Research Team

1. S.2(14)(iii): Capital asset – Agricultural land – Sale of agricultural land – Purchaser changed the use for commercial purposes – Not assessable as capital gains. [Gujarat Tenancy and Agricultural Lands (Amendment) Act, 1997 (GT & All) S.63AA, 65B]

   The assessee sold four pieces of agricultural land to a company Steel Strips Wheels Ltd. The purchaser received permission for bona fide industrial purposes. Assessee has obtained certificate for change of land use from agricultural to non-agricultural. The assessee contented that the land sold by him did not qualify as “capital asset” in terms of section 2(14)(iii) being rural agricultural land. The AO held that the land sold by the assessee as non agricultural land and concluded that it qualifies capital asset and therefore capital gained earned is liable to tax. ITAT held that, AO has erred in interpreting S.63AA of the Gujrat Tenancy and Agricultural land laws Act,1997 and the land did not qualify capital asset in terms of s.2(14) (iii) of the Act. Accordingly the capital gains is not liable to tax. (AY.2016-17) Hiten Tulshibhai Engineer v. ITO (2024) 204 ITD 98 (Ahd)(Trib)

2. S.2(15): Charitable purpose– General public utility – Publishing newspapers – Receipts more than 10 lakhs – Matter remanded for verification [S. 11, 12A]

   Tribunal held that the Revenue without examining whether activities were in nature of trade commerce of business denial of exemption is under section 11 is not justified merely on the ground that receipts had exceeded the limit of Rs.10 lakhs. The matter is remanded to the Assessing Officer to decide the issue in accordance with the judgement of apex court in Ahmedabad Urban Development Authority (2023) 449 ITR 1 (SC), examine the status of charitable entity granted under section 12A of the Act, examine the plea that the assessee has very nominal profit or margin from the main activity of selling IRS reports to members and non -members and also to decide the issue on principle of mutuality in light of the decision earlier years order of the Tribunal. (AY. 2009-10 to 2013-14) Media Research Users Council v. ACIT [2024] 205 ITD 170 (Mum)(Trib)

3. S. 2(15) : Charitable trust – Registration under Section 12AA – objects of the Trust should be charitable in nature and its activities were genuine

   The assessee trust applied for the first time for registration under Section 12AA of the Income- tax Act, 1961 as per the Trust Deed executed on February, 2019 has not disputed which was duly registered with the Sub-Registrar, Pampore. The objects as enshrined in the Trust Deed, it is clear that the aims and objects are in conformity with provisions of Section 2(15) of the Income- tax Act, 1961. The purpose of provisions of Section 12AA is to enable registration only of such trust or institution whose objects and activities are genuine. Section 12AA pertains to registration of the trust and not to assess what a trust has actually done and the term activities in the provision includes proposed activities. The Registering Authority is bound to consider whether the objects of Trust are genuinely charitable in nature and whether the activities of the Trust proposed to carry on are genuine, i.e., they are in line with the objects of the trust. The only requirement for granting registration is that the objects of the Trust should be charitable in nature and its activities were genuine. Supreme Court in case of Anand Social and Educational Trust vs. CIT. [2020] 426 IR 340 (SC) has laid down the basic principles for allowability of basis registration. The Commissioner (E) was directed to grant registration to trust from the date of application. Relied: Ananda Social and Educational Trust vs. CIT 426 ITR 340 (SC) Shri Swami Shankarnath Parvat Charitable and Welfare Trust v. CIT(E), B. M. L. Welfare Trust v. CIT (E) [2024] 109 ITR (Trib) 0678 (ITAT[Amrit])

4. S. 2(31) : Person – The amalgamation of the assessee company with another entity leads to the cessation of the assessee company’s status as a legal entity under section 2(31) of the Act.

   The assessee was a company engaged in the business of real estate development. It filed its return of income for the impugned assessment year declaring a loss. The Assessing Officer (AO) issued a notice under section 143(2) of the Income Tax Act, 1961 (the Act) and completed the assessment under section 143(3) dated 30.12.2016 of the Act on determining the income of the assessee, by rejecting the books of accounts and applying a net profit rate of 8% on the total turnover. The assessee company had merged and amalgamated with another company vide an order dated 21.11.2016 passed by the Hon’ble Calcutta High Court (assessee stood amalgamated w.e.f. 1.4.2015, the effective date of amalgamation as per scheme of amalgamation). The assessee intimated the AO about the amalgamation vide a letter dated 28.11.2016. However, the AO did not take cognizance of the letter and proceeded with the assessment in the name of the non-existent assessee company vide an order dated 30.12.2016. The assessee appealed against the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) partly allowed the appeal of the assessee and directed the AO to assess the income at 5% of the total turnover instead of 8%. The assessee as well as the revenue filed cross appeals before the Tribunal against the order of the CIT(A). The Hon’ble Tribunal quashed the assessment order passed by the AO in the name of a non- existent entity, following the principles laid down by the Supreme Court in similar cases. The judgement held that the amalgamation of the assessee company with another company resulted in the cessation of the assessee company as a person under section 2(31) of the Act, and hence it could not be subjected to assessment proceedings or an order of assessment. The judgement rejected the argument of the revenue that the assessee company had participated in the proceedings and hence could not raise the issue of its non- existence, as it was a substantive illegality and not a procedural violation. AY 2011-12 Solvent Real Estate P. Ltd. v. ITO [2024] 109 ITR (Trib) (S.N.) 0052 (ITAT[Kolk])

5. S. 6(1) : Residence in India – Individual – Employment outside India – Business or profession – Stayed 176 days during year – Entitled to claim the benefit of the extended period of 182 days as provided in explanation 1(a) to section 6(1) of the Act – Appeal of Revenue is dismissed. [S. 6(1)(a), 6(1)(c)]

   During the assessment proceedings, on perusal of the return of income filed by the assessee, it was observed that the assessee had claimed his residential status as non-resident and had not offered his global income to tax in India. Assessee was asked to furnish documents in support of his residential status. On the basis of documents it was observed that the assessee stayed in India for 176 days and went to Mauritius during the year. The AO assessed the assessee as resident. On appeal the CIT(A) held that the assessee was away from India for the purpose of employment outside India and is entitle to take the benefit of Explanation 1(a) to section 6(1)(c). On appeal by the Revenue, dismissing the appeal the Tribunal held that the assessee is entitled to claim the benefit of the extended period of 182 days as provided in explanation 1(a) to section 6(1) of the Act. (AY. 2013-14) ACIT v. Nishant Kanodia [2024] 205 ITD 20 (Mum) (Trib)

6. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – taxation of receipts from the sale of software to Indian entities under the India-Singapore DTAA – agreements merely granted the right to use software without transferring copyright ownership – Held, not liable to tax

   The Assessee is a Singapore-based entity which received income from the sale of software to Indian entities. The AO treated these receipts as taxable u/s 9(1)(vi) of the Act and Article 12(3) of the India-Singapore DTAA. The Assessee challenged the AO’s order and submitted that the agreements merely granted the right to use software without transferring copyright ownership. It emphasized that the software was licensed to Indian entities for specific business purposes, and modifications were limited to operational needs. The ITAT scrutinized the clauses of the agreements between the Assessee and Indian entities and noted the discrepancies in the AO’s interpretation of the DTA, emphasizing that the contractual terms aligned with the judgment in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT CA Nos. 8735-8736 of 2018. After considering the arguments and contractual clauses, the ITAT held that the receipts from software sales to Indian entities were not taxable under the India- Singapore DTAA. (AY 2020-21) Finastra Intl. Fin. Sys. PTE Ltd. v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0036 (ITAT[Del])

7. S. 10 (23C): Educational institution – survey under section 133A – certain expenses not properly vouched – Principal Commissioner cancelled registration by invoking clause (b)(ii) of 15th proviso to section 10(23C) – Edifice erected on statement of trustee – No case within any of ‘specified violation’ – Cancellation order revoked

   Assessee was a trust running five schools, which was granted registration under section 10(23C)(vi) of the Act. One trustee admitted undisclosed income of Rs. 9 crore relating to trust Principal Commissioner cancelled registration by invoking clause (b)(ii) of 15th proviso to section 10(23C). There was no evidence to demonstrate either of undisclosed income or spend on objects other than the objects. In a scenario where the cancellation of registration for an assessee trust was cancelled solely on a statement given by a trustee during a survey and there exists no evidence indicating any diversion of income for purposes other than those designated for the trust’s objects, thereby suggesting an absence of any specified violation, the order to cancel the registration ought to be nullified. St. Xavier’s Education Trust vs. Pr. CIT [2024] 109 ITR (Trib) 0501 (ITAT)[Pune]

8. S.11: Property held for charitable purposes – Income from property – Revising the claim with higher deduction – Not filed the return and Form No 10 within due date prescribed under section 139(1) of the Act – Not justified in not allowing the deduction for amount accumulated under section [S. 11(2), 139(1)]

   AO passed order u/s 143(1) whereby exemption u/s 11(2) was restricted as per original return on the ground that assessee had not filed ITR and form no.10 within due date prescribed u/s 139(1). On appeal the CIT(A) allowed the deduction. Tribunal affirmed the order of the CIT(A) holding that the Assessing Officer was not justified in not allowing the deduction for amount accumulated under section 11. (AY. 2019-20) ITO v. Ramji Mandir Religious and Charitable Trust [2024] 205 ITD 150 (Ahd) (Trib)

9. S. 11 : Property held for charitable purposes – Charitable trust – Exemption under section 11 – Allowability – Audit Report in Form No. 10B not filed along with return:

   Filing of Form No. 10B, would be directory in nature, as such, the AO is not powerless to allow an assessee to file Audit Report, if not filed along with return, at any time before completion of assessment. Further, filing of Form No. 10B beyond the due date, could not disentitle the trust from exemption claimed under section 11. Accordingly, AO was directed to verify the Form No. 10B filed by the assessee and allow the claim of exemption under section 11. Sri Vetri Vinayagar Educational Trust v. ITO, Exemptions, Trichy [ITA No.903/Chny/2023] [AY 2016-17]

10. S. 11(1)(a) : Charitable or religious purpose – Application of income – Expenses incurred on the repairs or renovation of its assets used for charitable purposes are also considered as income application towards the charitable aims.

