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Income Tax - Case Laws
Showing 81 to 100 of 947 Records
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2016 (7) TMI 1557 - ITAT JAIPUR
Interest on loan given to sister concern u/s 36(1) - CIT(A) restricting the rate of interest @ 9% from 15% applied by the A.O - whether the loans were given by the assessee as a measure of commercial expediency ? - Nexus between the interest bearing funds and advance made - HELD THAT:- As U/s 36, the interest paid in respect of capital borrowed for the purposes of business or profession is allowed to be deducted. As per Section 36(1)(iii) of the Act, a) there must be borrowing of capita by the assessee The assessee must have paid the interest in the the capital borrowed and c) The borrowed capital borrowed was by the assessee for the purposes of business or profession, then only the assessee is entitled to the deduction.
From perusal of the balance sheet, it is clear that though there is increase in share capital but simultaneously, there is also increase in the loan and the fixed assets of the assessee company, therefore, in our view, the assessee was required to prove whether on the date of making investment or giving the interest free amount to the sister concern, the assessee was having sufficient interest free funds available with it. For that purposes, the assessee should demonstrate from its cash flow statement and bank account that it has date-wise availability of interest free funds on the date of making advances to the sister concern. In our view, the assessee has failed to prove on the date of making investment in M/s Autopal Industries Limited that it has interest free funds available with it. No material was produced before AO despite the remand order of the Tribunal to substantiate the availability of surplus fund .
Whether some business connection or strategical investment was required to be made by the assessee by providing the interest free borrowed capital to M/s Autopal Industries Limited i.e. to prove the commercial expediency in lending the amount? - As relying on Hero Cycle Pvt. Ltd. Vs. CIT [2015 (11) TMI 1314 - SUPREME COURT] will come to the irresistible conclusion that the assessee has failed to prove the business connection with the amount given as loan and advances to the assessee. As per page 32 of the paper book, the loan has been utilized by the M/s Autopal Industries for repayment to Pennar Peterson Ltd. and government dues like PF/ESI/Excise/Electric bill, payment to employees and payment towards imported goods. In our view, none of the usages of advance by the M/s Autopal Industries proves business interest with that of the business of the assessee. In fact in the written submissions it is mentioned that “there was labour unrest in M/s Autopal Industries from 17.8.1996 during which the production was hampered therefore the assessee company had tried to help the said the M/s Autopal Industries “In our view submission of the assessee, that it tried to help M/s Autopal Industries on account of labour unrest was not supported by any document or record. Moreover the unrest in 1996 does not give any cause to advance the huge amount to M/s Autopal Industries 1999-2000 and 2000-2001. The records shows, contrary to the submissions, M/s Autopal Industries utilized the amount for other purposes (not for settlement of dues of labour except ₹ 19.46 lakh). It is expected from a prudent business man like the assessee in term of Hon’ble Supreme court judgment, to make use of the funds on the basis of commercial principle and should not waste good money against the bad money. No commercial expediency has been shown by the assessee for giving such a huge advances after taking advances from the financial institutions on paying the interest. In view thereof, the appeal of the assessee is required to be dismissed.
Tribunal is duty bound to decide the issue as it thinks fit and appropriate in accordance with facts and circumstances of the case. In our view, what is provided U/s 36, the deduction on the amount of interest paid on the capital borrowed for the purposes for business or profession. The provision is made applicable on the “capital borrowed”and has not restricted to the “capital borrowed during the year”. If we agree to the proportion of the ld AR, then it will amount to rewriting the provisions of law. The Tribunal being a creation of statute is bound to adhere to the law laid down in the statute book and is not within its liberty to make the additions by way of judicial order in the statute book. If we accept the argument of the ld counsel for the assessee whereby if we held that the interest shall be disallowed on the capital borrowed during the assessment year then the entire thrust and purpose of the provision will disappear and make the provision redundant. In view thereof, the submission of the ld AR whereby he sought to restrict the disallowance only for the amount borrowed during the assessment year, is not acceptable. Even otherwise the tribunal is also governed by its earlier remand order, where on such submissions were referred or addressed. Hence, the appeal of the assessee is dismissed on this ground.
