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2022 (10) TMI 1160
Penalty u/s 271(1)(c) - defective notice u/s 274 - Non striking of any of the twin charge - HELD THAT:- From the perusal of the notice dated 31/03/2013 issued u/ss 274 r/w section 271(1)(c) of the Act, we find that the AO did not strike–off any of the twin charges i.e., concealment of particulars of income or furnishing of inaccurate particulars of income.
The case of the assessee is squarely covered by the decision of Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] wherein held that the defect in notice by not striking off the irrelevant matter would vitiate the penalty proceedings. Accordingly, we reverse the findings of the lower authorities and quash the penalty order passed under section 271(1)(c) - Assessing Officer is directed to delete the penalty levied under section 271(1)(c) of the Act. Appeal by the assessee is allowed.
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2022 (10) TMI 1159
Correct head of income - Transaction of sale of land at Nagpur - Business Income Vs. Capital Gain - HELD THAT:- The assessee has used its capital to purchase the said land and what is recovered is the said capital. The transaction cannot be treated to be an adventure in the nature of trade since the transaction of sale was forced upon the assessee due to circumstances which are enlisted hereinabove. This transaction cannot be classified as an adventure in the nature of trade. It was not a transaction which was actively intended at the time of acquisition of land.
The judgments of courts relied upon Assessee is squarely applicable to the facts of the case on hand. The Ld. DR of the Assessee has not brought on record any contra decision or shown that the decisions relied upon by the Assessee and as relied upon by the CIT (A) are over ruled - DR has neither raised any additional argument other than what the AO has stated and already dealt with by the CIT (A) in an elaborate order nor stated as to why the findings and reasoning of CIT(A) is incorrect either on facts or in law.
We uphold the order of CIT(A) on this ground and hold that the Assessee has rightly offered the gain on sale of Nagpur land under the head "Capital Gain".
Long Term v. Short Term Capital gain - HELD THAT:- We are of the opinion that the date of finality of contract is the date of this AGM resolution dated 24/09/2007 passed by the Vendor Company and not the date of MOU as submitted by Assessee. Although as stated by CIT(A) in his order, the MOU grants right of termination only to the Assessee, yet a company operates through resolutions and hence, the date when the AGM resolution was passed, the contract became binding on the Vendor Company giving unfettered rights to the Assessee here to purchase the property. Hence, we direct the AO to take the said date of resolution being 24.09.2007 as the date of when the property can be said to be held by the Assessee for the purpose of section 2(42A) of the Act and compute the long term capital gain accordingly. To that extent, the order of the CIT(A) stands modified. This ground is partly allowed.
Project Completion Method Vs Percentage Completion Method - CIT(A) allowed the appeal of the Assessee upholding the validity of the Project Completion Method - HELD THAT:- Merely because percentage completion is a better method as per AO, does not make project completion method as invalid. The choice as to which accounting method to be followed is with the Assessee - AO has not rejected the books of accounts or invoked section 145 of the Act before rejecting the accounting method followed by the Assessee. The decision of Bombay High Court in the case of Aditya Builders [2015 (9) TMI 1304 - BOMBAY HIGH COURT] is squarely applicable to the facts of the case here.
More importantly, the entire exercise is tax neutral as the Assessee has offered the income of the project under project completion method in A.Y.s 2013-14 to 2017-18 as detailed which is accepted by the Revenue. Hence, we uphold the order of CIT (A) in this ground and dismiss this ground of the Revenue.
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2022 (10) TMI 1158
Exemption u/s 11 denied - return has been filed beyond due date as mandated in section 139 (1) - HELD THAT:- The undisputed facts are that the assessee filed its return of income on 23.02.2021. It is also not in dispute that the due date for this assessment year has been extended till 15.02.021. This means that there was a delay of 7 days but considering the pandemic period and the decision of the Hon’ble Supreme Court by which the Hon’ble Supreme Court has extended the period of limitation across board, thus delay of 7 days deserves to be condoned. In any case the return was filed before 31.03.2021 which is the last date for filing a belated return of income.
