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2023 (11) TMI 1258 - ITAT VARANASI
Addition u/s 40A(3) - assessee has made major purchases from a person in cash exceeding threshold limit of Rs. 20,000/- - HELD THAT:- When the assessee is making part of purchase consideration by way of cash (as freight payments made on behalf of suppliers), then the provisions of sec. 40A(3) would get attracted. We notice that the Ld CIT(A) has held that the provisions of sec. 40A(3) would be attracted only if the individual payment made by way of cash exceeds Rs. 20,000/-. In our view, the CIT(A) is correct on this aspect.
These payments have been debited to the account of suppliers and the same would mean that the part of purchase consideration of jute products has been paid by way of cash. Before Ld CIT(A), the assessee has contended that the individual payments made to each of the lorry owners on a particular day may not exceed Rs. 20,000/-. However, we notice that the assessee has not substantiated the said claim with any evidence. Further, the assessee seems to have debited the account of the supplier with amounts exceeding Rs. 20,000/-. Hence the above said argument of the assessee, in our view, is liable to be rejected.
With regard to the amounts aggregating to Rs. 9,95,800/-, we notice that the ld CIT(A) has given his finding that each of the payments included in the above said amount was less than the threshold limit of Rs. 20,000/-. The revenue did not bring any material to show that the above said finding given by Ld CIT(A) was not correct.
Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the addition made u/s 40A(3) of the Act to the extent of Rs. 12,06,600/- and granting relief of balance amount of Rs. 9,95,800/-.
Addition made u/s 14A - AO took the view that the assessee has used the borrowed funds for making investments and hence a portion of interest expenditure should be disallowed - AO made his own computation and worked out interest disallowance - assessee submitted that the own funds available with the assessee have exceeded the value of investments and hence no disallowance out of interest expenditure is called for - HELD THAT:- We notice that the assessee has made investment at the fag end of year and it is also submitted that the assessee has not earned any exempt income - own funds available with the assessee was mentioned as Rs. 8.62 crores, while the investment amount was only Rs. 2.00 crores, i.e., lesser than the amount of own funds. It is well settled proposition now that the disallowance u/s 14A is not called for when there is no exempt income. It is also well settled proposition that the disallowance out of interest expenditure is not called for, when the own funds available with the assessee exceeds the value of investments, because the presumption in that case is that the investments have been made out of own funds only. Accordingly, disallowance made by the AO u/s 14A is not called for and accordingly, the same is liable to be deleted.- Decided in favour of assesse.
Addition u/s 68 - trade creditors treated as as unexplained cash credit - assessee has introduced funds in the guise of purchase of jute, whenever there are fund requirements - HELD THAT:- Since the assessing officer, in the instant case, has assessed trade creditors as unexplained cash credit u/s 68 of the Act, while accepting the purchases, the said addition is liable to the deleted in accordance with the decisions cited above. Accordingly, we are of the view that the Ld CIT(A) was justified in deleting this addition and accordingly uphold the same.
Nature of expenses - Repairs & Maintenance expenses - assessee had incurred expenditure on purchase of iron rods - revenue or capital expenditure - HELD THAT:- In this case, no finding of fact is given by the AO that any new asset has come into existence. The AO has treated the expenditure as capital in nature, since the expenditure consisted of purchase of materials like iron rod etc. The submission of the assessee is that they have been used to strengthen the existing structures only and this submission has not been proved to be false. Under these set of facts, we are of the view that the AO has not shown that the impugned expenditure has brought any new asset in existence. Accordingly, we are of the view that the ld CIT(A) was justified in deleting this disallowance and accordingly uphold his decision rendered on this issue.
Addition of unexplained investment in factory building - assessee has constructed a factory shed - AO referred the matter of valuation to Departmental Valuation Officer (DVO), who estimated the cost of construction of factory shed and difference is added as unexplained investment - HELD THAT:- Since the AO has referred the matter of valuation to the DVO without rejecting the books of accounts, the said reference is not valid.
Accordingly, the impugned addition is liable to be deleted. Further, it is noticed that the addition has been made on the basis of estimate given by DVO. The Ld A.R submitted that the said report of DVO was not confronted with the assessee by the AO. It was also submitted that the deficiencies in the valuation report given by the Registered valuer, which was submitted by the assessee, were not also brought on record. It is well settled proposition of law that the AO cannot place reliance on the documents, which were not confronted with the assessee. AO could not have relied upon the report of DVO for making impugned addition - Decided in favour of assessee.
Disallowance of loss from Syntax Division - AO held that the onus to prove expenses has not been discharged - HELD THAT:- There is no allegation that the auditors have not accepted the accounts of the assessee, which would mean that the expenses and revenue booked by the assessee have been audited and accepted by the auditors. As pointed out by Ld CIT(A), the AO has also accepted the purchases and sales figures reported by the assessee. Even though the AO has reported in the remand report that he has rejected the books of accounts on account of deficiencies, yet, on a perusal of the assessment order, we do not find any such observation made by the AO. Accordingly, we do not find any merit in the action of the AO in disallowing the loss declared in the Syntax division. Accordingly, we are of the view that the Ld CIT(A) was justified in directing the AO to allow the set off loss against other business income of the assessee. Accordingly, we uphold the decision rendered by Ld CIT(A) on this issue.
