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Income Tax - Case Laws
Showing 61 to 80 of 660 Records
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2016 (11) TMI 1655
Revision u/s 263 - HELD THAT:- There was no occasion for the Assessing Officer to make any inquiry and the Assessing Officer accepted the return without proper inquiry as a result of which substantial amount of taxable income was not brought to tax. We also hold that no rule of universal application can be laid down for exercise of revisional powers u/s 263 of the act. It will depend on the facts of each and every case but the Commissioner of Income Tax must be satisfied of existence of twin conditions that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. - Decided against assessee.
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2016 (11) TMI 1653
TP Adjustment on account of AMP expenses - International transaction - HELD THAT:- On perusal of the order of the TPO, it emerges that while holding the AMP expenses to be an international transaction, he did not have the benefit of the judicial precedents now available for consideration, in some of which the transaction of AMP has been held as an international transaction, in others as not an international transactions, while still in some others, the matter has been restored for fresh consideration in the light of the judgment in Sony Ericsson [2015 (3) TMI 580 - DELHI HIGH COURT] in which the AMP expenses as an international transaction has been accepted.
Respectfully following the predominant view of the Hon’ble High Court, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter would end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO would determine the ALP of such an international transaction in the light of the relevant judgments of the Hon’ble High Court, after allowing a reasonable opportunity of being heard to the assessee.
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2016 (11) TMI 1652
Disallowance u/s. 14A - whether the disallowance u/s. 14A could exceed the exempt income derived by the assessee? - HELD THAT:- Provisions of section 14A of the Act are very clear in considering expenditure which were incurred for earning any income which do not form part of total income. So going by the plain language of the section it could be safely concluded that the legislature intended only to disallow the expenditure that were incurred for earning exempt income. The legislature never intended to disallow the expenditure which is more than the exempt income derived by the assessee.
We also draw support from the decision of the Hon’ble Delhi High Court in the case of Joint Investments Pvt. Ltd. Vs. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] wherein it has been held that the disallowance u/s. 14A of the Act cannot exceed the exempt income. Respectfully following the said decision, we direct the AO to restrict the disallowance u/s. 14A of the Act to ₹ 102/- and allow the ground of appeal raised by the assessee. Appeal of the assessee is allowed.
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2016 (11) TMI 1651
Income accrued in India - receipts of the assessee from DSSPL towards sale of software products - deeming provisions under section 9(1)(vi) - DTAA between India and USA - HELD THAT:- It is not disputed by the Revenue that payments received by the assessee from DSSPL were based on same regional support agreements between assessee and DSSPL which was considered by the Co-ordinate Bench of this Tribunal in [2011 (9) TMI 207 - ITAT, CHENNAI] . So the payments received by the assessee during the relevant assessment year from DSSPL was of the same nature as what were received by it from the said concern in the previous year relevant to assessment years 2002-03 to 2006-2007. In its order dated 16.09.2011, this Tribunal had followed the decision of Special Bench in the case of Motorala Inc. vs. DCIT [2005 (6) TMI 226 - ITAT DELHI-A]
Co-ordinate Bench had in its orders for the earlier years relied on the DTAA between India and USA for construing the meaning of the term Royalty which was available in Article 12(3). It is not disputed that the said definition had not undergone any change despite the amendment to Sec. 9(1)(vi) brought in through Finance Act, 2012. It is trite law that an assessee can fall back on the DTA when it is more advantageous to it. Hon’ble Delhi High Court in the case of Infrasoft Ltd [2013 (11) TMI 1382 - DELHI HIGH COURT] had clearly held that subsequent amendment to Sec. 9(1)(vi) of the Act in so far as it relates to definition of Royalty was not relevant when an assessee relied on DTAA provisions which were more beneficial to it. In the circumstances, following decisions of Co-ordinate Bench of earlier years, we are of the opinion that the receipts of the assessee from DSSPL could not have been considered as Royalty in the hands of the assessee liable for taxation in India. Addition made stands deleted. - Decided in favour of assessee
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2016 (11) TMI 1650
Disallowance of expenditure - Income is taxed out information arising out of seized material - HELD THAT:- Details were furnished regarding expenses of ₹ 35.00 lakhs before the AO and the ld. CIT(A) also. The claim of expenses of ₹ 35.00 lakhs is against unaccounted receipts as per the same seized material of ₹ 156.12 lakhs as noted by the CIT (A) in para-3 reproduced above. This is not the case of AO that this claim of the assessee regarding expenses of ₹ 35.00 lakhs against unaccounted receipt of ₹ 156.00 lakhs is excessive or unreasonable.