    The appellant-society, a charitable trust registered under section 12A of the Act, runs a school in a building owned by another trust. The appellant-society incurred expenditure on repairs/renovation of the school building and certain amount towards payment of property taxes. The AO disallowed the expenditure and the property tax on the ground that the building does not belong to the appellant-society. The CIT(A) upheld the disallowance on the ground that the appellant-society did not provide any agreement or MOU with the owner of the building regarding the maintenance of the building. The Tribunal allowed the appeal of the appellant-society and set aside the impugned order of the CIT(A). The Tribunal held that the expenditure incurred by the appellant- society on the repairs of the school building and the property tax paid was for the purpose of carrying out the objects of the charitable trust, which is to impart education to the poor and needy children. The Tribunal relied on the decisions of the Gujarat High Court in Satya Vijay Patel Hindu Dharmashala Trust v. CIT [1972] 86 ITR 683 (Gujarat) and the Supreme Court in S.R.M.CT.M Triuppani Trust v. CIT [1998] 230 ITR 636 (SC), which held that the purchase or construction of a capital asset for the charitable purpose is also an application of income for the charitable purpose under section 11(1)(a) of the Act. [AY: 2016-17] B. S. of the Salesian Sister India v. ITO [2024] 109 ITR (Trib) (S.N.) 0044 (ITAT[Mum])

11. S. 12A : Trust or institution – Registration – insufficient time to respond to notice – violation of the fundamental principles of natural justice. (r.w.s. 12AB & 80G(5))

    The appellant trust is a charitable trust formed with the objects of Indian Native Breed Cow cultivation, development, protection and awareness etc. It applied for registration u/s 12AB r.w.s. 12A of the Act in Form 10A and received a provisional registration. It also applied for registration u/s 80G (5) of the Act in Form 10AD. The ld. CIT, Exemption issued notices to the appellant trust seeking certain details and information regarding its activities, income and expenditure, and compliance with the conditions of registration. The appellant trust failed to respond to the notice within the stipulated time of five days. Consequently, the ld. CIT, Exemption rejected both the applications and cancelled the provisional registration by passing separate orders. The appellant trust challenged the orders before the ITAT on the grounds of violation of principles of natural justice, insufficient time to respond, and non-consideration of the merits of the case. The ITAT set aside the order rejecting the application u/s 12AB and remanded the matter to the ld. CIT, Exemption for de novo disposal after affording due opportunity of being heard to the appellant trust. The ITAT also set aside the order rejecting the application u/s 80G (5) on the same grounds and directed the ld. CIT, Exemption to decide the application afresh in accordance with law. AY: 2023-24. Chaitanya Goshala Trust v. CIT (E) [2024] 109 ITR (Trib) (S.N.) 0054 (ITAT)[Pune])

12. S.13(1)(c) : Trust or institution – Investment restriction – The transaction for purchase of land was a genuine and commercial transaction therefore, the provisions outlined in section 13(2)(a) do not apply to it. (r.w.s. 13(2)(a))

    The appellant society is a charitable institution registered u/s 12A of the Income Tax Act, 1961 (the Act), engaged in the promotion of education. It claimed exemption u/s 11 of the Act for the surplus of income over expenditure for the assessment year. The Assessing Officer (AO) denied the exemption on the ground that the appellant society had violated the provisions of section 13(1)(c) and 13(2)(a) of the Act by diverting funds to a specified person, who is the son of the founder and the managing trustee of the society. The AO also added notional interest on the advance paid by the society to the individual in question, for the purchase of land, which remained in his name for more than 10 years. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the additions made by the AO. The appellant society challenged the order of the CIT(A) before the Tribunal. The Tribunal allowed the appeal of the appellant society and deleted the additions made by the AO and confirmed by the CIT(A). The Tribunal held that: The advance paid by the appellant society to the individual for the purchase of land was a genuine and commercial transaction and not a diversion of funds to a specified person. The transaction was accepted by the department in the earlier and subsequent years and no adverse inference was drawn. The transaction was also examined and approved by the CIT(E) who dropped the proceedings for withdrawal of registration u/s 12AA of the Act. The provisions of section 13(1)(c) and 13(2)(a) of the Act were not applicable to the transaction as it was not a case of money lent to a specified person. The appellant society was entitled to the exemption u/s 11 of the Act for the surplus of income over expenditure. The addition of notional interest on the advance paid by the appellant society to the individual for the purchase of land was not justified as there was no income accrued or received by the society. The interest income on notional basis cannot be subjected to tax as per the settled law. The provisions of section 13(1)(d) of the Act were not applicable to the transaction as it was not a case of investment in the name of a specified person. The appellant society had notionalized the agreement to sale and recorded the land in its balance sheet as an asset. AY: 2016-17 Rastogi Education Society v. ITO (E) [2024] 109 ITR (Trib) (S.N.) 0063 (ITAT[Raipur])

13. S. 14A: Disallowance of expenditure – Exempt income

    In the absence of finding recorded by the authorities below that which and how much expenditure has been incurred in relation to an exempted income, disallowance us 14A cannot be made. (A.Y. 2009-10) Smt. Leela Devi Sankhlecha v. ITO [2024] 109 ITR (Trib) 0260 (ITAT[Jodh])

14. S.14A: Business Expenditure – Disallowance – Exempt income – No expenditure is incurred for earning dividend income – Disallowance is not justified. [R.8D]

    The tribunal held that the assessee has not incurred any expenditure for earning dividend income. Disallowance is deleted. (AY. 2016-17, 2017-18) Canara Bank v. DCIT (2024) 204 ITD 358 (Bang) (Trib)

15. S. 14A : The provisions of the section are not applicable when the Assessee has not claimed any exempt income. (r/w Rule 8D)

    The Assessee was carrying on business of residuary non-banking company registered with the RBI in the impugned Assessment year. And in pursuance of RBI guidelines, ‘Directed Investments’ (includes requirements to invest in certain priority sectors) are required to be made which are ‘business investments. The income accruing from these investments are offered under the head ‘profits and Gains of Business and Profession’. The 14A issue is whether the Assessing Officer was justified in disallowing a part of the appellant’s expenditure under section 14A of the Act, as he noticed that there was huge investment under the head “Non-current Investment”. The appellant claimed that no such expenditure was incurred, as it had not earned any exempt income during the relevant assessment year. The Assessing Officer, however, applied rule 8D and determined the disallowance. The appellant challenged the disallowance before the CIT(A) and the Tribunal, relying on the decision of the Hon’ble Jurisdictional High Court of Delhi in Cortech Energy 322 ITR 97, which held that section 14A and rule 8D are not applicable in the absence of any exempt income. The appellant also contended that the amendment to section 14A by the Finance Act, 2022, which clarified that the disallowance is mandatory irrespective of whether any exempt income is earned or not, is prospective and not retrospective, and therefore, cannot apply to the assessment year in question, as held by the Hon’ble High Court of Delhi in Era Infrastructure [India] Ltd 448 ITR 674. AY 2016-17. Asst. CIT v. Sahara India Financial Corpn. Ltd. [2024] 109 ITR (Trib) (S.N.) 0033 (ITAT[Del])

16. S. 32 : Depreciation – Goodwill – an intangible asset, qualifies for depreciation under the section, in acknowledgment of its value and impact on a company’s financial performance.

    The assessee, a private limited company engaged in providing financial information and analytics services, claimed depreciation on goodwill arising out of amalgamation with another company in the previous year relevant to the assessment year under consideration. The Assessing Officer (AO) disallowed the claim on the ground that goodwill is not a depreciable asset under the Income-tax Act, 1961 (the Act). The assessee challenged the disallowance before the DRP, which upheld the AO’s order and also rejected the assessee’s alternative claim for additional depreciation on goodwill. The assessee appealed to the Tribunal against the DRP’s order. The Tribunal allowed the assessee’s appeal and held that goodwill is an intangible asset eligible for depreciation under section 32 of the Act, following the decision of the Supreme Court in the case of Smifs Securities Ltd. The Tribunal affirmed the principle that goodwill of a business or profession is a depreciable asset under the Act, irrespective of the mode of its acquisition, and rejected the Revenue’s attempt to distinguish the Supreme Court’s ruling in Smifs Securities Ltd. based on the facts of the case.

    S & P Capital IQ (India) P. Ltd. v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0056 (ITAT[Hyd])

17. S.36 : Deduction – Interest – Addition made under the section are unjustified as the balances reflect business transactions, & not loans and advances.

    The Revenue contended that the assessee has not shown interest income on loans and advances given to related parties. The Revenue argues that interest @ 12% should be imputed on the average of opening and closing balances of the loans and advances. The assessee, however, contends that the payments are made in congruence to the terms and conditions of the agreements and that no interest income was accrued or received. The ld. CIT(A) verified the assessee’s contention and deleted the addition. The Hon’ble Tribunal observed that the outstanding balances are outcome of the business transactions and not loans and advances and further held that the Assessing officer has erred in imputing an imaginary income which is neither accrued nor has arisen to the Assessee. Asst. CIT v. Sahara India Financial Corpn. Ltd. [2024] 109 ITR (Trib) (S.N.) 0033 (ITAT)[Del])

18. S. 35DD: Amortisation of expenditure – Amalgamation – merger expenses – whether the year in which the High Court order was received can be treated as the 1st year from which the merger expenses can be claimed u/s 35DD and allow to claim the said expenses in next 4 AYs – Held yes.

    The Assessee had undergone amalgamation by order of the Calcutta High Court dated 26.10.2006 and the Bombay High Court dated 01.12.2006, which was to be effective from 01.04.2005. The Assessee claimed 2/5th of the expenses incurred during the present AY 2007-08 u/s 35DD in the computation of income by stating that since the Assessee could not claim the deduction in AY 2006-07, the Assessee has claimed 2/5th i.e. 1/5th for A.Y. 2006-07 & 2/5th A.Y.2007-08. The ITAT observed that section 35DD is unambiguous and there is no provision u/s 35DD to claim 2/5th of the expenditure incurred towards amalgamation / demerger. The Assessee had also raised an additional ground to treat AY 2007-08 as the first year from which the merger expenses are claimed u/s 35DD and allow the Assessee to claim the expenses in next 4 AYs subsequent to AY 2007-08. The ITAT found merit in this contention and allowed the same. (AY 2007-08) United Spirits Ltd. v. Jt. CIT [2024] 109 ITR (Trib) (S.N.) 0037(ITAT [Mum])1

19. S. 36(1)(vii) : Bad debt – Banks – Non-Rural branches – Amounts written off – Allowable as deduction.

    Amounts written off relating to non-rural branches allowable as deduction. (AY. 2016-17, 2017-18) Canara Bank v. DCIT (2024) 204 ITD 358 (Bang) (Trib)

20. S. 36(1)(viia) : Bad debt-Provision for bad and doubtful debts – Banks – Schedule bank – Average advances of rural branches – Advances outstanding as well as fresh advances are to be considered.

    Held that while calculating average aggregate advances of rural branches not only fresh advances made during year, but also amount of advance outstanding are to be considered. (AY. 2016-17, 2017-18) Canara Bank v. DCIT (2024) 204 ITD 358 (Bang) (Trib)

21. S. 36(2) : Business expenditure – Bad debt or part thereof – non-recovery of part of an amount advanced towards purchase of property – written off in profit and loss account and claimed as deduction while computing income – business loss.