Addition made u/s 40A(3) - expenses exceeding threshold limit of Rs. 20,000/- or not? - HELD THAT:- As noticed that the relief granted by Ld CIT(A) was in respect of payments made less than the threshold limit of Rs. 20,000/-. The revenue could not furnish any evidence to show that the said decision of Ld CIT(A) was not correct. Accordingly, we uphold the relief granted by Ld CIT(A) in respect of addition made u/s 40A(3) of the Act.
Intimation issued u/s 143(1) is amounted to assessment and hence the subsequent assessment order is illegal as being void ab-initio - HELD THAT:- This legal contention is liable to be rejected, as it is settled principle that the intimation is not considered as an assessment.
Selection of return of income of the assessee for scrutiny under Computer Aided Scrutiny Scheme (CASS) is bad in law, since it is contrary to the provisions of sec. 143(2)(ii) - As before us, the assessee could not substantiate the above said legal contention. Accordingly, we reject this ground.
Addition made u/s 40A(3) - individual payments exceeding Rs. 20,000/- - HELD THAT:- There was no laxity on the part of the assessee in substantiating its explanations that the individual payments made were less than Rs. 20,000/-. Further, the assessee has furnished relevant details and the same has also been extracted by Ld /CIT(A) in his order. A perusal of the same would show that the payments mentioned by the AO are the aggregate amounts and they have been paid to several persons, meaning thereby, the individual payments did not exceed Rs. 20,000/-. In view of the clear finding given by Ld CIT(A), we are of the view that the decision rendered by Ld CIT(A) on this issue does not call for any interference. Accordingly, we uphold the same.
Unverified consignment sales expenses - As assessee did not furnish bills/vouchers and also the details of TDS deducted, the AO disallowed 10% of expenses - HELD THAT:- We have noticed earlier that the AO did not add this amount while computing total income, even though he has discussed about this disallowance in the body of the order. It was also not shown to us that the AO had rectified the assessment order by making this addition. Nevertheless, it is the submission of the assessee that the expenses incurred by consignor are deducted by him from consignment sales and the said consignment notes constitute evidences for expenses. However, it is the case of the AO that the assessee did not produce relevant documents to substantiate the claim of expenses.
Assessee also did not furnish the details of TDS liability on such payments. If the assessee had not furnished relevant details that were called for by the AO, in our view, there is laxity on the part of the assessee and hence the AO cannot be found fault with in making adhoc addition. Accordingly, we do not agree with the view expressed by Ld CIT(A) on this issue.
Addition of undisclosed profit - AO noticed that there has been decline in the net profit rate from 1.90% in AY 2012-13 to (-)1.12% in the current year, i.e., AY 2014-15 - CIT(A) has held that the rejection of book results and consequent estimation of profit is not called for, thus deleted the addition made by the AO towards extra profit - HELD THAT:- We are of the view that the first appellate authority has passed a reasoned order dealing with the points raised by the AO. Further, the Ld CIT(A) has also demonstrated that the rejection of book results is not called for in the facts and circumstances of the case. Before us, the revenue could not contradict various findings given by Ld CIT(A). Accordingly, we do not find any reason to interfere with his order passed on this issue. Accordingly, we uphold the same.
Disallowance of employees’ contribution to PF/ESI madeu/s 36(1)(va) - as relying upon General Clauses Act, the Ld A.R submitted that the payments should be considered to have been paid within due dates and hence no addition u/s 36(1)(va) is called for - HELD THAT:- We find merit in the contentions of Ld A.R. We notice that the Ld CIT(A) has not applied the provisions of General clauses Act for determining the due date, where it is stated that the due date falls on a holiday, then the due date shall be extended to next working day. Since the claim of the assessee relates to factual aspects, we are of the view that the same requires verification at the end of AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO with the direction to examine the claim of the assessee by applying provisions of General Clauses Act. The assessee should be provided with adequate opportunity of being heard.
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2023 (11) TMI 1257 - ITAT MUMBAI
Revision u/s 263 - allowability of CSR expenditure u/s. 80G - HELD THAT:- Explanation 2 to section 37(1) of the Act says that any expenditure relatable to the discharge of CSR is not business expenditure and cannot be allowed as such. On this aspect, there is no contradiction of the fact submitted by the assessee that in compliance with this requirement, the assessee does not claim any deduction of such amount spent as CSR under any of the provisions between sections 30 and 36 of the Act, and suo moto disallowed the same by adding it back to the profit and loss account.