The objection is regarding supporting evidence. Un-accounted expenditure, supporting evidences may not be available in most of the cases but since the expenses are noted in the same seized material as per which the receipt is being taxed of ₹ 156.00 lakhs and the claim of such expenses is not excessive and unreasonable and no specific defect has been pointed out by the authorities below in the claim except asking for supporting evidence, we are of the considered opinion, that the assessee was able to establish the incurring of expenditure by way of notings in the seized material and furnishing of the details of the expenses item wise and this is not the case of the revenue that such details are not as per the notings in the seized material. Hence, we delete this disallowance. Accordingly, ground no.2 to 4 are allowed.
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2016 (11) TMI 1649
Reopening of assessment u/s 147 - assessee had not filed his return for the impugned assessment year - HELD THAT:- Order dated 09.02.2015 disposing of assessee’s objection to reopening reads that the said return had not been filed u/s.139(1) - CIT(A) on the other hand is of the view that the said return was not filed with the Assessing Officer issuing Section 148 notice. The fact however remains that the filing of assessee’s return in question is not otherwise in dispute.
We put up a specific query to Ld. Departmental Representative to prove that assessee’s residential status or his ward is different in the above stated return or in Section 148 notice or in reassessment. He could not point out such difference. It has further come on record that assessee had also received acknowledgement of his return from department’s end forming part of the paper book.
We quote hon’ble jurisdictional high court in Manish Kumar Pravinbhai Kiri vs. ACIT 2016 (1) TMI 787 - GUJARAT HIGH COURT holding that the only reason of non filing of return forming basis of the impugned reopening in such circumstances stands belied. We thus accept assessee’s challenge to validity of the reopening and conclude that the Assessing Officer’s above stated reasoning goes contrary to the record. The same is accordingly quashed rendering assessee’s other ground on merits as infructuous.
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2016 (11) TMI 1648
TPA - AMP expenses - existence of an international transaction - whether advertising, marketing and promotion expenses (‘AMP’) incurred by the Assessee can be said to be incurred not only for the benefit of the Assessee but also by way of rendering the services of promoting the brand of the foreign associated enterprise (‘AE’) namely B&L, USA? - Existence of an international transaction - re-characterization of its transaction involving its AE for the two years - HELD THAT:- Delay condoned. Leave granted.
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2016 (11) TMI 1647
TP Adjustment - notional interest on delayed collection of consideration on sale of goods to Associated Enterprises - Associated Enterprises to whom the sales were made got on an average a longer period for payment of the sale proceeds as compared to the Non-Associated Enterprises - HELD THAT- Tribunal by the impugned order rendered a finding of fact that the respondentassessee has not charged any interest from third parties i.e. Non Associated Enterprises on delayed payments exceeding more than 300 to 400 days from the sale of goods. Consequently, it holds that once such delayed payment in respect of sale of goods made to third parties carries no interest, then adding of notional interest to delayed payments made by the Associated Enterprises is not called for.
As placed reliance upon the order in M/s.Indo Amercian Jewellery Ltd. [2013 (1) TMI 804 - BOMBAY HIGH COURT] wherein similar question was not entertained by this Court on the ground that there is complete uniformity in the act of the assessee therein in not charging interest from Associated Enterprises and Non Associated Enterprises for delay in recovery of its sale proceeds.