AY - 2001-02 - Assessee company has failed to prove the nexus between the interest bearing funds and advance made by it to the M/s Autopal Industries. It has also failed to prove the business connection with the amount given as loan and advance. The facts narrated by assessee is general in nature. The assessee has not submitted any documentary evidence to prove the contention that the loan amount was given for the purpose of business, for which, it is clear from the facts above that the assessee made loan and advance for non business purposes. The ld CIT(A) has confirmed 9% interest charge instead of 15% applied by the ld Assessing Officer. From the above facts and circumstances, in our view, no new facts has been narrated by the ld DR before us, therefore, we uphold the order of the ld CIT(A)
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2016 (7) TMI 1556 - ITAT MUMBAI
TDS u/s 194H OR 194J - Disallowance of sub-brokerage - CIT(A) restricted the allowance to 50% as excessive and unreasonable within the meaning of Sec. 40A(2)(b) - HELD THAT:- As decided in own case [2016 (2) TMI 383 - ITAT MUMBAI] we hold that the provisions of Sec. 194H are attracted to the payments made towards sub-brokerage but not the provisions of Sec. 194J and we reverse the order of the Ld. CIT(A) in holding that provisions of Sec. 40A(2) are attracted. The grounds raised by the assessee are allowed.
Admission of additional evidence - No opportunity was given to the Assessing Officer - violation of Rule 46A - HELD THAT:- Admittedly, the assessee filed additional evidences before the Ld. CIT(A) in respect of 3 creditors and Ld. CIT(A) called for comments of the Assessing Officer and the Assessing Officer forwarded the remand report on other issue without commenting anything on the creditors. In such circumstances, the ground of the revenue that no opportunity was given to the Assessing Officer and therefore there is a violation of Rule 46A is wrong and cannot be sustained. This ground of the revenue is rejected.
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2016 (7) TMI 1555 - ITAT LUCKNOW
Validity of the assessment framed u/s 147 - Unexplained donation/capitation fees - HELD THAT:- In this case the Assessing Officer has initiated the proceedings on the basis of the letter from DDIT(Inv.). The assessment has not been reopened just for the sake of verification of the payment of capitation fees but the Assessing Officer has stated that he has the reason to believe that the income to the tune of ₹ 23lac has escaped assessment for the assessment year 2007-08. It has been held by Hon'ble Supreme Court in the case of Income Tax Officer vs. Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME COURT] that the court cannot look into the sufficiency of the reasons. The reasons for the formation of the belief for reopening of an assessment must have a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular assessment year. Bonafide of the reasons can be looked into by this Tribunal. It is a case where, in our opinion, the reasons recorded are bonafide.
In this case the assessee has asked the Assessing Officer which is apparent from para 8.1 of the assessment order to make available the person who has made the entries in the documents, which were seized from Santosh Medical College, Ghaziabad i.e. the third party and to produce the same to cross examine him.
AO instead of providing the said party to the assessee for his cross examination, asked the assessee to bring a certificate from the college i.e. from that third party that no cash payment of ₹ 23,00,500/- was made by the assessee at the time of admission of his son. This action of AO clearly proves that the addition has been made by the Assessing Officer on the basis of the evidence found from the third party and as has been recorded by the third party. It is undisputed fact that the documents on the basis of which addition has been made in the case of the assessee were not found from the assessee. The entries are also not in the hand writing of the assessee in the documents found during the course of search at the third party. It is a case where the third party has mentioned the name of the assessee. Therefore, the third party are the evidence of the Revenue for making the addition in the hands of the assessee. The Revenue is bound to produce these witnesses when the assessee asked for his cross examination as in our opinion, the statement and the documents of the third party was the witness of the Revenue. No contrary decision was brought to our knowledge. Decidion of M/S ANDAMAN TIMBER INDUSTRIES LTD. [2005 (3) TMI 763 - SC ORDER] is binding on us. Appeal of the assessee stands partly allowed.
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2016 (7) TMI 1554 - BOMBAY HIGH COURT
Monetary limit - maintainability of appeal in High Court - low tax effect - HELD THAT:- In the present case, the tax effect is ₹ 9.17 lakhs as mentioned in paragraph 10 of the Appeal Memo.
In view of the above, Mr. Suresh Kumar, learned Counsel appearing for the Revenue does not press the present Appeal.
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2016 (7) TMI 1553 - ITAT CHENNAI
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Assessee did not deny the fact of incurring expenditure for managing the investments which are in relation to earning of exempt income. The investments have huge potential in giving or earning exempt income like dividend income in the assessment year under consideration or also in the future years.
After considering various decisions and case of Cheminvest Ltd. vs. ITO [2009 (8) TMI 126 - ITAT DELHI-B] wherein, it was held that disallowance under section 14A can be made even in the year where no exempt income has been earned or received by the assessee. The Hon'ble High Court of Bombay in the case of M/s. Godrej & Boyce. Mfg. Co. Ltd. v. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] held that the Assessing Officer is duty bound to determine the expenditure which had been incurred in relation to income which did not form part of the total income. In view of the above, we find no infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the assessee is dismissed.