It is only thereafter the business income of the assessee is computed in accordance with the principles laid down for computation of the profits and gains of business or profession in sections 28 to 44DB of the Act. By this, the assessee seeks compliance with Explanation 2 of section 37 of the Act and, therefore, the revenue shall not have any grievance. Whether or not the assessee suo moto disallowed the amount spend towards the CSR while computing the business income is a verifiable fact.
After computing the business income, while computing the total income of the assessee, the assessee is invoking the benefit under Chapter VIA by claiming deduction of the sums u/s 80G of the Act. According to the revenue, when once such sum went to satisfy the requirement of section 135 of the Companies Act, the benefit gets exhausted and such an amount is no more available for the purpose of claiming deduction under section 80G of the Act. There is no express provision to support the contention of Revenue.
On the other hand, section 80G (2) (iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch Bharath Kosh and Clean Ganga Fund spent as a part of CSR are not qualified for deduction under section 80G of the Act. Out of so many entries under section 80G(2) of the Act, only donations in respect of two entries are restricted if such payments were towards the discharge of the CSR. The Legislature could have put a similar embargo in respect of the other entries also, but such a restriction is conspicuously absent for other entries.
The irresistible conclusion that would flow from it is that it is not the legislative intention to bar the payments covered by section 80G(2) of the Act which were made pursuant to the CSR, and other than covered by section 80G(2)(iiihk) and (iiihl) of the Act. As stated above, clue can be had from the restrictions by way of section 80G (2) (iiihk) and (iiihl) of the Act. Explanation 2 to section 37(1) of the Act which denies deduction for CSR expenses by way of business expenditure is applicable only to extent of computing 'business income' under Chapter IV-D of the Act and; it could not be extended or imported to CSR contributions which was otherwise eligible for deduction under Chapter VI-A of the Act.
Where the deduction under section 80G of the Act is also disallowed, since CSR qualifying donations are not 'voluntary contributions', it will be a double jeopardy in the case of assessee. Assessee cannot be denied the benefit of claim under Chapter VIA of the Act, which is considered for computing 'Total Taxable Income".
If assessee is denied this benefit, merely because such payment forms part of CSR, it would lead to double disallowance, which is not the intention of Legislature at all. Legislature on this matter simply dealing with the computation of total income under chapter IVD pertaining to “Income under the head Business and Profession” and not at all dealt with the eligibility of assessee to claim deduction u/s. 80G of the Act, falling in chapter VIA of the Act. It is further observed that genuineness of the transactions and identity of the donees are also not under challenge. All the payments were made through proper banking channel and appropriate donation receipts were also produced before the lower authorities and before us also.
Thus there is no bar for the assessee to claim benefit u/s. 80G of the Act, falling in Chapter VIA of the Act, we found observations of the Ld. PCIT as untenable in law, in the result grounds raised by the assessee are allowed and order of Ld. PCIT passed u/s. 263 of the Act is setaside. Appeal of the assessee is allowed.
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2023 (11) TMI 1256 - PATNA HIGH COURT
Appeal considered ex parte - Petitioner’s lawyer was unable to appear - it is categorically submitted by Income Tax Department that even according to the petitioner, there are appeals filed from the order impugned in the writ petition - HELD THAT:- We do not think that Article 226 of the Constitution can be invoked to consider Annexure-1 order. The appellant would be entitled to seek for an interim order in the appeal before the Tribunal or an early disposal of the appeal itself. The appellant would be granted a month’s time to make the request before the learned Tribunal.
We request the Tribunal to either dispose of the appeal expeditiously or consider the interim order sought for by the assessee, if the appeal cannot be disposed of within a time frame.
The coercive proceeding against the assessee shall stand stayed for a period of two months from today and then it shall depend upon the orders passed by the Tribunal.
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2023 (11) TMI 1255 - RAJASTHAN HIGH COURT
Validity of reopening of assessment - period of limitation - date of notice or date of dispatch which is required to be looked into - Reopening after a period of 7 years i.e. on the last date of 7th year has reopened the case u/s. 147 by issuing notice u/s 148 - appellant argued that an issue of limitation was specifically raised as a ground before the Income Tax Appellate Tribunal but the Tribunal did not examine this issue and decided the case on its merits
HELD THAT:- From the record pleadings made by the appellant, it does not appear that the issue of limitation has been raised on a factual foundation that though notice u/s 148 bears the date 31.03.2017, it was not issued on that date but it was put in the course of dispatch after that date. Had there been a factual assertion made either before the Assessing Authority, or the Income Tax Appellate Tribunal or even before this Court, that issue would have been considered.
In the absence of there being any factual foundation, the argument on issue of the limitation, does not have any substance. True it is that the Income Tax Appellate Tribunal has not recorded any finding on this, only on that ground, we are not inclined to admit this appeal as the substantial question of law would arise for consideration only on the basis of factual foundation, which is not there. Income tax appeal stands dismissed.