    Part of the amount advanced by the Assessee towards purchase of immovable property, being stock-in-trade, had subsequently become irrecoverable. The same was written-off by the Assessee from its profit & loss account and therefore, claimed as deduction while computing income. Held, although the AO was correct in holding the said amount cannot be allowed as a bad debt since it was not offered as income on any earlier occasion by the Assessee, however, the facts that the same is in nature of loss incidental to carrying of its business was allowable as deduction for arriving at its true income. CIT v. Mysore Sugar Co. Ltd. [(1962) 46 ITR 649 (SC)] followed. (AY 2015-16) Biltech Engineers P. Ltd. v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0009 (ITAT [Raipur])

22. S.37(1): Business expenditure – Non compete fee – Capital expenditure – Entitle to depreciation – Provision for litigation and taxation matter – Matter remanded.[S.32]

    The Assessee claimed payment of non-compete fees as revenue expenditure. The AO treated the said expenditure as capital in nature. On appeal, the Tribunal affirmed the order of the Assessing Officer. As regards provision for litigation and sales tax matter remanded to the Assessing Officer. (AY. 2012-13) Eaton Power Quality (P.) Ltd. v. DCIT (2024) 204 ITD 323 (Chennai) (Trib)

23. S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – payments by way of cash

    Assessee is mainly engaged in the machinery import and sales, besides undertaking AMC works. Payments have been made towards service charges and the payment made on one occasion did not exceed the prescribed limit of Rs.20,000/- applicable to the year under consideration. Assessee has furnished all the vouchers to the tax authorities. The tax authorities are not justified in invoking the provisions of sec.40A(3) of the Act without verifying the relevant facts. Avinash Kumar Ojha v. ITO (ITA No. 3552/M/2023, A.Y. 2014-15 (Mum-Trib)

24. S. 43B : Deductions under the section for interest paid on loans to banks are allowable if the payments are made by the due date for filing income tax returns.

    The appeal filed by the assessee is against the disallowance on account of interest paid on loan to bank under Section 43B of the Act. The assessee claimed that the interest liability was outstanding at the beginning of the financial year and was paid during the year, as evidenced by the tax audit report and the bank statement. The AO and the CIT(A) rejected the claim on the ground that the entries in the loan account statement were not clear, carried non-descript narrations of the entries in the loan account and held that such payments appeared to be in the nature of rebate or discount received by the assessee. The assessee submitted date-wise details of the repayment of interest on term loan and buyers’ credit to the CIT(A), but the CIT(A) ignored them and confirmed the addition. The ITAT set aside the order of the CIT(A) and remanded the matter back to the AO for fresh examination of the issue. AY: 2018-19. Urjaa Metalics P. Ltd. v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0059 (ITAT[Del])

25. S. 44AD: Concealed the particulars of income or furnished inaccurate particulars of income – Computation of Profits and Gains of business on presumptive basis

    Assessee had not been filing returns of income since its income was below taxable limit. In the other A.Y. on the basis of report of an Inspector that the assessee has been carrying on the business of sale of milk and on the basis of report of an Inspector, CIT(A) had restricted the addition to 6% of the total cash deposit. In view of the principle of consistency, Department could not be permitted to raise an issue in isolation for the immediately succeeding year for the same assessee. The CIT(A) held that the source of credit in assessee’s bank account stood explained as turnover from sale of milk for the A.Y. under consideration. In view of the provisions of Section 44AD, AO was directed to add sum of 8% of the turnover to the assessee’s income. Swaran Singh v. ITO [2024] 109 ITR (Trib) 0579 (ITAT[Amrit])

26. S. 45: Short term capital loss – sale of shares – alleged bogus sales – shares traded on BSE – no independent enquiry conducted by AO regarding rigging up of the price of shares by the Assessee or his broker – principle of circumstantial evidence not applicable in this case.

    The Assessee had claimed Short Term Capital Loss (STCL) on sale of shares of M/s Looks Health Services Ltd, which as per the AO was bogus in nature. According to the AO the transaction was sham as the Company was not financially viable, the price of the scrip had unusually skyrocketed without any financial or economic basis and unusually decreased, the script in that period were traded in bulk and most people who indulged in bulk trading were from Ahmedabad city only. However, the ITAT observed that the Assessee had carried out purchase and sale of shares on the Bombay Stock Exchange, as per the Assessment Order, no enquiry or investigation was carried out without any concerned authority regarding rigging up the price of Looks Health Services Ltd or by Assessee’s broker. Therefore, there was no information or finding based on corroborative material available with AO that the price of shares were rigged. The principle of surrounding circumstantial evidence was also not strong enough to draw an adverse inference. Therefore, the order of CIT(A) was set aside. PCIT v. Krishna Devi reported 126 taxmann.com 80 followed. (AY 2014-15) Varun Naginbhai Patel v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0014 (ITAT[Ahm])

27. S. 48: Capital gains – Mode of Computation – denial of indexed cost of improvement for the property sold – expenses incurred for the renovation of house property – held, the submissions of the Assessee that he had issued cheques for withdrawal of cash from his bank account for the purpose of utilizing the same for the renovation of is a plausible explanation – appeal allowed.

    Assessee sold a property and claimed a deduction u/s 48 of the Act. The Assessee claimed renovation expenses of Rs.9,50,000/- which was not allowed by the AO on account of insufficient documentation. The Assessee argued that being an NRI, payments were made through his mother ’s accounts, and the renovation was done by Mr. Alok Lal through his firm M/s Fourth Dimension. The DRP, after a remand report, upheld the AO’s decision, citing lack of evidence establishing the relationship between Fourth Dimension and Alok Lal. The Assessee argued that the flat required significant renovation before being inhabitable, which justified the expenses claimed. The Assessee also emphasized the use of cheques for payments and cash withdrawals as evidence of genuine expenses. The ITAT after considering the submissions made by the Assessee, found merit therein. It accepted the explanation of the NRI Assessee and directed the AO to allow the indexed cost of improvement and recompute the capital gains. (AY 2020-21) Ashwin Kapur v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0027 (ITAT [Del])

28. S. 48 : Capital gains – Mode of Computation – Cost of Improvement – Certain expenses not allowed as cost of improvement – Assessing Officer could not bring anything on record that statement given by Valuer was wrong on facts or had inconsistencies – Selective reading of sale agreement could not necessarily lead to disallowance 

    Assessee sold his residential house and claimed cost of improvement. It was held that since all improvements made necessarily lead to improvement in value of sale, assessee was entitled to deduction towards cost of improvement, thus allowing expenses incurred for installation of lift and other sundry expenses to make house habitable as cost of improvement. Rajiv Ghai v. Asst. CIT [2024] 109 ITR (Trib) 0439 (ITAT[Del])

29. S.54: Capital gains – Profit on sale of property used for residence-Purchase of new house in name of spouse – Eligible for deduction.[S. 45, 54F]

    Assessee sold his property in India. Out of the sale proceeds, an amount of Rs. 1cr was invested into a new residential house in India. The residential house in which the investment was made by the assessee was registered in the name of his spouse. The assessee claimed deduction u/s 54 of the Act. The Assessing Officer disallowed the claim, which was affirmed by the CIT (A). On appeal the Tribunal held that since the sale proceeds have been duly invested in acquisition of new property within the due time allowed, the assessee is eligible for claim of deduction u/s 54 of the Act. (AY 2020-21) Simran Bagga v. ACIT [2024] 205 ITD 100 (Delhi) (Trib)

30. S. 54 : Capital gains – Profit on sale of property used for residence – Registered in the name of the parents – Payment made through assessee’s bank account – Registered property gifted to the assessee by parents – Rule of purposive construction – Deduction allowed

    Where the assessee sells his residential property and reinvests the sale proceeds in purchasing another property which is registered under their parents’ name, but such investment is actually made by the assessee from his own bank account and subsequently, the property is gifted to the taxpayer by their parents, the assessee is held to be eligible for a deduction under section 54 of the Income Tax Act by invoking rule of purposive construction. Rajiv Ghai v. Asst. CIT [2024] 109 ITR (Trib) 0439 (ITAT[Del])

31. S. 54 : Capital gains – Profit on sale of property used for residence – Capital gains not deposited in CGAS – capital gain was invested in purchase/ construction of residential house within time limit prescribed under section 54(1) – Deduction Allowed

    Merely because capital gain was not deposited in capital gain account scheme within time, the assessment order allowing assessee’s claim under section 54 could not be treated as erroneous and prejudicial to interest of revenue where capital gain was invested in purchase/ construction of residential house within time limit prescribed under section 54(1).

    Ms. Sarita Gupta v. Pr. CIT [2024] 109 ITR (Trib) 0373 (ITAT[Del])

32. S.54B: Capital gains – Land used for agricultural purposes – Investment in new agricultural land – Loan was repaid after sale consideration was received – Order of CIT(A) deleting the addition is affirmed – Cash credits – Matter remanded to the Assessing Officer. [S. 45]

    Assessee purchased lands at Dhanelli and claimed deduction u/s 54B. According to AO above lands has been purchased either on or before the date of transfer of land at Sejbahar and hence deduction u/s 54B was not allowable. Assessee explained that the possession of the land was handed over to the buyer and the consideration received was utilized for purchasing new land. CIT(A) allowed the exemption. On appeal Tribunal affirmed the order of the CIT(A). As regards the loan transactions the matter is remanded to the Assessing Officer. (AY. 2015-16) ITO v. Rekhchand Jain (2024) 204 ITD 333 (Raipur) (Trib)

33. S. 54B : Capital gains – Land used for agricultural purposes – Land purchased in name of Assessee’s wife:Assessee sold an agricultural land and claimed exemption under section 54B on the ground that he purchased a land. AO denied the exemption as he noted that said land was purchased by the assessee in his wife’s name. In view of decision of Tribunal in case of Ashok Kumar S/o Tej Pal Singh v. ITO, [ITA No. 7460/Del/2018, dt. 28-12-2022], deduction under section 54B/54F is available in cases, where investments are made in property purchased in name of wife. Accordingly, AO was directed to allow deduction under section 54B to assessee. Ravinder Kumar v. ITO Ward – 2(2) Meerut [ITA No.2265/Del/2023] [AY 2011-12]
34. S. 54F : Capital gains – Investment in a residential house – three flats – single unit to be eligible for deduction under section 54F

    Assessee has entered into a single agreement to buy triplex flat from the buyer which has floor area of three flats. The agreement and the flat diagram clearly shows that all the three flats are interconnected with one living room, one kitchen and three rooms. Purchased triplex flats which are interconnected and which can be considered as “a residential unit” as per the definition of section 54F of the Act. Bhaskar Prataprai Shah v. DCIT – 16(2) (ITA No. 3698/M/2023 A.Y. 2020-21, (Mum-Trib)

35. S. 56(2)(vii)(b)(ii) : The stamp duty value as of the agreement date is acceptable, contingent upon the condition that the consideration, or a portion thereof, has been discharged through non-cash modes by or on the agreement date.