In the present case also the Tribunal has rendered a finding of fact that the interest is not being charged in case of sales made to Non-Associated Enterprises for delayed payment just as in the case of Associated Enterprises. These finding of fact rendered by the Tribunal is not shown to be perverse in any manner. No substantial question of law
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2016 (11) TMI 1646
Eligibility for deduction u/s 54B - whether the AO was justified in adopting the indexed cost of acquisition as per the value of DG Stamps ? - HELD THAT:- As the particular property in question has its own location and other parameter as very important mentioned in the above parameter of factor affecting the valuation report, hence increasing it by 10% cumulatively upto 1981, which becomes ₹ 21.43 per sq.mts for the year 1991. Hence he adopted the land value at ₹ 3,36,451/-. AO has adopted the rate on the basis of sale deed registered with the Stamp Valuation Authority situated in the nearby area. The law is well settled that the DG Stamps valuation would not be a proper indicator for ascertaining the Fair Market Value. However, the registered valuer has applied the rate as per the Circular issued by the Government of Rajasthan. Such valuation ought not to have been set aside without referring the matter to the DVO as per section 55A(a) of the Act. Therefore, we set aside the order of the AO on this issue and direct the AO to adopt the valuation as reported by the Registered valuer at ₹ 3,36,451/-. This issue is decided in favour of the assessee and against the revenue.
Entitled for indexed cost of improvement - AO has not allowed the indexed cost of improvement on the basis that no evidence has been furnished - HELD THAT:- No direct evidence with regard to the expenditure is placed on the record demonstrating the incurrence of the expenditure. But the fact that in the agricultural land such expenditures are incurred in the course of time. This fact cannot be lost sight of. Therefore, after considering the facts, we allow 50% of the indexed cost of improvement as claimed by the assessee being the reasonable expenditure incurred by the agriculturist on the improvement of the land. The assessee gets relief of ₹ 6,52,398/-. This ground of the assessee is partly allowed.
Claim of deduction u/s 54B for making investment in the agricultural land in the name of the wife - HELD THAT:- As decided in KALYA VERSUS COMMISSIONER OF INCOME-TAX [2012 (6) TMI 239 - RAJASTHAN HIGH COURT] the word assessee used in the Income Tax Act needs to be given a ‘legal interpretation’ and not a ‘liberal interpretation’, as contended by the learned counsel for the appellant. If the word ‘assessee’ is given a liberal interpretation, it would be tantamount to giving a free hand to the assessee and his legal heirs and it shall curtail the revenue of the Government, which the law does not permit - decided against assessee
Not allowing the deduction u/s 54F - HELD THAT:- Section requires the assessee to acquire a ‘residential house’ and so long as the assessee acquires a building, which may be constructed, in such a manner as to consist of several units which can, if the need arises, be conveniently and independently used as an independent residence, the requirement of the section should be taken to have been satisfied. Fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of exemption u/s 54/54F - In the case in hand, out of the sale consideration the assessee purchased a residential house for ₹ 41 lacs on 31.12.2005 adjoining to the existing house. Thereafter the existing house was demolished and a new house was reconstructed so that the house purchased and house reconstructed would meet the requirement of the family. This fact is not rebutted by the revenue by placing any contrary material on record. Therefore, by following the ratio laid down in the case of CIT vs. Syed Ali Adil [2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT] and Gita Duggal vs. CIT [2013 (3) TMI 101 - DELHI HIGH COURT] we hereby direct the AO to allow the claim of deduction under section 54F
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2016 (11) TMI 1645
Disallowance u/s 80IA(iv) - selection of initial year out of the block of 15 years - HELD THAT:- As far as selection of initial year is concerned, the Board has already clarified this issue in Circular no.1/2016. This discretion is with the assessee to select any initial year. It is the discretion of the assessee to opt any 10 years. Once the assessee has opted initial year, then it has to claim deduction under section 80IA consecutively for 10 years.
The approach of the AO to construe that initial year ought to be selected from the year of manufacturing, was not approved by the Board. Considering all these aspects, we do not see any reason to interfere in the order of the ld.CIT(A). Accordingly, the appeal of the Revenue is dismissed.
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2016 (11) TMI 1642
Addition u/s 40A(2)(b) - payment to the persons specified - HELD THAT:- It is clear that the disallowance under this section is made in respect of the expenses incurred or payments made which are not deductible. This section has no application to income aspect of the assessee. AO has made disallowance u/s 40A(2)(b) in respect of income which the assessee in his opinion ought to have earned rather than certain expenses incurred, the provisions of this section are not attracted. Therefore, uphold the impugned order on this score deleting the disallowance. - Decided against revenue.