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2023 (11) TMI 1254 - SC ORDER
Assessment u/s 153A - Valid Approval for assessment granted or not? - mandation of Approving Authority application of mind for giving approval u/s 153D - as decided by HC [2023 (3) TMI 785 - ORISSA HIGH COURT] ITAT has correctly set out the legal position while holding that the requirement of prior approval of the superior officer before an order of assessment or reassessment is passed pursuant to a search operation is a mandatory requirement of Section 153D and that such approval is not meant to be given mechanically. The Court also concurs with the finding of the ITAT that in the present cases such approval was granted mechanically without application of mind by the Additional CIT resulting in vitiating the assessment orders themselves.
HELD THAT:- Having regard to facts and circumstances of the case, we are not inclined to interfere in the matter. The Special Leave Petition is dismissed.
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2023 (11) TMI 1253 - CESTAT KOLKATA
Valuation - non-inclusion of freight charges collected from their buyers in the assessable value - HELD THAT:- The issue is squarely covered by the judgment of Hon’ble Supreme Court in the case of COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, NAGPUR VERSUS M/S ISPAT INDUSTRIES LTD. [2015 (10) TMI 613 - SUPREME COURT] wherein it has been held It is clear, therefore, that on and after 14-5-2003, the position as it obtained from 28-9-1996 to 1-7-2000 has now been reinstated. Rule 5 as substituted in 2003 also confirms the position that the cost of transportation from the place of removal to the place of delivery is to be excluded, save and except in a case where the factory is not the place of removal.
The impugned order is set aside - appeal allowed.
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2023 (11) TMI 1252 - SC ORDER
Withholding of GST amount - impact while paying bills from the month of September, 2019 - liability to pay GST shall be that of the Respondents in terms of the amended work order or not - reimbursement of GST - it was held by High Court that The respondents were not justified in withholding the amount of GST impact and the same is arbitrary, violative and against their own terms of agreement - HELD THAT:- There are no reason to interfere with the impugned order - petition disposed off.
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2023 (11) TMI 1251 - MADRAS HIGH COURT
Money Laundering - predicate offence - proceeds of crime - prayer for interim stay of operation of the impugned summons issued to the concerned District Collector of the five Districts, who are shown as the third petitioner in each of the writ petitions - HELD THAT:- The authorities under the PMLA, 2002 cannot prosecute any person on notional basis or on the assumption that a scheduled offence has been committed, unless it is so registered with the jurisdictional police and such complaint is pending enquiry or trial. As observed by the Hon'ble Supreme Court in paragraph 282 of the judgment in Vijay Madanlal Choudhary [2022 (7) TMI 1316 - SUPREME COURT], the authorised officer under the PMLA, 2002 can prosecute any person for offence of money laundering only if there exists proceeds of crime within the meaning of Section 2(1)(u) of the PMLA, 2002. The Hon'ble Supreme Court has held that merely because existence of undisclosed income and irrespective of its volume is noticed, the proceeds of crime under Section 2(1)(u) cannot be presumed, unless the property has been derived or obtained as a result of criminal activity relating to a scheduled offence - the existence of proceeds of crime within the meaning of Section 2(1)(u) of the PMLA, 2002 is quintessential, as held by the Hon'ble Supreme Court and in the absence of existence of proceeds of crime as aforesaid, the authorities under the PMLA, 2002 cannot step in or initiate any prosecution.
Even the Hon'ble Supreme Court in Vijay Madanlal Choudhary has observed that the respondent even if it had unearthed any particular offence and found proceeds of crime relating to the said offence, then under Section 66(2), the respondent is bound to inform the investigating agency about such offence. Only if the offence is scheduled offence, the respondent will get a right to further investigate the proceeds of crime, as held by the Hon'ble Supreme Court. Having regard to the interpretation of various provisions by the Hon'ble Supreme Court, this Court is prima facie convinced that the nature of enquiry contemplated by issuing the impugned summons is not within the jurisdiction of the respondent. It is just an attempt to investigate the possibility of identifying any proceeds of crime as a result of any criminal activity, which is not so far registered by the State agencies.
This Court sincerely appreciates the way in which the respondent had responded to these writ petitions within a short time. A detailed affidavit of objection is filed by the respondent raising several issues. The learned Senior Counsel appearing for the petitioners requested time to file reply in response to the objection in the form of affidavit. The learned Additional Solicitor General also submitted that they may be permitted to file a detailed counter affidavit.
Post the matters on 21.12.2023 for hearing of the main writ petitions.
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2023 (11) TMI 1250 - ITAT MUMBAI
TDS u/s 195 - Payment to Master card International Incorporated, USA without deduction TDS - Taxability of income of Master Card in India - scope of amendment in the provision of section 40(a)(i) -HELD THAT:- This issue is covered in favor of the Appellant by the decision of the Co-ordinate bench of the Tribunal in the Appellant’s own case for the assessment year 1999-2000 [2022 (9) TMI 1577 - ITAT MUMBAI] wherein the Tribunal followed the decision of Celltick Mobile Media (India) (P.) Ltd. [2021 (3) TMI 1121 - ITAT MUMBAI] wherein it was held that the amendment in the provision of section 40(a)(i) of the Act, which states that no disallowance u/s. 40(a)(i) is warranted in the hands of payer of income where payee has already discharged the tax liability on the said income, is retrospective in nature.