    The assessee, a non-resident individual, purchased a residential flat from one builder for a certain consideration. The agreement to sell was entered into on 21.06.2010 and the registration of the flat was done on 13.08.2013. The AO initiated reassessment proceedings under section 147 of the Act and made an addition under section 56(2)(vii)(b)(ii) of the Act on the ground that the stamp duty value of the property on the date of registration was higher than the consideration paid by the assessee. The assessee objected to the addition and claimed the benefit of the first proviso to section 56(2)(vii)(b)(ii) of the Act, which allows the stamp duty value on the date of the agreement to be taken for the purpose of this section, provided that the consideration or a part thereof has been paid by any mode other than cash on or before the date of the agreement. The assessee submitted that he had paid Rs. 1,00,00,000 by cheque on 23.06.2010 as a part of the consideration. The AO rejected the assessee’s claim and passed a draft assessment order. The assessee filed objections before the DRP, which confirmed and enhanced the addition made by the AO. The DRP held that the proviso to section 56(2)(vii)(b)(ii) of the Act was not mandatory but directory and that the AO had the discretion to take the stamp duty value on the date of registration. The DRP also held that the assessee had not submitted any valuation report of the property as on the date of the agreement and that the payment of Rs. 1,00,00,000 by cheque was not verified by the bank. The AO passed the final assessment order in pursuance of the directions of the DRP. Aggrieved by the order, the assessee filed an appeal before the Tribunal. The Tribunal allowed the appeal of the assessee and deleted the addition made by the AO and the DRP. The Tribunal held that the proviso to section 56(2)(vii)(b)(ii) of the Act was mandatory and not directory and that the assessee was entitled to the benefit of the said proviso as he had fulfilled the conditions laid down therein. The Tribunal observed that the assessee had entered into an agreement to sell the property on 21.06.2010 and had paid Rs. 1,00,00,000 by cheque on 23.06.2010 as a part of the consideration. The Tribunal also noted that the assessee had submitted the valuation report of the property as on the date of the agreement, which showed that the fair market value of the property was Rs. 1,82,00,000, the same as the consideration paid by the assessee. The Tribunal further noted that the bank had verified the payment of Rs. 1,00,00,000 by cheque and had furnished the relevant details to the AO. The Tribunal, therefore, held that the AO and the DRP had erred in taking the stamp duty value of the property on the date of registration and in disregarding the proviso to section 56(2) (vii)(b)(ii) of the Act. The Tribunal also relied on various judicial precedents in support of its decision. AY 2014-15. Shyamkumar Madhavdas Chugh v. Asst. CIT [2024] 109 ITR (Trib) (S.N.) 0049 (ITAT)[Del])

36. S.54EC: Capital gains-Investment in bonds – Not to be charged on investment in certain bonds – Sale of office premises – Depreciable assets – Six months mentioned in section 54EC is to be recorded as six British calendar months – Eligible for deduction in respect of both investments. [S. 50]

    Assessee has sold office premises on 16-12-2013. He invested Rs. 50 lakhs in REC Bonds on 31- 3-2014 and another Rs.50 lakhs on 30-6-2014. The Assessing Officer held that the assessee was eligible for deduction only in respect of fist investment which was made on 31-3-2014. The Assessing Officer held that amendment with effect form 1-4-2015 is clarificatory in nature. On appeal the CIT(A) enhance the income by holding that the assessee has sold the depreciable asset which is a short term capital asset hence not eligible for deduction under section 54EC of the Act. On appeal the tribunal held that the investment made by the assessee is within period of six months hence both the investments are eligible for deduction under section 54EC of the Act (AY. 2014-15) Shangar v. DCIT [2024] 205 ITD 126 (Ahd) (Trib)

37. S. 68 : Cash credits – Assessing Officer has not made any inquiry of his own either issuing notice under section 133(6) or 131 of the Act

    When the assessee has furnished all details in the comprehensive sheet mentioned; the name of the lender, PAN, amount of loan, repayment of loans, interest paid and Tax Deducted at Source, the closing balance, duly signed confirmation of ITR, relevant bank statement of the depositors were furnished, the assessee has already repaid the entire loan amount of a few lenders. The Assessing Officer has not made any inquiry of his own either issuing notice under section 133(6) or 131 of the Act. The assessee has discharged its onus and thus addition as an unsecured loan under section 68 of the Act is held to be bad in law, especially in the light of the facts that The Assessing Officer failed to give any reason for justification of addition except the presumption and without bringing any adverse evidence on record. (A.Y. 2018-19) Rajgreen Infralink LLP v. Dy. CIT [2024] 109 ITR (Trib) 0052 (ITAT[Surat]) Editorial: CIT v. Ranchod Jivabhai Nakhava (2012) 21 taxmann.com 159 (Gujarat) Followed

38. S.68: Cash credits – Estimation of income – Ex parte order by CIT(A) and Assessing Officer – Matter was remanded to Assessing officer for de novo assessment.[S. 148]

    AO issued notice under section 148. Assessee did not respond to various notices issued ITBA . The notice issued through speed post remained unserved. Before CIT(A) also the asseessee has not attended. CIT(A) partly confirmed the addition. On appeal the Tribunal held that the assessee should be given one final opportunity to present the case on merits. Accordingly directed the assessee to furnish the required information as may be called for without seeking any adjournment and cooperate with the proceedings. The matter is remanded to the Assessing Officer for de novo assessment. (AY 2012-13) Alpha Heavy Engineering (P.) Ltd. v. ITO [2024] 205 ITD 106 (Mum) (Trib)

39. S. 68 : Cash Credit – The AO cannot deem creditors as bogus solely due to lack of response, & without presenting evidence to demonstrate that the payables were unnecessary to settle.

    The assessee was engaged in the business of trading of imported goods. The Assessing Officer (AO) made an addition to the assessee’s income under section 68 of the Income Tax Act, 1961, on account of unexplained sundry creditors. The AO based his addition on the grounds that the assessee had not furnished the confirmation letters from the creditors, that some of the creditors had not responded to the notices issued under section 133(6) of the Act, and that one of the creditors had not supplied any goods to the assessee and the payment to it was made in subsequent years. The Tribunal held that the CIT(A) had correctly appreciated the facts and the evidence regarding the payment and that the AO had not brought any material on record to prove that the creditor in question was not genuine. The Tribunal further held that the absence of reply from the Creditors did not entitle the AO to treat the Creditors as bogus without bringing any evidence on record to prove that the payables were not indeed required to be paid. The Tribunal also held that the CIT(A) had made a reasonable and fair enquiry into the genuineness of the additional information submitted by the assessee, and that the AO had not rebutted the same. The Tribunal finally held that no addition could be made on the outstanding balance pertaining to a Creditor, as the assessee had discharged its onus of proving the identity, creditworthiness and genuineness of the transaction, and that the balance Creditors were also genuine and verifiable. AY 2016-17. ACIT v. Real Impact P. Ltd. [2024] 109 ITR (Trib) (S.N.) 0029 (ITAT[Del])

40. S. 68: Cash credits – long term capital gain treated – unexplained cash credit

    The assessee has sold shares during the year under consideration and earned long term capital gain. The sale of shares has taken place in the online platform of the Stock exchange and the sale consideration has been received through the stock broker in banking channels. The AO has not established that the assessee was involved in price rigging and further the AO did not find fault with any of the documents furnished by the assessee. The sale consideration cannot be considered to be unexplained cash credit in terms of sec. 68 of the Act. ITO v. Alpa Rajendra Jain (ITA No. 1922/M/2023, A.Y: 2014-15 Mum-Trib)

41. S. 68. : Cash credits – Receipt of share capital/premium – Summons issued to investors returned unserved:

    Assessee raised share capital of by issuing equity shares of face value of Rs. 10 at a premium of 90 per share. AO treated amount received by assessee as unexplained credit under section 68 on the ground that summons issued to investors under section 131 were returned unserved. ITAT held that the assessee has filed names, address and PAN of the investors, copies of share allotment advice, share application forms, bank statements, statement giving complete details of share application money received during the year, Form No. 2 evidencing return of allotment and Form 5 for increase in authorized capital. Also, AO issued notices under section 133(6) to all the investors for carrying out independent verification of these transactions which were duly responded by these investors by filing all the requisite details comprising shares subscribed, ledger accounts, bank statements, explanation for source of funds, ITRs and audited financial statements and also assessment order framed under section 143(3) in all the cases. AO had not pointed out any defect or deficiency in the evidences filed by assessee as well as by investors. Accordingly, no addition could be made under section 68 for the mere reason that summons issued to investors were returned unserved. ITO, Ward-13(1), Kolkata v. M/s. Gitika Commodities Pvt. Ltd. [ITA No.588/Kol/2020, dated 16/01/2023] [AY 2012-13].

42. S. 68/148: Addition of Loan deleted as identity, creditworthiness and genuineness proved.

    Tribunal held that the assessee had discharged its burden of proving the identity of loan creditor having permanent account number and filed the return of income as well. Further the creditworthiness of the transaction was proved since they had been through banking channel and sufficient funds were available with the loan creditors to prove genuineness of the transaction. Assessee Company was carrying out regular business activity and loan was obtained at commercial rate of interest which was repaid at a later date in the subsequent year. Tax was deducted at source on interest paid on loans. Hence, addition of Rs. 25,00,000/- made under Section 68 of the Act was deleted. Relied: Pr. CIT v. Sree leathers [2022] 448 ITR 332 (Cal.)  Poddar Realtors v. ITO [2024] 109 ITR (Trib) 0605 (ITAT[Kolk])

43. S. 69 : Unexplained investments – investment in the books of account – evidences to prove genuineness of the purchase

     

    The investment is through banking channel, which is duly supported by the bank statement given by the assessee. It is also reflected in the balance sheet filed with the return of income and wealth-tax records. Thus, once the investment has been shown in books and the source of the investment are also from the books, then no addition u/s.69 can be made. Sureshchandra Seksaria HUF v. ITO Ward – 17(3) (4), ITA No. 531/M/2024, A.Y: 2012-13 (Mum-Trib.)

44. S.69A: Unexplained money – Cash deposits – Demonetization period – Sales made to various parties – Produced copy of bills, sale/ VAT return, stock register and VAT assessment order – Order of CIT(A) deleting the addition is affirmed . [S. 115BBE]

    Assessee was asked to explain the source of cash deposits of Rs. 69 lakhs in its bank account during relevant year. It was explained that the assessee had paid VAT on the sales made and reported the same in its books of account. AO dismissed the claim of sales and went on to make addition of income u/s 69A treating the deposits as income from undisclosed sources and computed the tax as per provisions of section 115BBE. The CIT(A) held that the amount of Rs. 69 lakhs is duly recorded in the books of account which were audited under various laws applicable and supported by credible evidence like copies of invoices, stock register maintained on a day to day basis, VAT returns filed from time to time and order of VAT authorities accepting the sales made by the assessee during the year under consideration. On appeal by Revenue, Tribunal affirmed the order of the CIT(A). (AY. 2017-18) ITO v. J.K. Wood India (P.) Ltd. [2024] 205 ITD 10 (Delhi)(Trib)

45. S. 69A of the Income-tax Act, 1961 – Unexplained moneys – unexplained cash – sale consideration as per sale agreement in his books of account

    Assessee was engaged in real estate business and he filed an agreement of sale and confirmation letter of purchaser before Assessing Officer for justifying cash deposit in his accounts as sale consideration, AO was not justified in making addition of said deposit under section 69A. Assessing Officer treated cash deposit made by assessee as unexplained cash in hands of assessee and made addition by invoking provisions of section 69A, since assessee had deposited old currency notes which were kept for petty expenses and obtained new currency notes from bank, cash deposit was to be treated as explained. Konathala Nooku Naidu v. ITO [ITA No. 269/ VIZ/2023, A.Y. 2017-18 (Visakhapatnam – Trib.)]