Language of the Circular F. No.173/193/2019 –ITA – is very clear and unambiguous in so far as the return of income filed u/s. 139 of the Act is concerned. Section 139 has several sub sections (1), (2), (3), (4), (4a), (5) - it is of the considered view that if the return is filed within the specified time limit of sub section of 139 would be eligible for the benefit given by the above mentioned CBDT circular and should avail the benefit of exemption u/s. 11 of the Act. CIT(A) erred in misinterpreting the aforementioned circular and, therefore, to that extent the order of the CIT(A) is erroneous and deserves to be set aside the grievance of the assessee is allowed.
Delay has not been condoned inspite of CBDT circular No.06/2020 dated 19.02.2020 - As per CBDT circular No.06/2020 dated 19.02.2020, we direct the CIT(A) exemption to consider the return of the assessee and allow the benefit as per the provisions of the law.Appeal of the assessee is allowed in part for statistical purpose.
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2022 (10) TMI 1157
Income deemed to accrue or arise in India - Attributing any income in India - PE in India - activity relating to sale of network equipment and terminal equipments was carried out by the Appellant in India - Whether any portion of profits, if any, accruing to Appellant from off shore sale of terminal equipments to Indian customers can be attributed to the alleged PE in India given the nature of equipment, customer profile and modalities of undertaking sales - HELD THAT:- For Assessment Years 2005-06 to 2008-09 [2014 (4) TMI 770 - ITAT DELHI], the assessee has made no submission on profit attributed of alleged PE by the Assessing Officer in those years. That aspect has been duly noted by the Tribunal while upholding the order of the AO/DRP and dismissing the appeal filed by the assessee for those years. We note that this reference by the ld. counsel for the assessee is not factually correct as ITAT in its order has nowhere mentioned that this aspect has not been argued or this aspect has not been decided by the Tribunal. In this view of the matter, since the Tribunal in assessee’s own case has rejected this ground, ground no.6 alongwith all its sub-grounds raised by the assessee is liable to be dismissed and the same is dismissed as such.
We place reliance upon the decision of the Hon’ble Apex Court in the case of Honda Siel Power Products Ltd. vs CIT [2007 (11) TMI 8 - SUPREME COURT] regarding cannon of following Co-ordinate Bench decision. In this view of the matter, other case laws referred by the Ld. counsel for the assessee are not considered applicable in the particular facts of this case. This is more so when ITAT order has not been reversed by Hon’ble jurisdictional High Court. Moreover, it is also noticed that assessee is already in appeal before the Hon’ble High Court against this order of the Tribunal.
We agree that the assessee can raise this necessary ground before the Tribunal but we are also of the opinion that judicial discipline also demands that we follow ITAT order in assessee’s own case, facts being similar. Since ITAT in its common order dated 21.03.2014 [2014 (4) TMI 770 - ITAT DELHI] has categorically held that ground no.6 by the assessee is dismissed. We follow the same and hold that following the precedent in assessee’s own case, this ground is dismissed.
Taxation of software royalty - As both parties have accepted that in the assessee’s own case for Assessment Years 2005-06 to 2008-09 [2014 (4) TMI 770 - ITAT DELHI] the Revenue’s appeal in this regard was dismissed by ITAT and that Hon’ble Delhi High Court has dismissed the appeal against this order.
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2022 (10) TMI 1156
Maintainability of petition - petition dismissed by the Appellate Authority only on the ground that the Petitioner did not avail the remedy under Section 30 of the CGST Act - Cancellation of registration of petitioner - HELD THAT:- Petitioner may file an application either by E-mail or hand delivery within 15 days from today under Section 30 of the Central Goods and Services Tax Act, 2017 before the authority/proper officer who shall construe the same as within time and dispose the application on merits expeditiously and in any case within four weeks of receiving the application.
Petition disposed off.
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2022 (10) TMI 1155
Initiation of CIRP - petition filed under Section 7 of the Insolvency & Bankruptcy Code 2016 - It is stated by the petitioner that notice in terms of Rule 4 of Adjudicating Authority, IBC Rules, 2016 has already been issued on the Corporate Debtor - HELD THAT:- Notice to the Respondent/Corporate Debtor, be issued, returnable by seven days.
This Notice to be sent by the Petitioner/Financial Creditor under NCLT Rules, Form-5.