Respectfully following the decision of coordinate bench in the case of assessee on similar issue, we don’t see any force in the orders of authorities below and find that amendment in section 40(a) (i) is retrospective in nature. Therefore, the provisions of section 40(a) (ia) are equally applicable u/s. 40 (a) (i) of the Act. In view of this, ground raised by the assessee is allowed.
Direct expenses incurred outside India - disallowance towards part of the expenses directly attributable to operations in India - Appellant submits before us to allow the deduction towards Advisory services expenses and Singapore IT Hubbing cost under section 37(1) - HELD THAT:- We agreed with the logics put forward by the assessee and not in favour of additional contentions raised by the Ld. CIT (A). Moreover, similar issue is covered in the Appellant’s own case in A.Y. 1999-00, wherein with respect to the similar nature of services, the Hon’ble ITAT held that the said expenditure is allowable u/s 37(1) and should not be restricted under section 44C of the Act. Respectfully following the decision of coordinate bench and judicial pronouncements relied upon by the assessee, we are in agreement with the contentions of assessee and ground raised by the assessee is allowed.
Interest paid to Head office / Overseas Branches - AO disallow interest payable to head office/ overseas branches on the ground that the Act does not allow deduction of interest paid by Branch to Head office - Appellant submits before us to allow the deduction of interest paid to HO/OB in line with the decision of Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI] as it is not only dealing with India-Japan Tax Treaty but also dealt with India Netherland Tax Treaty. Your Honour will appreciate that the language of India-UK Tax Treaty (applicable in case of the Appellant) is in line with India-Netherland Tax Treaty - HELD THAT:- As revenue is not able to produce any argument to controvert the facts of the ground raised by the assessee and also not able to controvert the stand taken by the special bench in the case of Sumitomo Mitsui Banking Corporation [2012 (4) TMI 80 - ITAT MUMBAI]. Hence, in the given situation respectfully following the decision of special bench (supra), ground raised by the assessee is allowed.
Nature of expenses - Expenditure on refurbishment of premises - CIT(A) disallowed 25% of the expenditure incurred on refurbishment of leasehold premises as capital in nature - HELD THAT:- As Appellant submits before us to follow its own case vide ITAT order for A.Y. 1999-00[2022 (9) TMI 1577 - ITAT MUMBAI] and allow deduction for the entire amount incurred on refurbishment of premises. Revenue is not able to produce any argument to controvert the facts of the ground raised by the assessee and also not able to controvert the stand taken by the coordinate bench in assessee’s own case. Hence ground raised by the assessee is allowed.
Expenses attributable to exempt income - CIT(A) held Rule 8D is to be applied for arriving at the disallowance of expenditure attributable to earning taxable income - Appellant submits before us to follow its own case vide ITAT order for A.Y. 1999-00, [2022 (9) TMI 1577 - ITAT MUMBAI] and delete the disallowance made by the Ld. CIT(A) - HELD THAT:- Assessee’s own case pertains to A.Y. 1997-98 and A.Y. 1999-00, as there is no change in the facts of the case and law laid down by the Hon’ble Apex court in the case of South Indian Bank Ltd. [2021 (9) TMI 566 - SUPREME COURT] is squarely applicable to the assessee, we agreed with the plea taken by the assessee and to be just and fair in the matter, disallowance is restricted upto 1% of the exempted income. Ground raised by the assessee is partly allowed.
Recoveries made against securities losses - AO made addition of recovery of securities losses - as argued losses incurred by the Appellant pertaining to the earlier years is subject matter of litigation - HELD THAT:- As gone through the submissions of assessee and order of coordinate bench for A.Y. 1993-94, wherein the loss claimed by the assessee has been allowed on its own facts, but as the department is in further appeal before the Hon’ble jurisdictional High Court, we agree with the contentions raised by the assessee, that in case Hon’ble High Court reversed the decision of coordinate bench on the ground of crystallization of loss in A.Y. 1998-99, same will be allowed in current A.Y. under consideration as the same has been settled with the parties and final figure of loss has been crystallized in this year. This ground of appeal is allowed for statistical purposes and AO is directed to allow the same in A.Y. 2001-02, if Hon’ble High Court reversed the decision of coordinate bench for A.Y. 1993-94, then only on the basis of crystallization, same will be allowed in current assessment year.