Addition towards deferred revenue income - taxation of the time shares sold comprising 55% of the time share value which was treated by the assessee as advance subscription towards customers facilities in the accounts - AO was of the view that the entire sale amount including 55% is taxable in the year of receipt - AO made the disallowance only on the ground that similar issue for earlier assessment year is pending before the Hon’ble High Court - HELD THAT:- Assessee furnished decision of the ITAT D Bench Chennai in assessee’s own case for the assessment years 2002-03, 2006-07, 2007-08 and 2008-09 [2012 (8) TMI 1171 - ITAT CHENNAI] wherein ITAT allowed the claim of the assessee to defer the income in the subsequent years on the basis of the ITAT Chennai B Bench (Special Bench) in the case of M/s Mahindra Holidays & Resorts(India) Ltd. [2010 (5) TMI 524 - ITAT, CHENNAI] . By following the decision of the Tribunal, the ld. CIT(A) directed the Assessing Officer to delete the addition. The ld. DR could file any decision having reversed or modified the orders of the Tribunal. Just because, the Department has filed an appeal against the order of the Tribunal, we cannot take a different view on this account. - Decided against revenue.
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2016 (7) TMI 1552 - ITAT MUMBAI
Exemption u/s 10AA - what constitutes export in terms of section 10AA? - HELD THAT:- In the present appeal, we are concerned with the issue what constitutes export in terms of section 10AA of the Act. Therefore, in our view, the assessee would be eligible to avail exemption under section 10AA in respect of goods / services directly exported by it and it will not get any exemption in respect of sales made to other SEZ unit which cannot be treated as export sales.
The fact that assessee realized the sale proceeds in foreign exchange would also not entitle the assessee to claim exemption on sales effected to another SEZ unit.
In the present case, there is no dispute that assessee being a SEZ unit is eligible to claim exemption u/s 10AA subject to fulfillment of conditions prescribed therein. Therefore, as far as assessee’s claim of eligibility u/s 10AA is concerned, there is no doubt about that. We are only concerned with the computation of exemption u/s 10AA which is restricted only to export sales. In other words, exemption u/s 10AA has to be computed on each assessment year independently on the quantum of export sales made by assessee. If we pose a question to ourselves, can an assessee be allowed exemption u/s 10AA without exporting any goods or services in a particular assessment year only because in past assessment years it has been allowed such exemption? The answer will be “No”! Allowance of exemption in such a case would not only be against legislative intent but also defeat the purpose for which the provision was enacted.
The decision of the Hon'ble Bombay High Court in in Western Outdoor Interactive Pvt. Ltd. [2012 (8) TMI 709 - BOMBAY HIGH COURT] cannot be interpreted in a manner to suggest that even without fulfilling the basic conditions of statutory provision, it can claim deduction merely because such deduction was allowed in earlier assessment years.
As far as the decisions of the Tribunal in Goenka Diamonds and Jewellery Ltd. [2012 (3) TMI 258 - ITAT JAIPUR] and Gitanjali Exports Corp. Ltd. [2013 (11) TMI 563 - ITAT MUMBAI] relied upon by the learned Authorised Representative, on a perusal of the order of the Tribunal, we are of the view that they are of no help to the assessee as they were not directly on the issue whether sales to another SEZ unit will be treated as deemed export. Moreover, in both the decisions, the Tribunal has referred to instructions issued by the Ministry of Commerce and Industries clarifying that service includes trading also for the purpose of claiming exemption under section 10AA, whereas, there is no such instruction in relation to export vis–a–vis sales made to another SEZ unit. As stated earlier, the assessee is eligible for exemption under section 10AA in respect of direct export sales made by it. We, therefore, direct the Assessing Officer to verify the quantum of export sales directly made by the assessee and allow exemption under section 10AA in respect of such turnover.
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2016 (7) TMI 1551 - ITAT MUMBAI
Penalty u/s 271B - failure to audit account under section 44AB - assessee was reimbursed various expenses incurred by it by clients/principles and should not have been considered and taken for determination for applicability of section 44AB - HELD THAT:- Turnover of the assessee as accounted for by the assessee was to the tune of ₹ 14,51,994/- whereas the total receipts as per TDS certificates on which TDS was deducted were ₹ 56,46,246/- which was inclusive of reimbursement of expenses to the tune of ₹ 26 lakhs and thus, if we subtract the amount reimbursement from the gross receipt as per TDS certificate which is ₹ 56,46,246/-, the turnover of the assessee would be less than ₹ 40 lakhs.
As find merit in the case of assessee that the CBDT circular mentioned above provides that in case of agent who was placed as the kaccha arhatia, the turnover would be the commission service charges only and not gross receipt received by the assessee including the reimbursements.
The case of the assessee is also supported by the decision of GA Road Carriers [2010 (5) TMI 513 - ITAT, HYDERABAD] wherein it has been held that the deduction of TDS cannot lead to conclusion that freight charges constituted assessee’s firm turnover or gross receipts. AO has not brought any material on record to prove that the amount received by the assessee as per the TDS certificates were actual turnover of the assessee and no net element of reimbursement included in the gross receipt.
