assessee has failed to establish identity of the creditors, creditworthiness of creditors and genuineness of the transaction - HELD THAT:- This Tribunal is of the considered opinion that the CIT(Appeals) has to examine the material facts available on record and record his own reasons for arriving at his conclusion. In this case, the CIT(Appeals) has not recorded any of his reasoning for the conclusion reached in his order. The order of the CIT(Appeals) being a quasi-judicial order, the application of mind shall reflect in the order itself.
Reproducing the remand report and reply and thereafter simply rejecting the claim of the assessee on one line cannot be appreciated by the Appellate Authority. Therefore, the order of the CIT(Appeals) is set aside and the matter is remitted back to his file who shall re-examine the issue afresh and pass a speaking order and the order shall reflect the application of mind on material facts available on record - Appeal of the assessee is allowed for statistical purposes.
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2015 (11) TMI 1872
Eligibility of Deduction u/s 80IB - HELD THAT:- We find that this Tribunal in assessee’s own case for assessment year 2004-05 had held that the assessee was entitled to deduction u/s 80IB. The AO has not followed the ITAT’s order on the ground that the Department has filed the appeal against the decision before the Hon’ble High Court.
CIT(Appeals) has not accepted the ITAT’s decision on the ground that the Tribunal was not properly apprised of the facts. We find that since the facts are identical and in assessee’s own case the Tribunal has decided the issue, judicial discipline mandates that we follow the order of the Tribunal. We further note that the Revenue has already filed appeal before the Hon’ble High Court [2010 (4) TMI 1232 - BOMBAY HIGH COURT]. In this view of the matter since the Hon’ble jurisdictional High Court has not reversed the decision of ITAT, we follow the above said order of ITAT in assessee’s own case. Hence we set aside the order of learned CIT(Appeals) and hold that the assessee is eligible for deduction u/s 80IB. - Assessee appeal allowed.
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2015 (11) TMI 1871
Disallowance made on account of BMC Charges and Custom charges - HELD THAT:- In the present case, the assessee has paid the charges on account of regularization charges to the BMC and DR has not brought in our notice that any deviation is an offence under the statutory provision or by-laws of BMC.
We have also seen the order passed by Commissioner of Custom (import) dated wherein, the goods of the assessee were permitted to be clear on the payment as levied under various provision of Custom Act. Considering all the disallowance made on account of BMC Charges and Custom charges are deleted. - Decided in favour of assessee.
Disallowance made u/s 14A r.w.r. 8D - As per CIT disallowance out of administrative expenses worked out on the basis of formula in Rule 8D, made u/s.14A by the AO, is upheld - HELD THAT:- The assessee has not satisfied the AO as to why the disallowance U/s 14 A read with Rule 8D, be not made, however before the CIT(A) the assessee had admitted that and indirect expenditure of Rs. 93,12,971/- has been charged to the P/L account an estimated amount of Rs. 10,000/- could have been incurred in earning the exempt income. Thus both the condition for invoking Rule D was satisfied. The ld AR for the assessee has not brought any material before us as to why the disallowance made u/s 14 A read with Rule D is wrong, thus the addition u/s 14A, made by AO , which was sustained by CIT(A) does not require any interference. - Decided against assessee.
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