Research Team
412. S. 2(24)(xviii) : Income – Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement – Subsidy was given to setting up a new biomass co-generation system or to promote existing systems and its benefits – Capital subsidy – Directed to reduce from cost of asst acquired out of said subsidy and allow depreciation. [S. 32, 43(1)]
The assessee was engaged in the business of manufacturing and trading of petrochemical products. The assessee received a capital subsidy from the Government of India through Tamilnadu Energy Development Agency, and such subsidy was been given for the purpose of implementation of a program on ‘Biomass Co- generation in Industries’. The subsidy could be utilised for three purposes, including deployment of biomass co-generation systems, promotion of decentralised/distributed power generation through the supply of surplus power to the grid and creation of awareness of the potential and benefits of alternative modes of energy generation in the industry. Revenue treated this receipt as a revenue receipt and made an addition to the income of the assessee. Upon an appeal to ITAT, it was held that the subsidy received from the Government of India was directly linked to an investment made in setting up a new power plant and, hence, was to be considered as a capital receipt. However, it also directed the assessee to reduce the subsidy amount from the cost of the asset as per S. 43 (AY. 2013-14)
Manali Petrochemical Ltd. v. Dy. CIT (2023) 201 ITD 317 (Chennai)(Trib.)
413. S. 4 : Charge of income- tax – Alternative accommodation – Redevelopment agreement – Corpus monetary consideration – Rent for alternative accommodation – Hardship allowance – Capital receipt not taxable. [S. 56]
The Assessee is non-resident. The issue before the Income tax Appellate Tribunal was whether the addition on account of corpus fund for alternate accommodation received by the Assessee from the Developer / Builder is capital receipts. The Tribunal held that corpus monetary consideration, Rent for alternative accommodation, hardship allowance is capital receipt not taxable. Tribunal relied on Lawrence Rebello v. ITO (ITA No. 132 /Ind / 2020 order dt 29-9-2021, Deliah Raj Mansukhani (Smt) v. ITO (ITA N0/ 3526/ Mum/ 2017 dt 29-1-2021) (ITA No. 106/ Mum/ 2023 dt 10-5-2023)(AY. 2015-16)
Narayan Devarajn Iyengar v. ITO (2023) 201 ITD 503 (Mum)(Trib) www.itatonline.org
414. S. 4 : Charge of income-tax – Subsidy – Technology up gradation fund scheme – Capital in nature though net off against the interest expenditure in the books of account is still capital in nature and therefore not taxable. [S. 28(i)]
The Assessee Company engaged in diverse business had received subsidy under the technology up gradation fund scheme, claimed subsidy as capital receipt. The department treated subsidy as revenue in nature. Held that the subsidy received by Assessee Company under the technology up-gradation fund scheme was a capital receipt. Interest subsidy received under the technology up-gradation fund scheme, though net off against the interest expenditure in the books of account is still capital in nature and therefore not taxable. (AY.2009-10)
Dy. CIT v. Grasim Industries Ltd. [2023] 201 ITD 641 (Mum)(Trib.)
415. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – DRP cannot invoke provisions of section 44BB without any good and sufficient reason while departing from methodology adopted by revenue in respect of attribution of profit to PE on receipts from offshore supply of equipment in past assessment years – DTAA-India-Singapore. [S.44BB, Art. 6, 7]
The AO took a view that the activities of the assessee were integrally connected to the service and installing activity undertaken by the PE in India and hence, computed assessee’s income under section 44BB. The DRP upheld view taken by the AO. The Tribunal held that Paragraph 6 of article 7 of DTAA provides that the profit attributable to the PE shall be determined by adopting the same method year on year basis unless there is good and sufficient reason to the contrary. Therefore, both the Assessing Officer and DRP having failed to provide any good and sufficient reason while departing from the methodology adopted by the department in respect of attribution of profit to the PE on receipts from offshore supply of equipment in past assessment years, the addition made by the AO invoking provisions of section 44BB was deleted.(AY. 2018-19)
Vetco Gray Pte. Ltd. v. DCIT (2023) 200 ITD 277 (Delhi)(Trib)
416. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – licensing of software in India through distributors to end users – Transaction between the assessee and its Indian PE was at arm’s length therefore, no further attribution of profit could be made to dependent agent PE in India.
Assessee is a non-resident corporate entity incorporated in Ireland and a tax resident of Ireland. The assessee is engaged in licensing of software in India through distributors to the end users. The issue which arose for consideration was that if the transaction between the assessee and its AE in India has been found to be at arm’s length, whether further profit can be attributed to the dependent agent PE in India, if at all, such a PE exists in India. The ITAT observed that the TPO had proposed transfer pricing adjustment in relation to the international transactions between the assessee and its Indian AE, however, DRP has deleted such adjustment also no reference was made to the TPO, in the subsequent AY under consideration. This meant that the transaction between the assessee and its Indian AE was found to be at arm’s length. It was further noted that in appeals for earlier AYs it was held that when the transaction between the assessee and its Indian AE is found to be at arm’s length, therefore no further attribution of profit can be made to the dependent agent PE in India. It was held that the present appeal stands covered in favour of the assessee by the earlier decisions of the ITAT and accordingly the additions were deleted.(AY. 2018-19, 2019-20)
Adobe Systems Software Ireland Ltd v. ACIT (IT) (Delhi) 201 ITD 77(Delhi)(Trib.)