The purpose of applicability of provisions of section 44AB - We are of the considered view that the case of the assessee is squarely covered by the above decision. Accordingly, we set aside the order of ld. CIT(A) and direct the AO to delete the penalty. Appeal of the assessee stands allowed.
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2016 (7) TMI 1550 - ITAT KOLKATA
Deduction u/s 80IB - interest earned from fixed deposits, which is normally treated as income from other sources and not business income - HELD THAT:- As regards Ground No.1, the ld. representatives of both the sides have agreed that the issue involved therein relating to the assessee’s claim for deduction under section 80IB in respect of interest earned from Fixed Deposits kept with Bank as margin money is squarely covered in favour of the assessee by the decision of the Hon’ble Calcutta High Court in assessee’s own case for A.Y. 2003-04 [2014 (7) TMI 1313 - CALCUTTA HIGH COURT] wherein a similar claim of the assessee for deduction under section 80IB in respect of interest income has been allowed. CIT(Appeals) al lowing the claim of the assessee for deduction u/s 80IB in respect of interest income. Ground No. 1 is accordingly dismissed.
Disallowance u/s 14A - HELD THAT:- It is observed that the disallowance made by the Assessing Officer under section 14A on account of expenditure incurred by the assessee in relation to the earning of exempt income is sustained by the CIT(Appeals) to the extent of ₹ 24,996/- being 1% of the exempt dividend income. The disallowance under section 14A prior to the introduction of Rule 8D w.e.f. 2008-09 has to be done on some reasonable basis and as agreed by the ld. representatives of both the sides, this Tribunal has taken a consistent view that the disallowance u/s 14A to the extent of 1% of the exempt dividend income is fair and reasonable. No infirmity in the impugned order of the CIT(Appeals) restricting the disallowance of ₹ 5,00,000/- made by the AO u/s 14A being 1% of the exempt dividend income and upholding the same, we dismiss Ground No. 2 of the Revenue’s appeal .
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2016 (7) TMI 1548 - ITAT MUMBAI
Disallowance u/s 14A - HELD THAT:- Departmental Representative has not contested the factual matrix brought out by the Ld. Representative for the assessee. Apart therefrom, in our view, the decision of the CIT(A) that in the absence of any dividend or any other exempt income received in the instant year, no disallowance under section 14A of the Act is merited, is very much apt, as it is in line with the judgment of the Hon’ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT, [2015 (9) TMI 238 - DELHI HIGH COURT] . Thus, we have no hesitation in approving the stand of the CIT(A) on this aspect. In any case, so far as the decision of the CIT(A) in retaining the suo-motu disallowance made by the assessee is concerned, the same is not an issue before us. Thus, we hereby affirm the order of the CIT(A) on the aspect agitated by the Revenue. As a consequence, Revenue fails in Ground of appeal No.1.
Computation of ‘book profit’ in terms of section 115JB - The Tribunal in assessee’s own case [2015 (7) TMI 1217 - ITAT MUMBAI] has considered a similar issue and upheld the stand of the assessee following an earlier decision of the Tribunal in the case of Essar Teleholdings Ltd. vs. DCIT [2013 (5) TMI 116 - ITAT MUMBAI] . Secondly, the CIT(A) noticed that in this year, assessee has not earned any exempt income and, therefore, no such income was credited to the P&L Account. As a consequence, no corresponding expenditure can be identified and, thus, the provisions were unworkable. In this manner, the addition made by the Assessing Officer has been deleted. - Decided against revenue
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2016 (7) TMI 1547 - ITAT MUMBAI
Addition made u/s 68 - unproved loans taken by the assessee and also for deleting disallowance of interest thereon - HELD THAT:- In respect of these loans from the bank, the assessee had provided security to the bank, therefore considering the facts that such funds stems from the bank remains unaltered, and that an inextricable link is being established beyond doubt between the assessee company and the bank loans so received also proves the nature of such credits and the source thereof. We had also verified the confirmation of bank and the bank statement which clearly proves that these loans were directly received from the bank.
AO during the assessment proceedings issue summons to the bank asking for details of such loans and statements, in response the bank has produced all the evidence like bank statements of all the forty parties, their account opening forms, as also bank has categorically admitted that the banks had advanced loans to those forty parties, and cheques were directly issued in assessee favour, which goes to prove that the assessee had proved nature and source of the credits and therefore there is no question of addition u/s 68.
Detailed finding recorded by CIT(A) at para 3.9 are as per material on record and has not been controverted by ld. DR by bringing any positive material on record which clearly proves that amount so received was nothing but bank loan. An independent evidence was gathered by department also indicate receipt of loan directly from the banks in response to the summons issued to such banks. The findings of the CIT(A) is as per material on record, therefore do not require any interference on our part. Accordingly we confirm the action of CIT(A) deleting the addition made u/s 68 of I.T. Act.