1. By way of an email to the registered email of the Corporate Debtor available with the petitioner.
2. By way of an email to the CD email address registered with the MCA.
3. Service by way of Dasti within three days for today.
4. Proof of Service in any one of the above form filed by way of an affidavit before the next date of hearing.
List the matter for further consideration on 02.11.2022.
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2022 (10) TMI 1154
Validity of Reopening of assessment u/s 147 - mistake of noting section under section 147(b) of the Act for reassessment proceeding - non-application of mind by the AO while filling proforma in a mechanical manner - whether the mention of non-existent provision of section 147(b) of the Act is a clerical mistake which is curable u/s 292B? - HELD THAT:- AO, in the first page of reasons mentioned in column 7 that provisions of section 147(b) is applicable which is non-existent in the statute book for AY 2010-11. This apparently shows non-application of mind by the AO while filling proforma in a mechanical manner and the ld. ACIT and Ld. PCIT also approved the same in a mechanical manner.
So far as the contention of the ld. Sr. DR that this defect is curable u/s 292B of the Act is concerned, this contention was decided by the ITAT Delhi Bench in the case of Madhu Apartments India Pvt. Ltd [2021 (2) TMI 709 - ITAT DELHI] the relevant part of which has already been reproduced in the earlier part of this order since the same was referred to and included in the relevant part of the order of the ITAT in the case of Omkam Developers Ltd. (2021 (5) TMI 414 - ITAT DELHI). Therefore, we hold that the impugned reassessment proceedings and the impugned reassessment order deserves to be quashed and hold so. - Decided in favour of assessee.
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2022 (10) TMI 1153
TP Adjsutment - ALP of provision of software development services - MAM selection - TPO Rejecting the segmental profitability analysis computed by the Appellant while computing the arm's length price of Appellant's provision of software development services transactions using Transactional Net Margin Method (TNMM') - HELD THAT:- As relying assessee own case for the AY 2005-06 we decide the issue in favour of the assessee and direct the AO/TPO to consider the segmental profitability analysis computed by assessee with regard to software development services transactions using TNMM method. Ordered accordingly.
Comparable companies selected by the Appellant in the comparability analysis - Akshay Software Technologies Ltd., Sagar Soft India Ltd. and Sasken Communication Technologies Ltd. - These companies have not been included in the comparable on the reason that these companies were not appeared in TPO search matrix and documentation was available on this comparable. In our opinion, it is appropriate to remit this issue to the file of AO to consider it afresh to see whether all the filters applied by the TPO is satisfied. Accordingly, this ground is remitted back to the file of AO for fresh consideration. Accordingly, all three comparables are remitted to AO for fresh consideration on similar lines.
Turnover filter to be applied between Rs.1 crore to Rs.200 crores and if the comparable from the software development segment exceeds Rs.200 crores, the same to be excluded from the list of comparables.
Companies functinally dissimilar with that of assessee need to be deselected .
TP adjustment determined by AO in respect of interest on outstanding receivables - Tribunal consistently taking a view that if the credit period granted to the AE is more than 90 days that should be a TP adjustment towards notional interest @ LIBOR+2% - we remit this issue to the file of AO/TPO to pass order in conformity with the above direction of Tribunal as in the case of Swiss Re Global Business Solutions India Pvt. Ltd. Cited [2022 (1) TMI 1275 - ITAT BANGALORE] by allying LIBOR+2% in this case also.
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2022 (10) TMI 1152
Seeking rejection of the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 - HELD THAT:- In the facts and circumstances of the present case, no interference of this Court is called for in exercise of powers under Article 136 of the Constitution of India. The Special Leave Petitions stand dismissed.
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2022 (10) TMI 1151
Additional depreciation u/s 32(1)(iia) - assessee’s claim for 50% initial depreciation u/s 32(1)(iia) in respect of new plant and machinery purchased and installed in the preceding year but put to use for a period of less than 180 days in that year - HELD THAT:- Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee’s own case for preceding assessment year i.e. for AY 2010-11 [2017 (9) TMI 962 - ITAT KOLKATA] and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A). Thus, common ground no. 1 for AY 2011-12 & AY 2012-13 raised by the Revenue is dismissed.