46. S. 69B : Investments not fully disclosed in the books of account (r.w.s. 131)

    Hon’ble Tribunal held that it is a settled proposition of law that the statement recorded under Section 131 during the course of survey has no evidentiary value in the absence of any corroborative evidence on record vide CIT v. S. Khader Khan 300 ITR 157 (Mad.). The Officer is not authorised to administer the oath and to take sworn statement which alone has evidentiary value as contemplated under law and such statement so recorded can be used in evidence under the Act. Therefore, the statement of one of the partners of the assessee firm without any corroborative evidence for the purpose of invoking the deeming provisions of Section 69B of the Act. Hon’ble Tribunal further held that there was a clear affirmation that land and building was purchased in the year 2014 and was reflected in the books of account. Further, in order to buy peace of mind and avoid litigation, an amount of Rs.45 lakhs was offered on account of addition made to factory building and source whereof has been stated to be out of business income and the deeming provisions, therefore, cannot be invoked in the instant case. Hon’ble Tribunal further held that provisions of Section 69B read with Section 115BBE cannot be invoked in the instant case. DDK Spinning Mills v. Dy. CIT [2024] 109 ITR (Trib) 0619 (ITAT[Chand])

47. S. 69B: Stock not fully disclosed in books of account

    Where AO treated the amount surrendered by the assessee during the course of the survey as excess stock under section 69B, since the income surrendered by the assessee was from business operations and Revenue had not pointed out that excess stock had any nexus with any other receipts other than business being carried on by the assessee, the same could not be brought to tax under deeming provisions of section 69B read with section 11BBE. (A.Y. 2019-20) Montu Shallu Knitwears v. Dy. CIT [2024] 109 ITR (Trib) 0001 (ITAT[Chand])

48. 80G: Denial of final approval – due to technical reason – mentioning of wrong clause by Assessee – rectifiable mistake.

    The CIT(E) had denied the application for final approval u/s 80G of the Act on the ground that the Assessee out of inadvertence had mentioned another Clause, the ITAT observed that the same was not an illegality but rather the same was a rectifiable mistake. The ITAT held that instead of getting the application withdrawn, ld. CIT (Exemption) was supposed to give opportunity to the Assessee to rectify the mistake i.e. the mentioning of the appropriate Clause. CIT (E) even could have suo-moto passed an order treating the said application under the relevant ‘Clause-iii’ of Section 80G (5) of the Act. Appeal allowed. Vivekananda Mission Asram v. CIT [2024] 109 ITR (Trib) (S.N.) 0022 (ITAT) [Kolk])

49. S. 80(G)(5): Rejection of Application 

     

    Where assessee-trust filed an application dated 11-1-2023 in Form No. 10AB for approval under section 80G(5) and Commissioner (Exemption) rejected the application on the ground that it had been filed beyond six months of commencement of activities, since words ‘within six months of commencement of its activities’ used in sub-clause (iii) of the proviso to section 80G(5) applied for those trusts which had not started charitable activities at the time of obtaining provisional approval and not for those trusts including assessee which had already started activities before obtaining provisional approval, the application filed by assessee was within prescribed time limit and thus valid Bhamashah Sundarlal Daga Charitable Trust v. CIT (Exemption) 109 ITR (Trib) 0418 (ITAT[Jodh])

50. S.80GGA: Donation – Scientific Research – Rural development – At the time of making of donation the charitable trust was duly approved under section 35AC – Subsequent withdrawal – Denial of deduction is held to be not valid.[S.35AC(2), 80GGA(2) (bb), 147, 148]

    The assessment was reopened on the ground that the charitable trust had accepted donations in cheque which was later on returned in cash to donor after deducting commission. The reassessment proceeding was initiated and the claim under section 80GGA was disallowed. CIT(A) affirmed the order of the Assessing Officer. On appeal the Tribunal held that there is no material on record to dispute the claim of the assessee that at the time of making of donation to charitable trust was duly approved u/s 35AC of the Act. Accordingly the denial of the claim was set aside. (AY. 2010-11) Rabi Narayan Bastia v. DCIT [2024] 205 ITD 114 (Mum) (Trib)

51. S. 80IC: Special category States – disallowance of deduction – due date to file return of income – Assessee was required to report in Form 3CEB as specified under section 92E – thus as per the provisions of Explanation-2 to section 139(1) of the Act, the due date for filing the return of income was 30/11/2015 – filing of Form 10CCB alongside the return sufficed for claiming the deduction under section 80-IC.

    The Assessee, Supreme Treon Pvt. Ltd., contested the disallowance of a deduction claimed u/s 80-IC for its unit in Rudrapur, Uttarakhand on account of not filing its audit report in Form 10CCB before the due date of filing the ROI. As per the Department the due date for filing return for Assessee was 31.10.2015, however, as per the Assessee it was 30.11.2015, where the return was actually filed by the Assessee on 29.11.2015. The ITAT analyzed the provisions of section 139(1) and observed that the Assessee’s return, filed on 29.11.2015, fell within the prescribed due date. It was emphasized that compliance with section 92E did not alter this deadline. Furthermore, the ITAT determined that the Assessee’s filing of Form 10CCB alongside the return sufficed for claiming the deduction under section 80-IC. They highlighted that the intimation issued under section 143(1) did not provide a valid basis for denying the deduction.(AY 2015-16) Supreme Treon P. Ltd. v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0001 (ITAT[Mum])

52. S.80P: Co-operative societies – Interest – Surplus funds – Co-Operative banks and Schedule banks – Eligible deduction. [S.80P(2)(a)(i), 80P(2)(d)]

    AO disallowed the claim for deduction of interest income earned on fixed deposits made with bank by holding it to be a co-operative bank. CIT(A) affirmed the order of the AO. On appeal the Tribunal held that even the co-operative bank as well as schedule bank qualifies for deduction both under provisions of section 80P(2)(a)(i) and section 80P(2)(d) and therefore the reasoning given by the lower authorities on this issue cannot be accepted. (AY. 2018-19)  Kolhapur District Central Co-op Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd. v. ITO [2024] 205 ITD 6 (SMC) (Pune) (Trib)

53. S. 80P: Deduction in respect of income of co-operative societies. 

     

    Assessee received various grants from West Bengal State Government. It was a Government of West Bengal Undertaking which was an apex body over Societies like assessee. Miscellaneous incomes mainly constituted grants received from West Bengal Government for various activities as per its required byelaws, since the sum of Rs. 2,09,92,664/- was income earned by the Society for the purpose of its object, it was eligible for deduction under Section 80P of the Income-tax Act, 1961. U. L. S. Multipurpose Co-op. Society v. ITO [2024] 109 ITR (Trib) 0586 (ITAT[Kolk])

54. S. 80P : Co-operative societies – Deductions – co-operative society, has earned commission income on collection of MSEDCL bills which was from business activity carried on by assessee, same was eligible for deduction under section 80P(2)(a)

    Co-operative society, had received commission income on collection of MSEDCL bills which was from business activity carried on by assessee, same was eligible for deduction under section 80P(2)(a). Anand Urban Cooperative Credit Society Ltd. v. ITO Ward- 1(5) [ITA No. 136/PUN/2024, A.Y. 2018 -19 (Pun-Trib)]

55. S. 90 of Income-tax Act

     

    ITAT held that following the Co-ordinate Bench of ITAT, Pune it was held that there was no requirement of separate notification for importing the beneficial treatment from the agreement. Therefore, respectfully following the aforesaid decision of co-ordinate benches of Tribunal, held that CBDT Circular No. 3 of 2022 dated 3rd February, 2022 was not applicable and the assessee was entitled to the benefit of restricted definition under the India-Portugal Double Taxation Avoidance Agreement. The assessee was found not to have made available any technical knowledge, experience or skill or know-how, therefore, the impugned services received could not be taxed and accordingly, the appeal was allowed. Relied: Renewable Industries S.L. v. ACIT (2022) 100 ITR (Trib.) 470, Pune Dieffenbacher GmbH v. Asst. CIT (IT) [2024] 109 ITR (Trib) 0598 (ITAT[Mum])

56. S. 90 : A resident of Mauritius earning income from the transfer of shares of Indian companies should be subject to capital gains tax exclusively in Mauritius, rather than in India. (r.w. Article 13 of the DTAA b/w India & Mauritius)

    The assessee is a limited liability company incorporated in Mauritius and it had submitted the copy of the tax residency certificates issued by the Mauritius Tax Authorities for the relevant period during the assessment proceedings. It derived income by way of gains from transfer of shares of Indian companies and claimed that such income was taxable only in Mauritius as per the DTAA between India and Mauritius. The AO accepted the claim of the assessee and passed an order u/s 143(3) r.w.s. 144C (13) of the Income-tax Act, 1961 (the Act) allowing the benefit of the DTAA to the assessee. The Revenue filed an appeal against the order of the AO before the Tribunal. The Tribunal dismissed the appeal of the Revenue and upheld the order of the AO. It held that the assessee was entitled to the benefit of the DTAA between India and Mauritius as it had submitted the tax residency certificates issued by the Mauritius Tax Authorities and thus being a Mauritius resident deriving income by way of gains from transfer of shares of Indian companies, it was liable to capital gains tax only in Mauritius and not in India as per paragraph 4 of Article 13 of the DTAA between India and Mauritius. It also noted that the AO had accepted the claim of the assessee in the assessment order as well as the remand report and there was no material to controvert the same. AY: 2017-18. Dy. CIT v. Battery Ventures VII (Mauritius) [2024] 109 ITR (Trib) (S.N.) 0065 (ITAT [Del])

57. S. 90: Double taxation relief- India- Mauritius DTAA

    The assessee had acquired the Compulsorily Convertible Preference Shares before 01.04.2017. The capital gain derived from the sale of such shares would not be covered under Article 13(3A) or 13(3B) of the Treaty. It will fall under Article 13(4) of India-Mauritius DTAA and, hence, would be exempt from taxation as the capital gains are taxable only in the country of residence of the assessee. The tribunal held that the word ‘shares’ mentioned in the tax treaty is to be understood in a broader sense which will take within its ambit all shares, including preference shares and thus, CCPS acquired before Apr 1, 2017, would fall within the category of shares. (A.Y. 2020-21) Sarva Capital LLC v. Asst. CIT (IT) [2024] 109 ITR (Trib) 0330 (ITAT [Del])

58. S. 90: Double taxation relief – India-Singapore DTAA

    The marketing and sales services, operations and standardization services do not satisfy the “make available” clause as per article 12(4)(b) of Indo Singapore DTAA and, therefore, the amounts attributable for these services cannot be held to be fees for technical services. (A.Y. 2010-11 to A.Y. 2014-15) Dy. CIT v. CEVA Asia Pacific Holdings [2024] 109 ITR (Trib) 0280 (ITAT[Del])