Addition in respect of differential rate of interest on loan given by assessee - HELD THAT:- after recording the detailed finding with regard to the interest free fund owned by the assessee to the extent of ₹ 52,56,63,100/-, CIT(A) directed the AO to verify as to whether the amount paid for share application is encashed after the encashment of liquidation of shares and if the same is found to be correct then in that case the addition of ₹ 30,55,968/- should be deleted. In view of the fact that finding recorded by CIT(A) at para 6.5 has not been controverted, we do not find any infirmity in the direction so given by CIT(A) for deleting addition after proper verification. In the result ground taken by the revenue is dismissed.
Speculation loss under explanation to section 73 - HELD THAT:- Assessee had suffered loss in share business but the principal business of assessee was purchase and sale of shares. Income in any business is a positive income and loss is negative income which can be set off against positive income of the subsequent year. When the assessee is engaged in purchase and sale of shares whether explanation to section 73 is attracted with reference to the amendment w.e.f. 1.4.15, has been dealt with by the coordinate bench in case of Fiduciary Shares & Stock (P.) Ltd. vs. ACIT [2016 (5) TMI 814 - ITAT MUMBAI]
Amendment inserted in explanation to section 73 by Finance (No.2) Act,2014 w.e.f. 01.04.2015 is clarificatory in nature and would operate retrospectively from 01.04.1977 from which date the explanation to section 73 was placed on the statute. Accordingly the companies whose principal business is trading of shares, loss incurred by the said company in share trading will not be treated as speculation loss but normal business loss and, hence the same loss can be adjusted against other business income or income from any other sources of the year under consideration.
Disallowance of long term capital loss treating the sale of shares as sham transaction - HELD THAT:-Investment in these preference shares has been properly shown in Balance Sheet as at 31-3-2001 submitted with the Department while filing the return of income for the A. Y.2001-02 and the Department has accepted the same as genuine while completing the scrutiny assessment for the A. Y.2001- 02. Hence there is no reason and basis in treating such purchases as sham in the subsequent year without proving the same conclusively.
Before parting to the matter it pertinent to bring on record that apart from sale of these preference shares the assessee had also sold certain other shares during the previous year. The Id. AO has accepted Short term capital gains on sale of such shares. If the Short term capital gains are accepted on the basis of similar materials and evidences then Long term capital loss ought to have been accepted with the same logic and reasons.
Long term and Short term capital losses - HELD THAT:- As per documentary evidence placed on record we found that the assessee has discharged onus casted upon him fully and properly in respect of Long/Short term capital losses shown in the return of income. It was the Department, who asserted the transactions not belonged to F.Y. 2002-03 and therefore the initial burden is on the Department to prove such transactions belonged to subsequent year. Once the assessee gives an explanation which in the opinion of the ld. AO is not true and which could not reasonably be true, the burden is on him to prove that what he has claimed is true and whatever burden is on the Department stands shifted thereafter. In view of the above, the opinion formed by the ld. AO that the entire transactions were fabricated to book loss in A.Y. 2003-04 is not supported by any cogent basis and reason or materials is not sustainable. Furthermore the assessee has not claimed any set off of the capital losses and thence there is no reason to form an opinion that the transactions were fabricated to book loss in A.Y. 2003-04 since no benefits have arisen to the assessee out of these transactions. In fact transactions of sales were made during the previous year in the ordinary course of business and the same are supported by valid and legitimate materials and as such there is no reason and basis in taking a different view without establishing the same. The guess work and suspicion, howsoever it may be strong, have no role to play in assessment proceedings.
In view of the above we can conclude that assessee had furnished sufficient materials before the AO and as such prima facie onus was discharged to prove the genuineness of the acquisition and sale of shares. Accordingly ground taken by the assessee with regard to its claim of Long term and Short term capital losses is allowed in its favour.
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2016 (7) TMI 1546 - DELHI HIGH COURT
TP Adjustment - ITAT directing the AO to exclude following four comparables from the list of comparables i.e. Infosys Technologies Ltd; KALS Information Systems Ltd. (Segmental); Tata Elxsi Ltd. (Software Development and Services Segment); and Wipro Ltd. (IT Services Segment).