Deduction u/s 80IA in respect of thermal power plants for generating electricity - electricity generated by the two power plants was transferred to the assessee’s cement manufacturing units. Further, electricity was also sold to independent third parties during the year under reference - HELD THAT:- As decided in assessee’s own case for AY 2010-11 [2017 (9) TMI 962 - ITAT KOLKATA] in the issue to exclude electricity duty and cess, we find that the same has been addressed by the Hon’ble Gujarat High court in the case of CIT vs Shah Alloys Ltd. [2011 (11) TMI 762 - GUJARAT HIGH COURT] which approved the view taken by the Ahmedabad Tribunal in [2010 (1) TMI 1175 - ITAT AHMEDABAD], that the price charged by the Electricity Board inclusive of the amount of Electricity Duty represented the market value even though the assessee was not required to charge electricity duty. In view of our aforesaid findings, we direct the Id AO to accordingly modify the earlier years profits also which were modified by him, in the same lines as directed for Asst Years 2008-09 and 2009-10 herein. Accordingly, the grounds raised by the assessee in this regard deserve to be allowed and that of the revenue deserve to be dismissed.
Claim of compensation paid for obtaining limestone connected to mining activity - Revenue or capital receipt - HELD THAT:- As decided in assessee own case [2017 (9) TMI 962 - ITAT KOLKATA] for AY 2010-11 assessee is required to pay compensation as determined by the local authority/ court to the persons whose rights are infringed because of the mining activity. We also observe that Ld. CIT(A) has properly analysed the facts of the present case and distinguished the facts decided by the Hon’ble Apex Court in the case of Enterprising Enterprises vs. DCIT [2006 (12) TMI 138 - SC ORDER] and then only had come to a conclusion that the compensation was paid for the damaged caused on the infringement of right of the land owner. He has also analysed that the payments are progressively distributed as they work, as they proceed year by year, going on with their work and the payments are in the nature of incidental expenditure to conduct the mine and the business operations. He, therefore, held that the payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature. Decided against revenue.
Nature of receipt - treating of industrial promotion assistance from the State Government as capital receipt - HELD THAT:- The identical question involving the 2000 Scheme came up for consideration recently before the Hon’ble Calcutta High Court in PCIT vs. Budge Budge Refineries Limited [2022 (2) TMI 533 - CALCUTTA HIGH COURT] and the revenue’s appeal against the order of the Hon’ble Tribunal was dismissed - IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed.
Claim of interest subsidy from the State Government as a capital receipt - HELD THAT:- Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee’s own case for preceding assessment year i.e. AY 2010-11 [2017 (9) TMI 962 - ITAT KOLKATA] and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of ld. CIT(A) to hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed.
Disallowance u/s 14A of the Act read with Rule 8D of the Rules - HELD THAT:- As decided in assessee own case AY 2010-11 direct the AO to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D(2)(iii) of the Rules.
MAT Computation - whether subsidy/incentives need to be excluded from the book profit u/s 115JB? - HELD THAT:- Since the issue stands squarely covered by the Hon'ble Jurisdictional High Court in the case of Ankit Metal and Power Limited [2019 (7) TMI 878 - CALCUTTA HIGH COURT] we fail to find any infirmity in the finding of ld. CIT(A) holding that the subsidy/incentive received by the assessee which have been held to be capital receipts are to be excluded from the book profit u/s 115JB of the Act.
Upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules - HELD THAT:- As relying on Gokaldas Images’ case [2020 (11) TMI 345 - KARNATAKA HIGH COURT] no infirmity in the finding of ld. CIT(A) in deleting upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules.
Education cess being claimed as an expenditure u/s 37(1) - HELD THAT:- We fail to find any merit in this ground raised by the assessee, since the claim of deduction in the nature of education cess has been decided against the assessee by this Tribunal in the case of M/s. Kanoria Chemicals & Industries Ltd. [2021 (10) TMI 1153 - ITAT KOLKATA] and also in light of the retrospective amendment made by the Finance Act, 2022 inserting Explanation 3 to Section 40 of the Act as per which education cess cannot be claimed as expenditure. Therefore, common ground no. 1 raised by the assessee for AY 2011-12 & AY 2012-13 are dismissed.