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2016 (11) TMI 1641
Addition on account of higher rate of profit - both the authorities have increased the net profit rate from 10% to 11.5% - HELD THAT:- Taking into account the previous year the assessee's assessment was accepted at 10% G.P. No reasons are adopted by the Tribunal raise the net profit from 10% to 11.5%. In that view of the matter, the first issue is answered in favour of the assessee.
Tribunal holding that while arriving at net profit rate, salary paid to Managing Director would not be allowed as a deduction to the appellant - HELD THAT:- The Tribunal has considered the application of net profit rate as 11.5% and not 10%, in our opinion the net profit rate has to be assessed at 10%. No other expenses are allowed.
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2016 (11) TMI 1638
Condonation of delay - delay of 169 days in filing the appeal - assessee has submitted that the appeal of the assessee was dismissed exparte because of the tax consultant of the assessee failed to appear and he was under bona fide belief that the representative of the assessee will take care of the tax matter - HELD THAT:- Assessee is an individual and it appears to be the first experience with the tax matter. The explanation of the assessee has to be analysed in the context whether the reasons for delay as explained by the assessee are bona fide or merely a device to take benefit or an attempt to take undue advantage of filing the appeal belatedly. We find that it does not emerge from the facts and circumstances of the case that by filing the appeal belatedly the assessee has made an attempt to take undue advantage or benefit. Accordingly, having regard to the facts and circumstances of the case, we condone the delay of 169 days in filing the appeal.
Addition u/s 68 - unexplained cash deposits in Bank account - peak credit - HELD THAT:- AO on the basis of AIR information that the assessee has deposited cash in the Bank account during the financial year relevant to the assessment year under consideration. Thus addition has been made by the Assessing Officer as an unexplained cash credit under Section 68 of the Act.
In the case of CIT Vs. Gandhi Bhaichand H Gandhi [1982 (2) TMI 28 - BOMBAY HIGH COURT] has held that the passbook maintained by the Bank could not be regarded as books of account of the assessee much less book maintained by the assessee. Therefore the Hon'ble High Court has upheld the order of the Tribunal in deleting the addition made under Section 68 of the Act on account of deposits in Banks. We find force and substance in the alternate plea of the learned Authorised Representative of the assessee that even if an addition is to be made it cannot be more than the peak credit in the bank account.
Further since the assessee's case has been decided by AO as well as the CIT (Appeals) without any representative therefore in the facts and circumstances of the case, we set aside this matter to the record of the Assessing Officer for granting one more opportunity to the assessee for explanation of the source of cash deposit and in any case the addition if any it should not be more than the peak credit in the bank account. - Appeal of the assessee is partly allowed.
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2016 (11) TMI 1635
Disallowance of consultancy charges paid - assessee has paid consultancy charges to M/s. I.T. Lokam Services India Pvt. Ltd., which is a subsidiary company of the assessee - A.O. disallowed consultancy charges for the reason that the assessee has failed to prove the nexus between consultancy charges paid to M/s. I.T. Lokam Services India Pvt. Ltd. and generation of revenue - HELD THAT:- On perusal of the income tax returns filed by M/s. I.T. Lokam Services India Pvt. Ltd., the major source of revenue for the company is from consultancy charges received from the assessee. The recipient also paid more than 50% of consultancy charges as salary to its employees duly deducting tax at source wherever applicable, the proof of which has been furnished. On perusal of all these documents furnished by the assessee, it was clear that the consultancy charges paid by the assessee is genuine and also the assessee has proved the necessity of incurring such consultancy charges in relation to its works executed to M/s. IBM India Pvt. Ltd.
Even for some time, if we assume that the payments are fictitious and unproved, it will lead to wrong calculation of margins earned by the assessee that if the consultancy charges incurred by the assessee are added to the margins returned by the assessee for these assessment years, the net margin would go up to 51% which is quite contrary to the industrial average declared by the NASCOM. Therefore, we are of the considered view that the A.O. was erred in disallowing consultancy charges paid by the assessee.
Consultancy charges paid by the assessee to M/s. I.T. Lokam Services India Pvt. Ltd. is having nexus between earning of income. The assessee has proved beyond doubt with necessary supporting documents that it has incurred consultancy charges wholly and exclusively for the purpose of business.