HELD THAT:- ITAT, in giving the above direction, has followed the order passed for the earlier AY i.e. 2007-08 [2015 (6) TMI 1181 - ITAT NEW DELHI] which does not appear to have been challenged by the Revenue. On the question of exclusion of the above comparables, the Court finds that given the scale of operations of the above entities, their exclusion from the list of comparables for the purposes of determination of ALP appears justified. No substantial question of law
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2016 (7) TMI 1545 - ITAT MUMBAI
Reopening of assessment u/s 147 - reopening after four years - recomputed the short-term capital gains on transfer of Bangalore unit under slumps a as per the provisions of section 50B - HELD THAT:- A cursory look at the reasons clearly reveal that there was no failure on part of the assessee to disclose truly and fully the material facts necessary for making assessment.Provisio to section 147 clearly mandates that for re-opening the assessment,after four years from the end of the relevant assessment year,there should be failure on part of the assessee to disclose material facts.
Reassessment after a period of four years from the end of the relevant assessment year requires failure on part of the assessee. Not only there should be failure,what is important that it should be highlighted that as to how the failure took place. AO has not mentioned the very basic fact that would have given him the right to re-open the completed assessment.Secondly,it is also an admitted fact that the AO had not issued notice u/s.143(2) within the period of six months.Thus,on both the counts,order passed by the AO is invalid. Order of the FAA does not suffer from any legal infirmity.Confirming his order, we decide the effective ground of appeal against the AO.
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2016 (7) TMI 1543 - ITAT MUMBAI
Rectification u/s. 154 - HELD THAT:- Tribunal had restored the matter to the file of the AO for a ‘fresh decision’. It was not a case of simple direction to the AO, wherein he has to give appeal effect only. If the Tribunal directs the Revenue Authorities to verify certain facts like arithmetic calculations or to decide a particular ground of appeal that remained to be adjudicated, it can safely be said that the time limit prescribed by the section 153(2A) would not be applicable. But, in a case like this, where the AO had to not only decide the applicability of certain sections, but also had to decide the nature of the sections, would be covered by the provisions of 153(2A) of the Act.
Tribunal had directed the AO to decide as to whether the sub-sections (2) and (3) of subsection 14A of the Act were retroactive in operation. Thus, it was a case of fresh adjudication. Therefore, in our opinion, the FAA was not justified in holding that the provisions of section 153(3)(iii) were applicable to the case under consideration. Reversing his order, we hold that the order passed by the AO was not valid and was barred by time-limit as prescribed by the provisions of section with 153(2A) of the Act. First ground of appeal, raised by the assessee, is decided in its favour. As we have held that order of the AO was not a valid order, therefore, we are not deciding the merits of the case.
As the order of the AO has been held to be an invalid order, therefore, all the three matters (Appeal by the AO, appeal filed by the assessee with regard to the order passed u/s.154 of the Act and the CO filed by the assessee) become infructuous
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2016 (7) TMI 1542 - ITAT PUNE
Maintainability of appeal - low tax effect - monetary limit to maintain appeal - HELD THAT:- We find the tax effect in the instant appeal filed by the Revenue is admittedly below ₹ 10 lakhs. Therefore, in view of Circular No.21/2015 dated 10-12-2015 of CBDT raising the monetary limit for filing of appeals by the Department before the Tribunal, which also applies to pending appeals filed by the Revenue, the appeal filed by the Revenue is not maintainable and has to be dismissed. In view of the above, the appeal filed by the Revenue is dismissed.
Levy of surcharge of 10% on the tax payable - amount worked out on the basis of the assessed undisclosed income of the Respondent assessee - HELD THAT:- Levy of surcharge in case of block assessments pertaining to the period prior to 01-06-2002 has been settled by the latest decision of CIT Vs. Vatika Township Pvt. Ltd. [2014 (9) TMI 576 - SUPREME COURT] as held in the said decision that though provision for surcharge under the Finance Acts has been in existence since 1995, the charge of surcharge with respect to block assessments, having been created for the first time by the insertion of the proviso to section 113 of the I.T. Act, 1961 by the Finance Act, 2002, it is clearly a substantive provision and is to be construed as prospective in operation. The amendment neither purports to be merely clarificatory nor is there any material to suggest that it was intended by Parliament. Accordingly, it was held that surcharge will not be applicable to block assessments pertaining to period prior to 01-06-2002. Since the block period in the instant case is admittedly for the period 01-04-1989 to 08-121999, i.e. prior to 01-06-2002, therefore, surcharge is not applicable to the facts of the present case.
Liability to pay any interest u/s.158BFA(1) - HELD THAT:- Respectfully following the decision of MR. MUKUND KRISHNAJI PURANDARE [2012 (9) TMI 1167 - ITAT PUNE] we restore the issue to the file of the AO with a direction to decide the issue of levy of interest u/s.158BFA(1) in the light of the decision of the Tribunal and in accordance with law after giving due opportunity of being heard to the assessee.
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2016 (7) TMI 1541 - ITAT COCHIN
Condonation of delay - inordinate delay of 1964 days - Registration u/s. 12AA rejected - HELD THAT:- No sufficient cause for condonation of such an inordinate delay of 1964 days and accordingly, the appeal of the assessee is not admitted and the same is rejected. Also, we do not think it fit to decide the issue on merit. Thus the appeal of the assessee is dismissed.