Deduction of provision made for leave encashment and the allowability of the deduction u/s 43B(f) of the Act - HELD THAT:- As respectfully following the finding of the Tribunal applying the ratios laid down by Hon'ble Supreme Court of India in the case of Exide Industries Limited [2020 (4) TMI 792 - SUPREME COURT] are of the considered view that the issue needs to be remitted back to the file of ld. AO who shall allow the claim of leave encashment actually paid by the assessee during the AY 2011-12 & AY 2012-13.
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2022 (10) TMI 1150
Income from house property - ALV of the flats held as stock in trade - notional income as income from house properties in respect of unsold units held by the assessee as its stock in trade - HELD THAT:- When specific provision has been brought with the effect from 01.04.2018 which cannot be applied retrospectively, then in our humble opinion it cannot be imputed that ALV of the flats held as stock in trade should be taxed on notional basis prior to AY 2018-19. Without any legislative intent or specific provision under the Act, such notional or deeming income should not be taxed as cardinal principle, because assessee is not aware that any hypothetical income is to be shown when he has not received any real or actual income. In our view of Hon‟ble Delhi High Court East India Housing & Land Development Trust [1960 (11) TMI 7 - SUPREME COURT] is too harsh an interpretation.
Since, even prior to the amendment, there is one High Court judgment of Hon‟ble Delhi High Court which is directly on this issue and against the Assessee, therefore same needs to be followed. Accordingly, we hold that Assessing Officer is correct in computing ALV on notional rent on unsold stock, but with following riders and directions to the AO as discussed herein after.
Firstly, the flats or units on which assessee has received any advance in this year or in the earlier years but has not delivered or given final possession of the said flat/unit to the buyer, then no notional rent can be charged as it tantamount to sale. Secondly, if unit of flat is shown as work-in-progress in the books then also no notional rent can be computed. And Lastly, Ld. Assessing Officer is not justified in making estimate of 8.5% of investment as ALV which is unsustainable in view of the decision of Hon‟ble Bombay High Court in the case CIT Vs. Tip top Typography [2014 (8) TMI 356 - BOMBAY HIGH COURT] wherein, it has been held that rent should be computed at Municipal ratable value. We accordingly direct the AO to ascertain the Municipal rateable value for computing the notional rent. This is also been held by ITAT Mumbai Bench in the case of Dimple Enterprise [2021 (6) TMI 132 - ITAT MUMBAI]
AO is directed to compute accordingly as per direction given above. Accordingly, ground No.1 of the revenue is partly allowed for statistical purposes.
Disallowance u/s 14A - Admittedly the AO has made disallowance u/s 14A much beyond the exempt claimed by the Assessee - Assessee has claimed exempt income and has suo motto disallowed the entire exempt income - CIT (A) has restricted the disallowance to the extent of exempt of income after following the judgment of M/s. Nirved Traders Pvt.Ltd. [2019 (4) TMI 1738 - BOMBAY HIGH COURT] - HELD THAT:- CIT (A) is justified in restricting the disallowance to the extent of exempt of income. Accordingly, the order of the CIT (A) is confirmed and ground no.2 of the revenue is dismissed.
MAT Computation - Disallowance u/s 14A, r.w.s 115JB is also dismissed as already we have deleted the disallowance u/s 14A.
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2022 (10) TMI 1149
TP Adjustment - applicability of principle laid down in the Advance Pricing Agreement[APA] for benchmarking the international transactions - HELD THAT:- When in the APA entered into between the tax payer and the CBDT though for the subsequent years, application of most appropriate transfer pricing method and arms length price of these transactions have already been agreed upon between the tax payer and CBDT and there is no change in the FAR and nature of the international transactions entered into during the year under consideration vis-à vis subsequent years, principle laid down in the APA for benchmarking the international transactions in question shall have a guidance value.
Moreover, in these days it is endeavor of the Union of India to stop multiplicity of the litigation and this case falls in the category of cases where litigation can be minimized. Consequently, we are of the considered view that APA already entered into between the tax payer and CBDT has the persuasive value so the matter is remitted back to the TPO to decide afresh in the light of the APA already entered into by providing opportunity of being heard to the tax payer. So aforesaid grounds are determined in favour of the assessee for statistical purposes.