59. S. 92CA : Transfer pricing – Reference to Transfer Pricing Officer – computation of Arm’s Length price – selection of comparable companies – Accentia Technologies Limited, Eclerx Services Limited, and TCS E-Serve Ltd. – held functionally different than the Assessee – rejection by CIT(A) upheld.The Revenue had challenged the rejection of three comparable companies viz. Accentia Technologies Limited, Eclerx Services Limited and TCS E-Serve Ltd., which were identified by the AO/TPO for the purpose of ALP determination of the international transaction. The issue was covered by the order of the coordinate bench of ITAT in Assessee’s own case for other AYs. 2009-10 and 2010-11, wherein the aforementioned comparable companies were rejected prima facie on the ground of being functionally different from that of the Assessee company. In case of TCS it was also observed that TCS is in a different league as it owns huge intangible assets and has the Tata brand. (AY 2011-12) Asst. CIT v. Reservation Data Maintenance [2024] 109 ITR (Trib) (S.N.) 0012 (ITAT[Del])
60. S. 92CA : Transfer pricing – Reference to Transfer Pricing Officer – Arm’s Length price – selection of certain comparables – Gujarat Fluorochemicals Limited – Inox Air Products Limited – excluded. – Purchase and subsequent sale of capital asset.Assessee is in a Project Engineering line of business, which executes turnkey contracts relating to industrial gases plants, a process gas solutions line of business, etc. The issue involved is selection of comparable for computation of ALP of international transaction of purchase of raw materials and sale of finished goods. The first comparable involved is Gujarat Fluorochemicals Limited (GFL). The Assessee submitted that in Assessee’s own case, the DRP has excluded this concern on account of functional disparity in AYs 2012-13, 2013-14, 2014-15. Held, GFL is to be excluded from list of comparables. With respect to Inox Air Products Limited, the Assessee submitted that it is not specifically in the line of manufacturing gases but it also has a host of other activities. The TPO had not examined its segmental accounts and not worked out how much component of its revenue is from the same area of operation as the Assessee is engaged in. Further TPO failed to compute true operating profit margins as well as considering the adjustment for working capital before adopting true percentage of margin for compare. Therefore, matter remanded back to AO to re-examine the issue and exclude the two aforementioned comparables from the list of 12 comparables finalised by TPO. The second issue is with respect to transfer of fixed asset. The Assessee had purchased two second-hand nitrogen generating plants which were manufactured in UK and installed in China. One of these plants were sold by the Assessee to its AE in Indonesia. The Assessee furnished additional evidence to show that it had paid customs duty which was not considered and that the Assessee had actually incurred a loss on sale. The ITAT held that this is a specific instance of purchase and sale of a plant for which it is quite difficult to find a comparable. It is a specific item for whom very limited customers would be there. Therefore, this issue was also remitted for re-examination at the level of AO. Appeal allowed. (AY 2011-12) Linde India Ltd. v. Jt. CIT (ITAT[Kolk]) [2024] 109 ITR (Trib) (S.N.) 0006
61. S. 115JB: denial of MAT credit – in rectification order – documents filed to show the availability of MAT credit – original assessment proceeding pending final adjudication – matter remanded to AO.

    The only issue involved in this appeal is denial of adjustment of MAT credit of earlier years in the rectification order passed u/s 154 r.w.s. 143(3) of the Act. The AO took note of Form 29B along with annexure “A” which demonstrated the availability of MAR credit, Form 26AS, the fact that the proceeding for AY 2012-13 is pending as the Co-ordinate Bench of ITAT had remanded the same to the file of CIT(A) for afresh appropriate adjudication. In view of the above, the ITAT remanded the matter to the file of the AO to verify the records in respect of claim of MAT credit and allow the same in accordance with the provisions of law (AY 2013-14) Jute Corporation of India Ltd. v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0025 (ITAT[Kolk])

62. Ss. 132, 143(3) and 153A – Income to be taxed in the hands of key person:

    The key person of the group managed all financial affairs and he was responsible for earning the undisclosed income emerged from the seized materials, all the transactions, which did not belong to any specific group were to be considered in his hands. Therefore, the Order of CIT(A) was to be set aside and the issues restored to the Assessing Officer for fresh adjudication after considering the order passed by Settlement Commission. Shiv Cotex India P. Ltd. v. Dy. CIT [2024] 109 ITR (Trib) 0594 (ITAT[Del])

63. S. 139(1)(5): Mistake being of Punching error, correct income be taxed

    The appellant filed its original return of income in February 2015 declaring income at Rs. 1,28,42,730/-. Thereafter, on very next day, it filed revised return of income declaring total income at Rs. “NIL”. The CIT(A) observed that the correctness of the revised computation statement had not been questioned by the Assessing Officer and in the interest of substantial justice only correct income should be taxed. On Appeal, the Tribunal held: That the mistake being as a result of punching error the decision of CIT(A) was to be upheld. ITO v. Vikunj Enterprises P. Ltd. [2024] 109 ITR (Trib) 0517 (ITAT[Mum])

64. S. 133A : Survey – Statements recorded lack evidentiary value and cannot be relied upon as substantive evidence.

    The assessee, a partnership firm engaged in the business of construction and development of residential flats and shops, filed its return of income declaring its total income for the assessment year. A survey action under section 133A of the Income Tax Act, 1961 (the Act) was conducted in the business premises of the assessee, during which statements of two partners were recorded, wherein they admitted a profit element in respect of different construction projects carried out by the assessee firm. Later, the partners retracted their statements by way of an affidavit, describing the loose papers found during the survey as dumb documents. The Assessing Officer (AO) rejected the retraction and made an addition, as the undisclosed income of the assessee. The assessee appealed before the Commissioner of Income Tax (Appeals) (CIT(A)), who estimated the gross profit of the assessee at 12.5% and directed the AO to reopen the assessments for the assessment years 2009-10 to 2016-17 and give telescopic effect to the income of the assessee. The Revenue challenged the order of the CIT(A) before the Tribunal. The Tribunal dismissed the appeal of the Revenue and upheld the order of the CIT(A). The Tribunal held that the AO was not correct in making the addition to the extent desired as the undisclosed income of the assessee, based on the statements recorded under section 133A of the Act, had no evidentiary value and were retracted by the assessee. The Tribunal also held that the CIT(A) had made a thorough analysis of the income of the assessee project-wise and estimated the gross profit at 12.5%, which was reasonable and did not require any interference. The Tribunal further held that the CIT(A) had rightly given direction to the AO to reopen the other assessment years and recompute the income of the assessee by giving telescopic effect, as per the provisions of section 147(1) of the Act. AY: 2014-15. ITO v. Shubh Developers [2024] 109 ITR (Trib) (S.N.) 0061 (ITAT[Ahm])

65. S. 143 : Assessment Order without DIN – set-aside

    Where the assessment order passed by Assessing Officer did not bear any DIN in terms of CBDT Circular No. 19, dated 14-8-2019, the assessment order was to be set aside (A.Y. 2015-16) Smt. Sharda Devi Bajaj v. Dy. CIT [2024] 109 ITR (Trib) 0131 (ITAT[Del])

66. S. 143 : Where assessment order was passed under section 143(3) without any Document Identification Number (DIN) on the body of the communication, and no reasons were mentioned for not generating DIN at time of passing of such order as mentioned in Circular No. 19/2019, dated 14-8-2019 which would sustain communication of final assessment order manually without DIN, assessment order was to be treated as never been issued.

    The assessee had filed appeals against the assessment orders passed by the Assessing Officer (AO) under section 143(3) of the Income- tax Act, 1961 (the Act) for the said assessment years, which were accompanied by a covering letter dated 31.12.2019 containing the Document Identification Number (DIN) and letter number. The AO had made various additions and disallowances to the assessee’s income and levied penalty under section 271(1)(c) of the Act for concealment of income or furnishing of inaccurate particulars of income. The assessee had also filed appeals against the penalty orders passed by the AO for the said assessment years. The issues raised by the assessee in the appeals were whether the assessment orders and the penalty orders were valid and legal in the absence of mention of DIN in the body of the orders and whether there was any material on record to show that the AO had obtained the approval of the Chief Commissioner or Director General of Income Tax for issuing the orders manually without DIN, as required by the Circular No. 19/2019 issued by the Central Board of Direct Taxes (CBDT) on 14.08.2019. The Hon’ble Tribunal held that the assessment orders and the penalty orders were invalid and non-est in the eye of law, as they did not comply with the mandatory requirements of the CBDT Circular No. 19/2019. The bench relied on the decision of the Delhi High Court in CIT (International Taxation) v. Brandix Mauritius Holdings Ltd., which held that any communication issued by the revenue without DIN, except in the circumstances specified in the CBDT Circular, would be treated as non-est in law and would not confer any jurisdiction on the revenue to make any assessment or levy any penalty. The bench also observed that the revenue had not shown any exceptional circumstances or approval for issuing the orders manually without DIN, as required by the CBDT Circular. The bench quashed the assessment orders and the penalty orders and allowed the appeals of the assessee. AY 2007-08, 08-09, 09-10, 12-13 & 2013-14. Sad Bhawna v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0045 (ITAT[Del])

67. S. 143(1)(a) : Assessment – Intimation – Assessee trust registered under section 11 – assessee had evidently demonstrated failure on part of revenue to issue prior intimation to it before making an adjustment by way of disallowing claim of exemption under section 11 – income should be understood in its commercial sense – computing total income of assessee equal to total receipts for year was not in accordance with commercial prudence – Addition deleted

    If the revenue fails to provide prior intimation to an assessee trust registered under section 12AA, before making an adjustment under section 143(1)(a) to disallow its exemption claim under section 11, then such an adjustment should be deleted. Further it was held that income should be understood in it’s commercial sense and computing total receipts of the assessee as total income is not prudent. ITO (E) v. Camellia Educare Trust [2024] 109 ITR (Trib) 0362 (ITAT[Kolk])

68. S. 143(1)(a) : Assessment – Intimation – Income in the nature of income from house property and income from other sources declared along with business income – Auditor further reported such income under clause 16(d) of Form No. 3CD – CPC, processed return making an addition of such amount – Income clearly non- business income – Mistake on part of auditor would not ipso-facto lead to addition or adjustment in business income

    If the income clearly falls outside the scope of business income, a mistake by the tax auditor in including such income in clause 16(d) of Form No. 3CD should not inherently result in an addition or adjustment to the business income. This is particularly pertinent when the assessee has already disclosed this income under the appropriate heads in the ITR. Brajesh Agrawal v. Asst. DIT [2024] 109 ITR (Trib) 0476 (ITAT [All])

69. S. 143(3): Assessment – Validity – Addition on account of bogus LTCG – Addition based on some incriminating material found in a search at premises of third parties.