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2016 (7) TMI 1540 - ITAT MUMBAI
TDS u/s 195 - Nature of payment - Royalty or FTS - Disallowance u/s 40(a)(i) - HELD THAT:- Non–deduction of tax at source in respect of payment made to Equant Network Services Ltd. was subject matter of appeal before the Tribunal in assessee’s own case for assessment year 2006–07. While considering the issue relating to demand raised under section 201/201(1A) Tribunal held that the payment made to Equant Network Services Ltd. is not in the nature of royalty or fees for technical service, hence, it does not require deduction of tax at source u/s 195. The same view was again expressed by the Tribunal in assessee’s own case while deciding the issue arising out of disallowance made under section 40(a)(i) for the assessment year 2006–07. In a recent decision, the Tribunal, Delhi Bench, in Bharti Airtel Ltd. v/s ITO [2016 (3) TMI 680 - ITAT DELHI] , also expressed similar view - the payment made to Equant Network Services Ltd. not being in the nature of royalty or fees for technical service there is no requirement of deduction of tax at source, hence, disallowance made under section 40(a)(i) is not sustainable.
TP Adjustment - comparable selection - HELD THAT:- Vishal Information Technologies Ltd - It is evident from the material placed before us that personnel cost of Vishal Information Technologies Ltd. as a percentage of its turnover is only 0.95% as against the employee cost of 47.86% of the assessee. The aforesaid fact signifies that the company does not carry out the ITES activities on its own but out sources it to third party vendors. For the very same reason in various decisions of the Tribunal as well as High Court, this company has been rejected as a comparable to ITES services provider. For the aforesaid reasons, we do not find any infirmity in the order of the learned Commissioner (Appeals) in excluding this company.
Cepha Imaging Pvt. Ltd. - It is seen from the order of the learned Commissioner (Appeals), he has excluded this company as it is involved in software development and production of spares. He also noted that company is engaged in document scanning and conversion, content conversion, content indexing and extended metadata text encoding. He also noted that company bears collection risk and incurs selling and administration expenses. We have also noted that for this very reason, the Tribunal in the decisions cited by the learned Authorised Representative has found this company to be functionally different from ITES service provider, hence, excluded it as a comparable. As these decisions relied upon by the learned Authorised Representative are for the very same assessment year, respectfully following the same, we uphold the exclusion of the company as a comparable.
Payment made by the assessee to its A.E. for availing technical services - Undisputedly, the assessee is remunerated at cost plus of mark–up of 10% by the A.E. towards provisions of ITES. Therefore, whatever cost incurred by the assessee is reimbursed by the A.E. with mark–up. That being the case, as the cost has already been reimbursed by the A.E. with mark–up and has been taken as part of income of the assessee the Transfer Pricing Officer was not justified to disallow the cost without making similar adjustment in the income. In the aforesaid view of the matter, we find the conclusion drawn by the learned Commissioner (Appeals) to be appropriate and logical, hence, there is no reason to interfere with the same. Accordingly, ground raised by the Department is dismissed.
Application under rule 27 of the IT(AT) Rules pertains to allowance of risk adjustment - HELD THAT:- Assessee having been able to demonstrate that for the impugned assessment year RPT of this company fails more than 25% RPT filter applied by the Transfer Pricing Officer, we are inclined to exclude this company as a comparable. Though, the assessee had also objected to another company viz. Saffron Global Ltd., however, in the course of hearing the learned Authorised Representative fairly submitted that on exclusion of Airline Financial Support Services India Ltd. the margin of the assessee comes within the tolerance band of ± 5% requiring no further adjustment. In that view of the matter, the issue relating to comparability of Saffron Global Ltd. being of academic interest is not required to be adjudicated upon.
One more issue raised by the assessee in the application under rule 27 of the IT(AT) Rules pertains to allowance of risk adjustment. However, considering the fact that after exclusion of certain comparable companies and other relief granted to the assessee, no further adjustment is required to be made to the price charged by theassessee, this issue has become academic, hence, we do not intend to adjudicate the same. However, it is open for the assessee to raise such issue in an appropriate case in future.
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2016 (7) TMI 1539 - ITAT MUMBAI
Interest income earned on fixed deposits - correct head of income - Income from other sources or business income - HELD THAT:- From the financial statements, we notice that the assessee has borrowed loans for executing the project and the amount of loan outstanding as on 31.3.2010 stand at ₹ 824.73 crores. The loan taken from banks alone stands at ₹ 503.29 crores.
The term loans have to be repaid in fixed installments and hence there is merit in the contentions of the assessee that it was constrained to keep the funds in fixed deposits to earn interest, which will meet a portion of interest burden of bank loans.