Nature of expenses - computer software expenses - revenue or capital expenditure - HELD THAT:- This issue has already been decided in assessee’s own case by the co-ordinate Bench of the Tribunal which has since been confirmed by the Hon’ble Bombay High Court [2020 (7) TMI 648 - BOMBAY HIGH COURT] by treating the software expenses as revenue expenditure. The AO is directed to treat the computer software expenses claimed by the assessee as revenue expenses.
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2022 (10) TMI 1148
Appellate Jurisdiction - Provisional order of attachment - jurisdictional error - HELD THAT:- Had there been no Presiding Officer for the Appellate Tribunal, we would have entertained this petition. Now that a Presiding Officer has been appointed to the Appellate Tribunal, the petitioners can approach the said Tribunal and urge all these points. In fact, under Section 42 of PML Act, a further appeal from the order of the Appellate Tribunal has been provided to the High Court, which is entertained as a Civil Miscellaneous Appeal (CMA).
We do not want to arrogate to ourselves the powers of the Appellate Tribunal by entertaining this writ petition. Hence, this petition is dismissed with liberty to the petitioners to approach the Appellate Tribunal constituted under Section 26 of PML Act. No costs.
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2022 (10) TMI 1147
Deduction u/s 80P(2)(d) - claim denied as assessee had not filed return of income within due date as specified u/s. 139(1) of the Act - HELD THAT:- A bare perusal of the un-amended provision would show that there was no restriction for claiming deduction u/s 80P of the Act even if the return was filed beyond due date as specified u/s. 139(1) - The restriction was applicable only to the specified sections mentioned in section 80AC of the Act. The scope of section was enlarged by the Finance Act 2018 to include all deductions admissible under Chapter-VIA under the heading “C-Deduction in respect of certain incomes” The substituted section w.e.f. 01/04/2018 would be applicable to assessment year 2018-19 and in respect of deductions claimed u/s. 80P of the Act, as well. Since, in the impugned assessment year substituted provisions of section 80AC would be applicable, the CIT(A) has rightly rejected the appeal of assessee.
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2022 (10) TMI 1146
Addition u/s 68 - unexplained cash credit received by the assessee by issuing equity shares at premium - summon issued u/s 131 of the Act to the director of the assessee company remained uncomplied with whereas the AO has not pointed any defect or deficiency in the evidences/details produced qua the said investments by assesse as well as by the investing companies - HELD THAT:- The case of the assessee is squarely covered by the decision PCIT vs. Ambition Agencies Pvt. Ltd. [2021 (11) TMI 750 - CALCUTTA HIGH COURT] wherein the Hon’ble Court has held that where thein the appellate proceedings, the Ld. CIT(A) after calling remand report from the AO on the issue of share application had allowed the appeal of the assessee after following the observations of the AO in the remand report stating therein that transactions of the share holders were duly cross-verified.
Hon’ble Court upheld the view taken by the Tribunal where Tribunal upheld the order passed by the Ld. CIT(A) deleting the addition on the basis of remand report nonetheless the addition was made in the original assessment order by the AO for the want of information/details u/s 68 of the Act.
Similarly the case of assessee find support from the decision of Hon’ble Supreme Court in the case of PCIT vs. Paradise Inland Shipping Pvt. Ltd. [2018 (7) TMI 1105 - SC ORDER] as upheld the order of Hon’ble High Court wherein the Hon’ble High Court has taken a view that the assessee has proved genuineness of the transactions after the assessee filed voluminous documents from the public offices and also brought on records the assessment orders passed in the case of said companies.
We uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue.
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2022 (10) TMI 1145
Validity of order u/s 201 - HELD THAT:- As submitted notice under Section 201 was issued much prior to the ITAT decided against the Department, which was for the AY 2014-2015 [2018 (6) TMI 1107 - ITAT MUMBAI]. It is submitted that the appeal against the final decision of the ITAT for AY 2014-2015 is pending before the High Court. It is submitted that even the judgment for AY 2010-2011 which is followed subsequently while deciding the dispute for AY 2014-2015 is also pending before this Court. It is submitted that even in a case the Department succeeds before the High Court in an appeal for AY 2014-2015, in that case also subsequently there may be dispute with respect to limitation. It is submitted that therefore, the proper course for the High Court would have been to club the writ petition(s) to be heard with the pending appeal against the final decision of the ITAT for AY 2014-2015 so that the dispute with respect to limitation may not arise subsequently.