CIT(A), without appreciating the facts, simply confirmed the additions made by the A.O. by holding that the impugned expenses have not been proved to be incurred wholly and exclusively for the purpose of assessee’s business. Therefore, we set aside order passed by the CIT(A) and direct the A.O. to allow consultancy charges paid by the assessee for the assessment years 2009-10 to 2011-12.
Disallowance of employees contribution to provident fund - addition u/s 2(24)(x) r.w.s. 36(1)(va) - contribution deposited on or before the due date of furnishing return of income u/s 139(1) - HELD THAT:- We find that the coordinate bench of this Tribunal, in the case of Eastern Power Distribution Company of AP Limited [2016 (9) TMI 1040 - ITAT VISAKHAPATNAM] has considered similar issue and held that if employees contribution to provident fund is paid on or before the due date of furnishing return of income u/s 139(1) of the Act, then no disallowance can be made.
If employees contribution to provident fund is paid within the due date specified u/s 139(1) of the Act, then no disallowance can be made towards employees contribution to provident fund. Therefore, we direct the A.O. to allow contribution to provident fund for the assessment year 2009-10 to 2011-12.
Addition of export profit under the provisions of section 10A - HELD THAT:- In assessee’s own case for the assessment year 2003-04, we are of the view that for the purpose of determination of exemption u/s 10A, the turnover of the undertaking has to be considered, but not turnover of the assessee. The CIT(A), after considering the relevant facts and also following coordinate bench decision has rightly deleted additions made by the A.O. towards disallowance of exemption claimed u/s 10A. We do not see any error or infirmity in the order of the CIT(A). Hence, we inclined to uphold CIT(A) order and dismiss appeal filed by the revenue.
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2016 (11) TMI 1634
Disallowance u/s 14A - plea of assessee is that the assessee has not incurred any expenditure in earning of the exempt income and, therefore, the disallowance is not justified - HELD THAT:- AO was justified in making the impugned disallowance because he was not satisfied, having regard to the accounts of the assessee, that no expenditure was incurred in relation to earning of the exempt income. No doubt, the proposition canvassed by the assessee is tenable, so however, it has to be examined in the context of facts of each case. In the present case, having regard to the discussion in the assessment order, we find no reason to delete the disallowance made by the Assessing Officer by invoking Sec. 14A of the Act. Thus, on this aspect, assessee fails.
Assessment of rental income - Accrual of income - addition pertaining to Shiv Sagar property, which has been assessed in the hands of the assessee, whereas the plea of assessee is that it is not the owner of such property - HELD THAT:- insofar as the issue of assessability of rental income of ₹ 33,63,677/- relating to Shiv Sagar property is concerned, same is directed to be assessed in the hands of the assessee as held by the income-tax authorities following the order of Tribunal [2012 (2) TMI 681 - ITAT MUMBAI] in the case of assessee. Simultaneously, the Assessing Officer is directed to apply the final decision on the question of law, which is pending before the Hon'ble Bombay High Court in the earlier Assessment Year 2006-07 [2013 (3) TMI 825 - BOMBAY HIGH COURT ] without requiring the assessee to file appeal to the higher court in this year on the same issue. In this view of the matter, the issue is decided against the assessee, subject to the aforesaid observations.
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2016 (11) TMI 1632
Rectification of mistake u/s 154 - disallowance u/s 40a(ia) - HELD THAT:- We can point it out that this Court in the case of Piu Ghosh [2016 (8) TMI 99 - CALCUTTA HIGH COURT] held that “that the Finance (No.2) Act, 2004 got Presidential assent on September 10, 2004. The assessee could not have foreseen prior to that date that any amount paid to a contractor without deducting tax at source was likely to become not deductible u/s 40.
It could not be assumed that the Legislature was not aware or did not foresee this predicament. The Legislature therefore provided that the Act shall become operative on April 1, 2005. Section 11 of the Finance (No.2) Act, 2004 by which sub-clause (ia) had been added to section 40, 1961 did not provide that it was to become effective from the assessment year 2005-06. It had merely said that it was to become effective on April 1, 2005, which should have been meant to refer to the financial year. There was no scope for ambiguity or confusion. The Tribunal had erred in applying the provision of section 40(a)(ia) of the Income-tax Act, 1961 in disallowing the payment made to a contractor without deducting tax at source during the financial year 2004-05, corresponding to assessment year 2005-06.