We find merit in the contentions of the assessee that it had to keep some surplus funds in hand in order to meet the maintenance requirements of the roads. In these set of facts, we are of the view that there were business exigencies in keeping the funds in fixed deposits and hence there is merit in the contentions of the assessee that interest income earned on those fixed deposits is assessable as income from business.
In the case of Lok Holdings [2008 (1) TMI 365 - BOMBAY HIGH COURT] the assessee therein collected advances from the customers who intended to purchase the flats in the properties as developed by the assessee. Since the construction was going on, the surplus funds available with the assessee out of the advances so received was deposited in Fixed deposits.
The Hon’ble jurisdictional Bombay High Court, after considering the decision of Hon’ble Supreme Court rendered in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd [1997 (7) TMI 4 - SUPREME COURT] held that the interest income is assessable under the head Income from business. - Decided in favour of assessee.
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2016 (7) TMI 1538 - MEGHALAYA HIGH COURT
Maintainability of writ petition - petitioner seeks to question the demand notice as issued by the respondent No.5-Assistant Commissioner of Income Tax, Shillong for recovery of the dues pursuant to the Assessment Order under Section 143 (3) - HELD THAT:- Seeking to question the aforesaid demand notices, this writ petition was filed way back on 07.12.2015. This petition came up before a Division Bench of this Court on 11.12.2015, when it was ordered to be listed before another Bench. Thereafter, this petition remained pending and was listed only on 04.07.2016 before us when a request for adjournment was made on the ground that the arguing counsel for the petitioner was not available in town. Thereafter, the petition has come up today.
5. It rather surprising that although this writ petition has never been entertained and the respondents have never been called upon to answer, yet the respondents No.1 to 5 have chosen to file a detailed affidavit-in-opposition, seeking to justify the Assessment Order as also the demand notices in question.
6. Leaving the aforesaid uncalled for affidavit-in-opposition aside, we have queried the learned counsel for the petitioner that when an appeal has admittedly been filed, why the petitioner has not chosen to prosecute the remedy already taken recourse of and not sought the appropriate relief in the appellate forum in accordance with law. Only an uncertain response is forthcoming to our queries that the Commissioner of Appeals was not regularly sitting at Shillong. In this regard, it is informed by the counsel for the respondent-department that in fact, the appeal filed by the petitioner has already been posted for consideration on 10.08.2016.
Referring to directions and observations of the Hon'ble Supreme Court in ITC LTD. [1990 (8) TMI 173 - SUPREME COURT] and TODI INDS. LTD. [1998 (11) TMI 133 - SC ORDER] if applied with relevant contextual variation to the present case, could only result in leaving it open for the petitioner to make appropriate prayer before the appellate authority in an appropriate manner and in accordance with law.
Even at the cost of the repetition, we cannot help reiterating that when the petitioner had already filed an appeal against the Assessment Order in question, any prayer against the demand arising from the impugned order of the Assessing Authority, ought to have been made only before the Appellate Authority concerned. No reason to entertain this writ petition.
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2016 (7) TMI 1537 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - whether the Tribunal has committed a serious error in holding that under Section 147 of the Act, the Assessing Officer could not have reopened the assessment for the relevant year ? - HELD THAT:- As gone through the materials on record and the judgments relied upon by the Tribunal while passing the impugned orders. Learned advocate for the appellant is not in a position to dispute the decisions relied upon by the Tribunal at the time of passing the impugned orders. Therefore, applying this ratio, in our view, the Tribunal has not committed an error while passing the impugned orders. Accordingly, all these appeals are dismissed. The question posed for our consideration is answered in favour of the assessee and against the revenue and it is held that the Tribunal has not committed any error in interpreting the provision of Section 147 of the Income Tax Act, 1961
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2016 (7) TMI 1536 - ITAT BANGALORE
Declaration under VDIS - Introduction of cash in the books of accounts of the assessee on sale of sliver and diamonds which were declared under Voluntary Disclosure of Income Scheme, 1997 (VDIS) - HELD THAT:- Same quantity of silver and diamonds which were declared under VDIS was sold. Though the assessee has declared the silverware in different form under VDIS, but in sale bill the assessee has sold silver bullion and diamonds separately. The assessee has filed evidence with respect to conversion of silverware into silver bullion and diamonds.
Since the same quantity which was disclosed under VDIS was sold, I find no justification in making the addition on introduction of sale proceeds in the books of account. Once the Revenue has accepted the declaration under VDIS and accepted the tax deposited by the assessee, it should not have made a further addition on account of introduction of sale proceeds of the said jewellery in the books of account. I therefore find no merit in the addition made by the revenue authorities. Accordingly, I set aside the order of the CIT(Appeals) and delete the addition.
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