Taxability u/s 115JB on assessee banking company - HELD THAT:- As provisions of section 115JA of the Act is not applicable in the case of assessee being banking company duly regularized by the provisions of Banking Regulations Act, 1949 and is not required to prepare its Profit & Loss Account under the provisions of Part-II & III of Schedule-VI of the Companies Act, 1956. In view of the above, ground raised by the assessee is allowed.
Head Office Expenditure - CIT(A) denied Head Office Expenditure in all as no revised return of Income was filed for such claim and thus, restricted the claim under section 44C - HELD THAT:- This issue is covered in favor of the Appellant by the decision of the Co-ordinate bench of the Tribunal in the Appellant’s own case for the A.Y. 1999-2000 [2022 (9) TMI 1577 - ITAT MUMBAI] wherein the Tribunal, following the decision of Metchem Canada Inc. v DCIT [2005 (9) TMI 227 - ITAT BOMBAY-F] has held that in view of Article 26 of the India-UK DTAA, provisions of section 44C of the Act will not be applicable to the Appellant
We agree that as decided by the coordinate bench, in the case of assessee that the Head office expenditure is allowed in entirety under the provisions of Article 26 of the tax treaty without the applicability of restriction under section 44C of the Act, and as the submissions by assessee not controverted by the Revenue, In view of this, ground of appeal of the assessee is allowed following the precedent discussed.
Taxability of interest income received on tax refund - HELD THAT:- As we agreed with the contentions of the assessee that the interest on income tax refund is taxable, once it reaches finality and not in A.Y. 2001-02 i.e., A.Y. under consideration and as the submissions by assessee are not controverted by the Revenue in principle, in view of this, AO is directed to delete the addition made on this count till finality on this issue been attained. In the result, this ground of appeal is allowed.
Allowability of Direct expenses incurred outside India and Salary paid to expatriate employees - HELD THAT:- As in own case ITAT order [2022 (9) TMI 1577 - ITAT MUMBAI] for A.Y. 1999-00 and decision of Mumbai Tribunal in case of Shinhan Bank [2022 (11) TMI 719 - ITAT MUMBAI] allow the deduction as held there cannot be any purpose of expenses incurred by the HO, which are relatable to the Indian PE, being allowed as a deduction in the computation of income of the PE when non-reimbursement of that expenditure by the PE is treated as a source of income of the foreign company itself- particularly when, from the income tax perspective, the taxable unit is the foreign company and not the PE. It is also important to bear in mind the fact that, in the light of the five-member bench decision of this Tribunal, in the case of Sumitomo Mitsui Banking Corpn. [2012 (4) TMI 80 - ITAT MUMBAI] the intraorganization transactions, as non-reimbursement of employee costs by the PE to HO, is, are tax neutral. In any case, there cannot be a benefit accruing to the Korean company when the Indian PE of the assessee company does not reimburse its Korean company, because the assessee itself is the Korean company and the transaction in question is a wholly non-business and internal transaction of the Korean company. Decided against revenue.
Indirect Income - CIT(A) directing deletion of indirect income earned by the Head Office by relying on submission admitted in contravention to Rule 46A of the Income-tax Rules, 1962 - HELD THAT:- Since the indirect income of the Head Office already forms part of profit and loss account of the Assessee and offered to tax in the computation of income, the same should not be taxed again. Decided against revenue.
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2023 (11) TMI 1249 - DELHI HIGH COURT
Assessment u/s 153A - Undisclosed deposits with a foreign bank - HELD THAT: - Despite a specific direction being issued, no affidavit has been filed on behalf of the respondent/revenue. On the other hand, Appellant has taken us through the documents that were the subject matter of proceedings before the statutory authorities, which, prima facie, seem to indicate that the information concerning the bank account said to be maintained by the appellant/assessee with Geneva Branch of HSBC Bank emanated prior to the search carried out on 14.11.2011
We may also note that the appellant/assessee refutes the veracity of the document furnished to him, which appears to be a bank statement.
Despite the reminders served on the concerned officer and Respondent the affidavit has not been filed. As a result, we are left with only two choices. First, to proceed without the affidavit and draw our inferences based on the record made available by the appellant/assessee. Second, to give one more opportunity to the concerned officer to file an affidavit in terms of the court’s order dated 18.08.2023.
For the moment, we are adopting a conservative approach, which is to give one last opportunity to the concerned officer to file an affidavit, as directed by the court via order dated 18.08.2023. While filing the affidavit, the concerned officer will bear in mind the statutory record which has been made available in the matter, in particular, the parts to which our attention has been drawn during the hearing.
Respondent will make sure that the concerned officer files the affidavit at least two (2) days before the next date of hearing and a copy of the same is furnished to Appellant
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2023 (11) TMI 1248 - ITAT RAJKOT
Rectification u/s 254 - Denial of claim of deduction u/s. 80P by way of prima facie adjustment u/s. 143(1)(a)(v) - ITAT allowed deduction - HELD THAT:- ITAT has given a detailed legal as well as factual finding has to why the denial of claim of deduction u/s. 80P cannot be made by way of prima facie adjustment u/s.143(1)(a)(v) of the Act for the impugned assessment order i.e. A.Y. 2019-20 [2022 (10) TMI 1236 - ITAT RAJKOT].