The appeal, as such, is admitted. The question is answered in the negative and in favour of the assessee
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2016 (11) TMI 1631
Levy of penalty u/s 271(1)(c) - unexplained investment in jewellery - assessee has admitted undisclosed income under VDIS Scheme in 1997 - HELD THAT:- Though the assessee admitted jewellery of ₹ 2.23 crores and the cash of 3.00 crores under VDIS, she has not filed the wealth tax returns which implies that the wealth declared under VDIS has been exhausted and nothing is carried forward for subsequent year. The assessee is from the educated and from affluent family, assisted by the legal counsels and aware of the wealth tax provisions.
In the absence of any evidence for purchase of jewellery from the explained sources, and in the absence of wealth tax returns, we are unable to accept the source of jewellery was from explained sources/VDIS. The assessee cannot take an advantage of VDIS disclosure for explaining the source of investment in jewellery by evading wealth tax.
We are of the considered opinion that the explanation of investment out of VDIS and Stridhan, gifts is nothing but an afterthought. Even if the assessee acquires the gold from VDIS, and gifts she is bound to declare in wealth tax returns and pay wealth tax failing which it remains unaccounted. Therefore, we hold that this is clear case of penalty under section 271(1)(c) of act.
The facts of the assessee’s case are squarely covered by Hon’ble Supreme Court judgement in the case of MAK Data (P) Ltd. Vs. CIT–II [2013 (11) TMI 14 - SUPREME COURT] and this is a clear case for penalty under section 271(1)(c). Accordingly we set aside the order of the Ld.CIT(A) and confirm the penalty levied by the Assessing Officer and dismiss the cross objections filed by the assessee. - Decided in favour of revenue.
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2016 (11) TMI 1630
Disallowance u/s 80P - income earned on providing credit facilities to its members as provided under Section 80P(2)(a)(i) - HELD THAT:- Assessee society was not doing the banking business having no licence from RBI, therefore, the claim of the assessee was not hit by the provision of Section 80P(4). CIT(A) while deciding the matter of controversy relied upon the decision of Bombay High Court in the case of Quepem Urban Co-operative Credit Society Ltd. [2015 (6) TMI 573 - BOMBAY HIGH COURT] and KALPADI CO-OPERATIVE TOWNSHIP LIMITED [2016 (9) TMI 952 - MADRAS HIGH COURT]
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2016 (11) TMI 1629
Re-opening of the assessment order u/s 147 - non disposal of disposal of the objections raised by the assessee on the re-opening of the assessment - HELD THAT:- Since the AO has not disposed of the objections raised by the assessee on the re-opening of the assessment order u/s 147 we relying on the aforesaid decision in the case of KSS Petron [2016 (10) TMI 1112 - BOMBAY HIGH COURT] and following the same reasoning we quash the reassessment order passed u/s 144 r.w.s 148 of the Act. Since we have upheld the order of CIT(A) in quashing the re-assessment order framed u/s 144 r.w.s 148 of the Act, we are of the view that the other grounds raised by the Revenue on merits, require no adjudication.
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2016 (11) TMI 1628
TP adjustment - selection of MAM - TNMM OR CUP as the most appropriate method - HELD THAT:- The requirement of law is that the most appropriate method suitable for determining the ALP is to be adopted. Merely because the assessee has adopted the CUP method, it will not become the most appropriate method. AO, after conducting the FAR analysis has to determine the most appropriate method. It has been held time and again that the proceedings before the first appellate authority are continuation of the assessment proceedings itself.
It is the bounden duty of the CIT (A) to examine the most appropriate method for determination of the ALP particularly when the assessee itself is challenging the method adopted by it in its TP study. In view of the same, we are satisfied that the TNMM is the most appropriate method and therefore, we deem it fit and proper to set aside the orders of the authorities below and remand the issue of determination of the ALP to the file of the AO by adopting the TNMM as the most appropriate method
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