    Assessee filed his return of income for relevant assessment year, which was processed under section 143(1). Assessee challenged the said assessment order on the ground that the same was bad in law in as much as it should have been framed under section 153A read with section 153C as entire assessment was based on outcome of search and seizure proceedings conducted at premises of several stock brokers, whereby it was found that he was also one of the beneficiaries of LTCG earned through manipulation of shares. There was no dispute that entire addition in instant case, was based upon incriminating material/information detected out of search proceedings under section 132 conducted at premises of stock brokers. Therefore, assessment order should have been framed as per provisions of section 153C. Hence, assessment order passed under section 143(3) was set aside being bad in law. Shri Rajender Agarwal vs. The A.C.I.T. Central Circle – 5, [ITA No.2631/Del/2019] [AY 2014-15]

70. S.144C: Reference to dispute resolution panel – Objection is filed before DRP after due date of time allowed for filing objections- AO should carry proceedings to finalize assessment order as per provisions of section – Assessment order was barred by limitation and treated as void. [S.92CA(3), 144C(4), 153]

    The draft of assessment order was passed on 4-3-2022, but the assessee filed objections before DRP on 6-4-2022. i.e. after due date of time allowed for filing of objections before DRP. On appeal the assessee contended that the final assessment order passed by the AO was invalid, bad in law and liable to be quashed being in contravention of the provisions of section 144C(4) of the Act. The tribunal held that since the final assessment order has been passed after due date prescribed u/s 144C of the Act, the order is barred by limitation and treated as void. (AY. 2013-14) Mavenir UK Holdings v. ACIT [2024] 205 ITD 1 (Delhi) (Trib)

71. S.144C: Reference to dispute resolution panel – Passing draft assessment order – AO passed final assessment order instead of draft assessment order – Invalid order – Order quashed. [S.92CA(3), 144C(4), 153]

    Tribunal held that the Assessing Officer passed the final assessment order which was in contravention of provision of s.144C of the Act. Accordingly the final assessment order being bad in law, all notices including the penalty notices and notice of demand is quashed . (AY. 2012-13) Panasonic Life Solutions India (P.) Ltd. v. ACIT [2024] 205 ITD 139 (Mum)(Trib)

72. S. 145: Method of accounting – Low GP

    Where Assessing Officer found that the assessee had shown a GP rate of 11.25 percent as against the GP rate of 12.8 percent of the immediately preceding year and he made an addition by taking a GP rate of 12.8 percent for want of relevant documents, since the assessee had produced all relevant books before Commissioner (Appeals) and Assessing Officer had accepted same, the addition made on account of low GP rate was to be deleted (A.Y. 2010-11) Dy. CIT v. Kortek Electronics (India) Ltd. [2024] 109 ITR (Trib) 0276 (ITAT[Del])

73. S.147: Reassessment – old provisions – on information received from investigation wing – borrowed satisfaction – cash deposits – reassessment set aside.

    Assessment was reopened on the basis of information received from the investigation wing that funds have been transferred to the Assessee out of cash deposits made in six bank accounts of five parties and that the unaccounted cash has been transferred to the account of the Assessee by rotation of funds. ITAT observed that AO has merely relied on the information received on a borrowed satisfaction without recording his own reasons. Further, even the amounts which were stated to be allegedly deposited in the bank account of the Assessee was not added to the income of the Assessee. ACIT v. Meenakshi Overseas Pvt. Ltd. [2017] 82 taxmann.com 300 (Del), CIT vs. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del), DCIT v. Great Wall Marketing Pvt. Ltd. [ITA No. 660/ KOL/2011, dated 03.02.2016] followed. (AY 2009- 10 and 2010-11) Ujjala Suppliers P. Ltd. v. ITO [2024] 109 ITR (Trib) (S.N.) 0016 (ITAT [Kolk])

74. Ss. 147 and 149(1)(b): Validity of reassessment proceedings

    Once the initiation of reassessment proceedings had been challenged, all the grounds incidental thereto were available to assessee to challenge the validity of reassessment proceedings, hence, reassessment proceedings initiated by the Assessing Officer were not in conformity with the provisions of the first proviso to Section 147 of the Act. It was for Assessing Officer to record reasons clearly and unambiguously and no inference can be drawn therefrom. That the requirement of the provisions of first proviso to Section 147 as well as Section 149(1) (b) of the Act were not fulfilled. Therefore, the reassessment proceedings under Section 147 were set aside as bad in law. Followed: Hindustan Lever Ltd. (2024) 268 ITR 332 (Bom.) Dy. CIT v. Satya Securities Ltd. [2024] 109 ITR (Trib) 0700 (ITAT[Mum])

75. S. 147 : The reopening of an assessment solely on borrowed satisfaction, devoid of independent scrutiny, lacks validity.

    The revenue alleging bogus long-term capital gain (LTCG) from penny stocks and commission, reopened the assessment for the impugned assessment year and made additions. The AO reopened the case after obtaining approval from the competent authority on the basis of information received from the Investigation Wing that the assessee had earned LTCG from transfer of shares of a company which was a penny stock company, and claimed it as exempt under section 10(38) of the Income Tax Act. The AO added to the assessee’s income under section 68 of the Act an unexplained cash credit and commission for arranging the accommodation entry of LTCG in the assessment order. The assessee challenged the reopening and the additions before the Commissioner of Income Tax (Appeals) (CIT(A)), National Faceless Appeal Centre (NFAC), Delhi, who dismissed his appeal. The assessee then filed an appeal before the Tribunal where it was contended that the reopening was invalid as the reasons recorded by the AO were vague, contradictory, and based on borrowed satisfaction without any independent application of mind. He also submitted that he had purchased and sold the shares through genuine transactions and had disclosed all the material facts in his return of income. He relied on various judicial precedents to support his case. The Tribunal, after hearing both the parties, found merit in the assessee’s contentions and held that the reasons recorded by the AO were not clear and unambiguous and did not establish any link between the information received and the escapement of income by the assessee. The Tribunal also observed that the AO had stated different amounts of LTCG and commission in the reasons and the assessment order and had used the terms “his/her” and “she” interchangeably, which showed non-application of mind. The Tribunal further noted that the AO had not examined the details of the purchase and sale of the shares, the mode of payment and receipt, and the source of funds of the assessee, and had merely relied on the information from the Investigation Wing without any independent verification. The Tribunal, therefore, quashed the reopening and the additions made by the AO and allowed the appeal of the assessee. AY: 2013-14.

    Dinesh Gangwal v. ITO [2024] 109 ITR (Trib) (S.N.) 0042 (ITAT[Kolk])

76. S.151 : The absence of proper authorization from the designated officer renders the notice of reassessment under section 148 null and void from the outset, warranting its dismissal.

    Section 127 of the Income Tax Act, 1961: Prior to altering jurisdiction, it is imperative to ensure that the assessee is duly notified. The assessee, a proprietor, was engaged in the business of manufacturing and trading bullions, precious stones, studded jewellery and gold and diamond ornaments. He filed his return of income for the assessment year declaring his total income. The case was selected for scrutiny and the Assessing Officer made an addition on account of unverifiable purchases from parties. The assessee appealed against the addition and the CIT(A) deleted the same. The department’s appeal before the Tribunal was also dismissed. Subsequently, the Assessing Officer reopened the assessment under section 147 of the Income Tax Act, 1961 (the Act) on the basis of information received from the Investigation Wing that one entity from whom the assessee had made purchases was a bogus entity managed by an individual, who was engaged in providing accommodation entries. The Assessing Officer issued a notice under section 148 of the Act to the assessee and passed a reassessment order, making an addition as bogus purchase. The assessee challenged the validity of the reopening and the addition before the National Faceless Appeal Centre (NFAC), which upheld the action of the Assessing Officer. The assessee then filed an appeal before the Tribunal. Appeal was also on erroneous exercise of jurisdiction by the ITO at Delhi without due notice under section 127 on the transfer of jurisdiction. The Tribunal held that the reopening of the assessment and the issuance of notice were invalid and void-ab initio, as the Assessing Officer had not obtained the proper sanction from the Joint-Commissioner of Income-tax as required under section 151(2) of the Act and had not issued the notice from the competent jurisdictional Assessing Officer as there was no order under section 127 for transfer of the case from jurisdiction A to B. AY 2007-08. Chirag Mishrimal Hirani v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0040 (ITAT[Surat])

77. S.153A: Assessment – Search – Less than 50 lakhs – Assessment beyond six years is bad in law. [S.69, 132]

    Held that the assessment beyond six years but not more than ten years can be reopened u/s 153A of the Act only if the AO is in possession of evidence depicting the escapement of income more than 50 lakhs . Tribunal held that such provision extending the scope of assessment beyond six years from the date of search has to be constructed strictly and the evidence relied upon by the AO in such assessment of extended period must be tangible evidence. Appeal is allowed. (AY. 2011-12) Kawaljit Singh v. ACIT (2024) 204 ITD 307 (Chd)(Trib)

78. S. 195: Resident of Canada entitled to benefit under DTAA

    The Joint Venture had already withheld the tax on payments for technical know-how @ 10% and financial commitment fees @ 15% respectively under Section 195 of the Income- tax Act. The Commissioner allowed the claim to be taxed in accordance with the provisions of DTAA between India and Canada. On further appeal, the Tribunal held that the assessee was a resident of Canada and entitled to the benefit under DTAA. Thus, there was no infirmity in the decision of the Commissioner appeal. Dy. CIT v. Foundation Co. of Canada Ltd. [2024] 109 ITR (Trib) 0590 (ITAT[Del])

79. Ss. 201(1) and 201(1A): Deduction of Tax at source: India UAE Treaty

    Assessee is an Indian Company engaged in the business of engineering, procurement and construction (EPC) contracts relating to infrastructure facilities comprising high power transmission lines, transmission and distribution, laying of electrification of railway lines, cross country paying of oil and gas pipelines etc. In one of the engineering procurement and construction project executed by the assessee’s branch office in Uganda, the assessee has made payment for services of towers design including designing of its foundation and structural drawing to oilstone technologies DMCC of UAE (Oilstone UAE) and no tax was deducted at source on such payment by the assessee on the ground that such payment was not chargeable to tax in India. The TDS Officer held that the assessee had made payment to oilstone UAE for various services as mentioned in the Explanation 2 to Section 9(1)(vi) of the Act and such payment was in the nature of royalty and since the assessee failed to deduct tax on such payment, it was default and liable to the provisions of Section 201(1) and (1A) of the Act. The TDS Officer accordingly raised a demand of Rs. 2,28,23,683/- under Section 201(1) and (1A) of the Act on the assessee. Aggrieved with the aforesaid order, the assessee filed appeal before CIT(A) challenging addition made / treatment given by TDS Officer. CIT(A) held that since, the services were provided by oilstone, UAE to the assessee outside India and services were utilised for the purpose of business of the assessee outside India, the case of the assessee was covered by the exclusion clause provided in Section 9(1)(vii)(b) of the Act and the payment was not chargeable to tax in India as “fees for technical services” hence, the Assessing officer was not justified in holding the assessee as an assessee in default under Section 201(1) and (1A) of the Act. The Department filed an appeal before Tribunal against the deletion of additions made by the TDS Officer. Tribunal held that in the absence of fees for technical services clause in the India – UAE Tax-treaty, payment of aforesaid services cannot be taxed in India, unless it is established that the overseas company had a permanent establishment (PE) in India. In the instant case, the assessee had also furnished a declaration regarding “no permanent established in India Tribunal further held that the assessee was not under obligation to withhold taxes on such payments made to Oilstone UAE and did not find any infirmity in the Order of CIT(A). Hence, the appeal of the department was dismissed. Dy. CIT v. Kalpataru Power Transmission Ltd. [2024] 109 ITR (Trib) 0689 (ITAT[Ahm])