Issue notice for the aforesaid purpose, making it returnable on 25.11.2022. Dasti, in addition, is also permitted.
The respondent be served within a period of one week from today.
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2022 (10) TMI 1144
TP adjustment - determination on arm’s length price of expenditure incurred by the assessee for advertisement, marketing and promotion (AMP) of the brand of Associated Enterprises (AEs) - TPO benchmark the transaction by applying Bright Line Test (BLT) method and proposed an adjustment - whether the AMP expenditure incurred by the assessee can be regarded as an international transaction? - HELD THAT:- Undisputedly, while deciding the issue, learned DRP has relied upon a decision of the ITAT, Special Bench in case of LG Electronics India Pvt. Ltd. [2013 (6) TMI 217 - ITAT DELHI] However, the ratio laid down in case of LG Electronics India Pvt. Ltd. (supra) has been disapproved by the Hon’ble Jurisdictional High Court, hence, no more a good law.
Be that as it may, it is observed, identical issue came up for consideration before us in assessee’s own case for the assessment year 2008-09. While deciding the issue in[2019 (12) TMI 1483 - ITAT DELHI] the Coordinate Bench has held that the AMP expenses incurred by the assessee does not fall within the definition of international transaction. The Bench further disapproved the determination of ALP by applying BLT method. Ultimately, the adjustment made on account of AMP expenses was deleted. Identical view was expressed by the Tribunal while deciding the issue in assessment year 2010-11[2020 (8) TMI 130 - ITAT DELHI] - thus we delete the addition made by the Assessing Officer. These grounds are allowed.
TP adjustment made to the arm’s length price of purchase of finished goods for distribution in India - Selection of MAM - HELD THAT:- Imported goods are not only utilized for resale but were also leased out to customers to be installed at their premises on rental basis. Therefore, in case, there are two streams of revenue being generated by the assessee in respect of imported goods, one resale and second leasing, the issue which requires to be considered is, whether in such a scenario RPM can be applied as the most appropriate method to determine the ALP. In case, RPM is applied, what adjustments are required to be made. On a careful perusal of the order passed by the TPO and learned DRP, it is observed that assessee’s claim regarding two streams of revenue earned in relation to goods imported from the AE for resale have not been considered. We have further observed from the materials placed before us, though, the assessee is following the same business model as regards the purchase of office equipments from the AE in other assessment years. However, the TPO has benchmarked the transaction by applying TNMM. This is the factual position we noted on going through the assessment orders passed by the TPO in assessment years 2008-09, 2010-11 and 2011-12. In case, the facts are identical in the impugned assessment year, the departmental authorities must justify their action of taking a different approach in the impugned assessment year. However, no proper reasoning has been recorded by the departmental authorities while making a departure from the view taken in the other assessment years.
As in assessment year 2010-11, though, learned DRP has held that RPM is the most appropriate method to benchmark the transaction, however, they directed the TPO to take into the account the total expenses as well as the total revenue in the distribution segment while determining the ALP of the international transaction
Assessee as submitted before us that if DRP’s direction in assessment year 2010-11 is followed in the impugned assessment year, there would be no adjustment. Since, the aforesaid aspects have not been considered by the departmental authorities and needs to be considered qua the facts available on record, in our view, it has to be examined at the level of AO/TPO. Accordingly, we are inclined to restore this issue to the Assessing Officer for fresh adjudication, keeping in view the discussions made hereinabove.
Disallowance of depreciation on capital assets converted into stock in trade - HELD THAT:- We are convinced that the issue is squarely covered by the decisions of the Coordinate Bench in assessee’s own case in assessment year 2007-08[2015 (3) TMI 932 - ITAT DELHI] confirmed by HC [2016 (1) TMI 945 - DELHI HIGH COURT] - Thus we hold that assessee’s claim of depreciation is allowable.
Short grant of TDS credit - HELD THAT:- Having heard the parties, we direct the Assessing Officer to verify the relevant facts and allow TDS credit in accordance with law.