We observe that ITAT has given a detailed factual and legal finding/discussion while deciding this issue. Further, the decision cited by Department is not on the issue of denial of claim by way of adjustment made u/s. 143(1)(a)(v) of the Act and has been rendered on its own set of facts while the assessee’s facts are on a different footing. Accordingly, on going through the order passed by the ITAT, we find no apparent mistake in the order passed by the ITAT so as to call for any interference. Miscellaneous Application filed by the Department is dismissed.
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2023 (11) TMI 1247 - ITAT RAJKOT
Rectification u/s 254 - Deduction u/s. 80P denied by way of prima facie adjustment u/s. 143(1)(a)(v) - ITAT allowed deduction - HELD THAT:- ITAT has given a detailed legal as well as factual finding has to why the denial of claim of deduction u/s. 80P cannot be made by way of prima facie adjustment u/s.143(1)(a)(v) of the Act for the impugned assessment order i.e. A.Y. 2019-20 [2022 (10) TMI 1237 - ITAT RAJKOT].
We observe that ITAT has given a detailed factual and legal finding/discussion while deciding this issue. Further, the decision cited by Department is not on the issue of denial of claim by way of adjustment made u/s. 143(1)(a)(v) of the Act and has been rendered on its own set of facts while the assessee’s facts are on a different footing. Accordingly, on going through the order passed by the ITAT, we find no apparent mistake in the order passed by the ITAT so as to call for any interference. Miscellaneous Application filed by the Department is dismissed.
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2023 (11) TMI 1246 - ITAT RAJKOT
Rectification u/s 254 - Denial of claim of deduction u/s. 80P by way of prima facie adjustment u/s. 143(1)(a)(v) - ITAT allowed deduction - HELD THAT:- ITAT has given a detailed legal as well as factual finding has to why the denial of claim of deduction u/s. 80P cannot be made by way of prima facie adjustment u/s.143(1)(a)(v) of the Act for the impugned assessment order i.e. A.Y. 2019-20 [2022 (11) TMI 128 - ITAT RAJKOT]
We observe that ITAT has given a detailed factual and legal finding/discussion while deciding this issue. Further, the decision cited by Department is not on the issue of denial of claim by way of adjustment made u/s. 143(1)(a)(v) of the Act and has been rendered on its own set of facts while the assessee’s facts are on a different footing. Accordingly, on going through the order passed by the ITAT, we find no apparent mistake in the order passed by the ITAT so as to call for any interference. Miscellaneous Application filed by the Department is dismissed.
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2023 (11) TMI 1245 - SC ORDER
Retention of certain goods as security - claiming release of goods - it was held by High Court that Application is accordingly allowed and disposed of by appointing Mr. S. Muralidhar, former Chief Justice of the Orissa High Court to act as the Arbitrator subject to the learned Arbitrator communicating his consent in the prescribed format to the Registrar, Original Side of this Court within three weeks from date.
HELD THAT:- No case for interference under Article 136 of the Constitution of India is made out - However, it will be always open for the petitioner to raise all permissible objections/contentions before the Arbitral Tribunal in accordance with law.
The Special Leave Petition is accordingly dismissed.
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2023 (11) TMI 1244 - ITAT RAJKOT
Rectification u/s 254 - Denial of claim of deduction u/s. 80P by way of prima facie adjustment u/s. 143(1)(a)(v) - ITAT allowed deduction - HELD THAT:- ITAT has given a detailed legal as well as factual finding has to why the denial of claim of deduction u/s. 80P cannot be made by way of prima facie adjustment u/s.143(1)(a)(v) of the Act for the impugned assessment order i.e. A.Y. 2019-20 [2023 (1) TMI 752 - ITAT RAJKOT].
We observe that ITAT has given a detailed factual and legal finding/discussion while deciding this issue. Further, the decision cited by Department is not on the issue of denial of claim by way of adjustment made u/s. 143(1)(a)(v) of the Act and has been rendered on its own set of facts while the assessee’s facts are on a different footing. Accordingly, on going through the order passed by the ITAT, we find no apparent mistake in the order passed by the ITAT so as to call for any interference. Miscellaneous Application filed by the Department is dismissed.
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2023 (11) TMI 1243 - ITAT HYDERABAD
Bogus LTCG - exemption u/s 10(38) denied - HELD THAT:- No doubt assessee has meticulously completed the paperwork by routing his entire investment through banking channel, but the results thereof are altogether beyond the pale of common course of natural events, human conduct and public and private business.
As pertinent to note that neither in the past nor in the subsequent years, assessee engaged into any such investment to have a huge windfall. If the assessee been so informative qua the nuances of the share market, he would have certainly undertaken such adventurous activities at least in future by making such investment in the unknown stock.