80. S. 248: Denying liability to deduct tax at source:

    The assessee remitted payment to its parent company after tax deduction as directed by the Assessing Officer. Assessee filed appeal before CIT(A) under Section 248 of the Act for a declaration that assessee was not liable to deduct tax at source on payment to non- resident. The CIT(A) rejected the appeal of the assessee. Tribunal held that the assessee though claimed to have reimbursed the cost incurred by the parent company to provide certain common services without any mark-up, however the claim was not substantiated. From the agreement it was difficult to ascertain whether they were in nature of fees for technical services “or” only reimbursement of cost. Assessee relied upon the Certificate of D and contended that payment made to non-resident was only cost incurred by the parent company without and mark-up. However, the same was not supported by any evidence. Assessing Officer was directed to re-examine the issue as to applicability of Section 195 in respect of payment to non-resident in the light of Cost Sharing Agreement and Certificate issued by D and provisions of Section 9(1)(viii) read with DTAS between India and Germany. Relied: BASF India Ltd. v. Dy. CIT (International Taxation) [2019] 102 Taxmann.com 133 (Mumbai) BASF Catalysts India P. Ltd. v. Dy. CIT [2024] 109 ITR (Trib) 0668 (ITAT[Chen])

81. S. 251: Appeal – Commissioner (Appeals) – Powers Co-terminus – Fresh claim of deduction

    The appellate authority has coterminous power to accept the deduction which was not claimed in ITR. So, the entire claim under section 80C is eligible for claim of deduction. (A.Y. 2015-16 to A.Y. 2018-19) Ajay Sharma v. Jt. CIT [2024] 109 ITR (Trib) 0268 (ITAT[Amrit]) Followed: CIT, Delhi-II v. Jai Parabolic Springs Ltd [2008] 172 Taxman 258/ 306 ITR 42 (Delhi HC) Sesa Goa Ltd. v. Additional CIT, Panaji, Goa, [2020] 117 taxmann.com 548 (Bombay) Distinguished: Goetze (India) Ltd. v. CIT [2006] 284 ITR 3231 (SC)

82. S. 263 : Revision of orders prejudicial to revenue – revision on the basis of investigation/ enquiries conducted post completion of assessment – no information provided with respect to nature of investigation, material brought on record – Assessee not provided an opportunity to examine and rebut the material relied upon – held, exercise of jurisdiction u/s 263 is invalid.

    The PCIT had invoked his jurisdiction u/s 263 of the Act despite admitting that based on evidence available on record, the AO could not doubt the purchase and sale of shares. After completion of assessment, some investigation was carried out by the department, which allegedly revealed that the share transaction was through an entry operator, hence, non-genuine. However, what was the nature of such investigation, what was the material brought on record therefrom was not forthcoming either from the SCN or the order passed u/s 263 or to what extent the Assessee or the concerned broker was involved in such non-genuine transactions has not been discussed by the PCIT. Further, in spite of repeated requests, such adverse materials/ investigation report was never confronted to the Assessee. In such circumstances, the assessment order cannot be considered to be erroneous and prejudicial to the interest of revenue. (AY 2017-18) Kaustubh Gupta v. Pr. CIT [2024] 109 ITR (Trib) (S.N.) 0010 (ITAT[Del])

83. S. 263: Commissioner – Revision of orders prejudicial to revenue

    Where revisionary proceedings were invoked on grounds that the assessee wrongly adjusted LTCL twice once with LTCG and then again with STCG since the same was a case of bona fide mistake committed by the assessee purely based on verifiable facts which had no bearing on income-tax liability for the year under the consideration and effect was on availability of MAT credit in the subsequent year for which assessee submitted to make a course correction, revisionary proceedings under section 263 would not be justifiable Revision of an order under section 263 presupposes the existence of an order since levy of interest under section 115P and any liability of DDT under section 115-O gets fastened on the assessee by provisions contained under Chapter XIID and did not form part of assessment order under section 143(3), Principal Commissioner could not have invoked revisionary proceedings to direct AO to impose DDT liability in reference to assessment order passed under section 143(3) (A.Y. 2018-19) Bijni Dooars Tea Co. Ltd. v. Pr. CIT [2024] 109 ITR (Trib) 0105 (ITAT[Kolk])

84. S. 263 : Validity of Order under Section 263: No DIN

    The additional grounds relate to the validity of Order under Section 263 for the reason that the Order issued was a manual order and did not contain document identification number (DIN) which was not in accordance with the instruction of CBDT issued vide Circular No. 19 of 2019 dated 14th August, 2019 [2019] 416 ITR (St.) 140. Held that according to Circular No. 19 of 2019 dated 14th August, 2019 all communication must have a computer- generated identification number. However, in exceptional circumstances, manual issuance was allowed, but in such cases, it must be explicitly mentioned that the communication was issued manually without a document identification code and must have written approval of the Chief Commissioner or Director General of Income-tax. Failure to comply with these mandatory requirements rendered the communication invalid and deemed never to have been issued. Therefore, the order was not in conformity with CBDT Circular, hence, the orders passed under Section 263 for assessment years 2014-15 to 2016-17 were invalid and deemed to have never been issued. Followed Tata Medical Centre Trust v. CIT(E) [2023] 33 ITR (Trib.)- OL-495 (Kol.) and Brandix Mauritius Holdings Pvt. Ltd. v. Dy. CIT (International Taxation) Dilip Kothari v. Pr. CIT [2024] 109 ITR (Trib) 0654 (ITAT[Bang]) 

85. S. 270A : Penalty for under – reporting and misreporting of income

    Issuance of Show Cause Notice without specifying corresponding Limb for which Penalty is being initiated: The AO levied penalty us 270A(8) of the Act wherein show cause notice was issued without specifying the corresponding limb in sub- sec.270A(9) of the Act. The tribunal found in favor of the assessee, citing judicial precedents submitted by the Assessee and stating that the failure to specify the relevant limb at the initiation of the penalty proceedings invalidated the entire process. Consequently, the penalties were deleted for both assessment years. Additionally, a delay in filing one of the appeals was condoned for reasons of justice. Shri Shivaji Dattatray Sonawane v. ITO, Ward 2(1), Nashik [ITA No.708,1089/Pun/2023,] [AY 2017-18, AY 2018-19]

86. S. 271(1)(c): Penalty – Concealment of income or furnishing of inaccurate particulars – Addition under section 56(2)(vii)(b)

    Assessee purchased a property for a consideration, which was less than FMV for the purpose of stamp duty valuation. Accordingly, AO added the difference to income of assessee under section 56(vii) (b). Thereafter, the AO levied penalty under section 271(1)(c). Assessee contended that addition was made by invoking “deeming provisions” under section 56(2)(vii)(b) and no penalty could be levied under section 271(1)(c) on “deemed addition”. ITAT held that Addition was made by invoking “deeming provisions” under section 56(2)(vii)(b) and nothing was brought on record to demonstrate that assessee concealed particulars of income or deliberately furnished inaccurate particulars of income. Merely because the assessee agreed to addition on the basis of valuation made by stamp valuation authority, it could not be a conclusive proof that sale consideration as per sale agreement was deemed to be incorrect. Hence, penalty could not be levied on the basis of deeming provision. Bankimbhai Natverbhai Patel v. ITO Ward-3, Anand [ITA No. 45/Ahd/2022; dated 13/12/2023] [A.Y.: 2015-16] 

87. S. 271(1)(c): Concealed the particulars or furnished inaccurate particulars of income: Investments not fully disclosed in books of account

    For Assessment Year 2011-12, penalty proceedings were initiated under Section 271(1)(c) of Income-tax Act, 1961 and Assessing officer imposed penalty of Rs. 4,54,486/-. The assessee appealed before the CIT(A) who dismissed the appeal. On appeal to the Tribunal held that the penalty notice issued under Section 274 read with Section 271 of the Act showed that notices were in the nature of Omnibus show-cause notice issued without deleting or striking off the inapplicable part. The penalty order passed under Section 271(1) did not state under which limb of Section 271(1)(c) of the Act penalty had been levied. The penalty of Rs. 4,54,486/- levied under Section 271(1)(c) of the Act was deleted. S. Sagar Enterprise v. Dy. CIT [2024] 109 ITR (Trib) 0650 (ITAT[Mum])

88. S. 271(1)(c) : Penalty is levied for tax sought to be evaded and not on an addition from a deeming provision. 

     

    The assessee, an individual resident, sold an immovable property jointly owned by him and one Mr. X as per an agreement. The market value of the property as per Stamp Duty Authority was significantly higher and the value determined by the Valuation Officer was a figure intermediate to the selling price and the stamp duty value. The assessment of the assessee was reopened based on the information received from the assessment proceedings of Mr. X. The learned Assessing Officer made an addition under Section 50C of the Income-tax Act, 1961 (the Act), and levied a penalty under Section 271(1) (c) of the Act. The contention of the Assessee was that addition is made based on DVO report u/s 50 C of the Act. It is a deeming provision; there is no dispute about actual consideration. And that on deeming provision addition, penalty could not be levied. The assessee appealed against the penalty order before the learned CIT(A), who confirmed the penalty by an ex-parte order. The assessee further appealed before the Tribunal, challenging the ex-parte order and the levy of penalty. The Tribunal concurred with the Assessee in holding that the penalty under Section 271(1) (c) of the Act is not applicable in a case of addition under Section 50C of the Act, which is a deemed provision. And that on deeming provision addition, penalty could not be levied. AY: 2014-15. Gunwant Sohanlal Kherodiya v. Dy. CIT [2024] 109 ITR (Trib) (S.N.) 0031 (ITAT [Mum])

89. S. 271A: Penalty – deletion of penalty under section 271A – failure to fulfill conditions specified in section 44AA – failure on the part of the AO to produce any evidence which showed the Assessee’s engagement in a business – penalty set aside.

    The Assessee challenged the penalty imposed by the AO u/s 271A for non-maintenance of books of accounts as required by section 44AA. The AO initiated the penalty based on the Assessee’s share transactions exceeding 10 lakhs. ITAT observed that the AO failed to produce any evidence which showed the Assessee’s engagement in a business requiring the maintenance of books under section 44AA. The assessment order lacked conclusive evidence on the nature of the Assessee’s share transactions as a business activity. The ITAT criticized the AO for prematurely concluding a violation of section 44AA without establishing the essential conditions. (AY 2011-12) Amey Pravinbhai Brahmbhatt v. ITO [2024] 109 ITR (Trib) (S.N.) 0017 (ITAT[Ahm])