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2022 (10) TMI 1143
Liquidation of Corporate Debtor - it is contended that the decision of the CoC has been arbitrarily taken - It is submitted that the CoC never wanted to continue with the CIRP and after having been constituted, after admission of Section 10 application assets, were never handed over to the Resolution Professional, hence, Resolution Professional could not draw Information Memorandum and issue EOI - HELD THAT:- The Explanation under Section 33 (2) has been inserted by Act of 26 of 2019 contains the legislative declaration and intention. The CoC in the Legislative Scheme has been empowered to take decision to liquidate the Corporate Debtor, any time after its constitution and before confirmation of the resolution plan. The power given to the CoC to take decision for liquidation is very wide power which can be exercised immediately after constitution of the CoC. The reasons which has been given in Agenda Item 1, it is made clear by the CoC that the Corporate Debtor is not functioning for last 19 years and all machinery has become scrap, even the building is in dilapidated condition and the CIRP will involve huge costs.
We are not convinced with the submission of learned counsel for the Appellant that the CoC’s decision is an arbitrary decision. CoC is empowered to take decision under the statutory scheme and when in the present case the decision of the CoC for liquidation has been approved by the Adjudicating Authority, we see not good ground to interfere at the instance of the Appellant.
The Appeal is dismissed.
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2022 (10) TMI 1142
Bogus LTCG - exemption u/s 10(38) - long-term capital gain on sale of shares of Kailash Auto Finance Limited. AO disbelieved this transaction and estimated a commission expenditure for arranging this transaction - HELD THAT:- We find that there are large number of assessees, who have transacted with equity shares of Kailash Auto Finance Limited and claimed exemption under section 10(38) of the Income Tax Act. Apart from this scrip, there are other scrips also in Kolkata, who were found to be penny stock and transactions on papers only.
The Hon’ble Calcutta High Court has recently considered this aspect in its judgment in the case of Swati Bajaj & Others [2022 (6) TMI 670 - CALCUTTA HIGH COURT]. In a number of appeals, we have also rejected the claim of the assessees, the assessee transacted the shares of M/s. Kailash Auto Finance Limtied. All these transactions have been held as bogus. Therefore, relying upon the decision of the Hon’ble Calcutta High Court coupled with various orders of the ITAT, we are of the view that Revenue Authorities have rightly rejected the claim of the assessee and made the additions. We do not find any merit in this appeal. Appeal of the assessee is dismissed.
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2022 (10) TMI 1141
Nature of expenses - lease right payment - Revenue or capital expenditure - HELD THAT:- CIT(A) clearly shows that the ld. CIT(A) has recorded the facts that the lease was only for a period of eight months and further renewal of 11 months subject to satisfactory performance. It is noticed that the ld. CIT(A) has taken on record that the lease was for the period from 20.07.2007 to 31.03.2008 and further renewal of 11 months subject to satisfactory performance and that the lease was cancelled on 09.08.2011 and the assessee was in Writ before the Hon’ble Jurisdictional High Court. This being so, we are of the view that the CIT(A) is right in holding that the lease right payment does not give any enduring benefit to the assessee and it is a revenue expenditure.
Addition representing the crushing activity which the assessee has not offered in its return - HELD THAT:- A perusal of the order of the ld. CIT(A) clearly shows that he has called for the said seized document i.e. BMD-10 and the same was not produced and in the remand report the AO had categorically admitted that the seized document was not available. This being so, in absence of corroborating evidence being the seized material, we are of the view that the ld. CIT(A) was right in deleting the addition made by the AO in respect of crushing activity.
Disallowance of 10% of the export expenses less custom duty - HELD THAT:- A perusal of the order of the ld. CIT(A), it is noticed that the ld. CIT(A) when disallowing 10% out of the administrative and other expenses, has directed to reduce the director’s remuneration. In fact, this is a right method insofar as the director’s remuneration has already been taxed in the hands of the directors. So further taxing the same in the hands of the assessee would actually be a miscarriage of justice. Further in the interest of justice, we are of the view that the disallowance at 10% as made by the ld. CIT(A) is excessive and the same is reduced to 5%.
Export expenses - HELD THAT:- We are of the view that the ld. CIT(A) is right in directing the exclusion of the export duty insofar as the same is a payment made to the Government. However, it is noticed that the ld.CIT(A) has directed for disallowance of 10% out of export expenses and in the interest of justice the same is also reduced to 5%.
Assessee appeal is partly allowed.
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