We are, therefore, of the considered view that what is apparent is not real and what is real is not made to appear. Investment in unknown stock by the assessee is not real and all the paper work and routing money through banking channels is only to make it real or legal, but when examined, the whole transaction of sale and purchase of the stock with huge windfall to the assessee is only a part of the larger picture.
We concur with the findings of the AO and while upholding the same, we find the grounds of appeal devoid of any merits and are liable to be dismissed. Grounds of appeal are accordingly dismissed.
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2023 (11) TMI 1242 - SC ORDER
Money Laundering - Section 45 of the Prevention of Money Laundering Act, 2002 - HELD THAT:- The detailed investigation has been carried out. In fact in July, 2018, on two occasions, statements of the appellant have been recorded. What is pertinent to note is that even during the course of investigation, the Enforcement Directorate did not arrest him.
Considering these peculiar facts, the interim order passed on 13th October, 2023 deserves to be made absolute on the same terms and conditions.
Appeal allowed.
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2023 (11) TMI 1241 - ITAT JAIPUR
Denying the approval u/s 80G - delay on the part of the appellant in filing the application in Form 10AB - delay of about 2.5 months from the extended date of filing the application for obtaining the permanent registration u/s 80G(5)(vi) - HELD THAT:- There is no dispute as to the fact that assessee is provisionally registered till A.Y. 2024-25 vide order dated 27.10.2021. Thus it has complied with section 80G(5). The proviso to this section only deals with the procedure as to the filing of the application. The law of procedure has to be approached, understood and appreciated as a helpmate in the course of the process of administration of justice. Procedural provision should be so construed as to sub serve the course of justice and not to hinder it. It is a settled proposition of law that technicalities should not come in way in imparting the substantial justice. We get support of our this view from the decision of Hon’ble Supreme Court in case of S. Nagaraj & Others Vs. State Of Karnataka & Another [1993 (8) TMI 292 - SUPREME COURT]
Though the assessee has filed the application of 2.5 months delay and the provisions registration was not cancelled merely for permanent registration the application filed delayed. The assessee has all the reasons for recognition u/s 80G of the Act at least from the date the assessee filed an application and therefore, we direct the ld. CIT(A) to decide the issue of registration u/s 80G of the Act in accordance with law from the date on which the assessee made an application for permanent registration - Appeal of the assessee is allowed for statistical purpose.
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2023 (11) TMI 1240 - SUPREME COURT
Time Limitation - challenge to award of the Facilitation Council - award set aside on the ground that the claim was barred by limitation - Articles 226/227 of the Constitution - HELD THAT:- The appellant failed to avail of the remedy under Section 34. If it were to do so, it would have been required to deposit seventy-five per cent of the decretal amount. This obligation under the statute was sought to be obviated by taking recourse to the jurisdiction under Articles 226/227 of the Constitution. This was clearly impermissible.
The appellant sought to urge that the view of the Facilitation Council to the effect that the provisions of the Limitation Act 1963 have no application, which has been affirmed by the Division Bench in the impugned judgment, suffers from a perversity, and hence a petition under Article 226 of the Constitution ought to have been entertained. This submission cannot be accepted for the simple reason that Section 18 of the MSMED Act 2006 provides for recourse to a statutory remedy for challenging an award under the Act of 1996. However, recourse to the remedy is subject to the discipline of complying with the provisions of Section 19. The entertaining of a petition under Articles 226/227 of the Constitution, in order to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the special enactment which has been legislated upon by Parliament.
The decision of the Division Bench is affirmed by holding that it was justified in coming to the conclusion that the petition under Articles 226/227 of the Constitution instituted by the appellant was not maintainable - appeal disposed off.
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2023 (11) TMI 1239 - ITAT BANGALORE
Income deemed to be agreed or arising in India - Revenue Characterization - FTS or Royalty or business income - payments received by assessee towards interconnectivity utility charges treated as Royalty since the payment is made to “use the process” or “an equipment” - HELD THAT:- Admittedly there is no treaty between India and Hong Kong, the country of which the assessee is a tax resident. Therefore the payment received by assessee has to be analysed under the Income Tax Act alone. We note that the decision relied by the Ld.AR in the following cases has analysed the taxability of the identical payment received by the assessee therein for similar services, under the provisions of Income Tax Act, having regards to section 9(1)(vi); Explanation 2, 5 and 6 also. And this Tribunal has held that payments made by an Indian telecom company for identical services, as rendered by the present assessee will not fall within the ambit of Royalty under section 9(1)(vi), Explanation 2,5 and 6.
As per the decision of case of Vodafone Idea Ltd.[2023 (7) TMI 1164 - KARNATAKA HIGH COURT] we hold that the receipts in the hands of the assessee could be taxed as business profits as per the applicable laws of Hong Kong and cannot be brought to tax either as FTS or Royalty under the Income Tax Act in India. Decided in favour of assessee.
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