417. S. 9(1)(ii) : Income deemed to accrue or arise in India – Salaries – Short term assignment – Service rendered USA – Salaries received in India – Not taxable in India – DTAA -India-USA [S. 5(2)(a), 5(2)(b), 90, Art. 16]
Assessee an individual, was employee of Wells India was sent on short term assignment into Wells USA, his salary was taxable in India under provisions of Section 5(2)(a), but because of overriding effect of Section 90, Article 16 of DTAA would prevail over Section 5(2)(a) and, consequently, salary received by assessee in India for services rendered in USA was not liable to tax in India. Followed: British Gas India (P) Ltd. [2006] 157 Taxman 225 / 287 ITR 462 (AAR) (AY. 2019-10)
Prasanth Nandanuru v. ITO (IT)[2023] 200 ITD 596/ 225 TTJ 110 (Hyd)(Trib)
418. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Reimbursement of salaries paid to employees – Employees were high level technical executives – Payments fell under technical services – Tax deducted at source not relevant – Payment taxable. [Explanation 2]
Held that that the facts were identical to the facts for the AY 2013-14 for which the Tribunal had held that since the employees deputed by the assessee were high level technical executives and rendered highly technical services to the Indian company, the payments for such services would fall within the ambit of fee for technical services Merely because the assessee had deducted tax at source that would not change the colour of the transaction. Thus, A.O. was justified in its order. (AY. 2015-16, 2017-18)
Panasonic Holdings Corporation v. Dy.CIT (2023)101 ITR 5 (SN.)(Delhi)(Trib.)
419. S. 10(1) r.w.s 2(1A) : Agricultural income – Failure to prove earning of agricultural income
Assessee raised a claim of having earned agricultural income in the return of income filed with the Revenue, which was claimed to be exempt from income-tax under section 10(1) read with section 2(1A). AO denied exemption claimed on the ground that there were absolutely no corroboratory evidences, whatsoever, filed by the assessee to justify/substantiate that agricultural operations were, in fact, carried out by the assessee during the year under consideration.
It is well settled that exemption provisions are to be strictly construed and the onus is strictly on the assessee to prove that his case falls within four corners of the exemption provision. The assessee having miserably failed to prove that he earned agricultural income as allegedly claimed to have been earned by him during the year, and hence claim of earning alleged agricultural income and consequent claim of exemption was rejected.
Late Mr. Satya Prakash Gupta v. ACIT, Circle-I, Allahabad [ITA No. 3,4,5,6/Alld/2022; dated 15/03/2023] [A.Y.: 2006-07 to A.Y.: 2009-10]
420. S. 10(2A) : Share income of partner – The Limited Liability of Partnership (LLP) being a distinct person from its partners can become a partner in a partnership firm and is also eligible to claim the exemption. [S. 2(23), Indian Partnership Act, 1932, S. 4, 25, 26, 49, Limited Liability of Partnership,Act, 2008, S. 14, General Clauses Act, 1897, 3(42)]
The assessee, an LLP, was a partner in a partnership firm from where it derived profits. While filing its Return, it claimed an exemption under s. 10(2A) of the Act. The exemption was disallowed by Revenue Authorities, stating that a firm cannot be a partner in another firm. Tribunal, after analysing various provisions of the Indian Partnership Act, 1932, the LLP Act, 2008, and the General Clauses Act, 1897, observed that the liability of partners of the LLP and liability of the LLP as a partner under the Partnership Act would be different. The liability of partners in an LLP cannot have any relevance when the LLP itself becomes a partner. In such cases, the provisions of the Partnership Act will apply to an LLP. It also observed that the LLP is a distinct body corporate and a ‘person’ separate from its partners and hence characteristically differs from a partnership firm. Referred Dulichand Laxminarayan v. CIT AIR 1956 SC 354.(AY. 2020- 21)
Mulberry Textiles LLP v. ITO (2023) 200 ITD 244 (Bang)(Trib)
421. S. 10(23C): Educational institution – Corpus donation – Registration is not mandatory – Matter remanded for verification. [S.10(23C(iiiad), 12AA]
Assessee, an educational society, was running a school and claimed exemption under section 10(23C) (iiiad) on account of corpus fund. The Assessing Officer added back said corpus funds since the genuineness of transactions was not proved. Consequently, exemption under sections 11 and 12 was rejected for violation of section 12AA since turnover of assessee exceeded Rs. 1 crore. Commissioner (Appeals) also upheld order of Assessing Officer. Registration under section 12AA is not a necessary requirement for availing corpus donations. Since, in instant case, corpus donations remained unverified and assessee was also interested in reverification of evidence, matter was to be remitted back to Assessing Officer for further verification.(AY. 2010-11)
Guru Govind Singh Educational Society v. ITO (2023) 201 ITD 325 (Amritsar)(Trib)
422. S.10(37) : Capital gains – Agricultural land – With in specified urban limits – compensation received on account of compulsory acquisition of agricultural land by state Govt is exempt from tax. [S. 45, Land Acquisition Act, 1894, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act]
Dismissing the appeal of the Revenue the Tribunal held that where the assessee’s agricultural land was compulsorily acquired by following entire procedure prescribed under Land Acquisition Act, merely because compensation amount was awarded vide order of State Government, determining final award would not change character of acquisition from that of compulsory acquisition to voluntary sale so as to deny exemption under section 10(37) to assessee.(AY. 2015-16)
ITO v. Mohd. Aslam Baggar (2023) 200 ITD 712 (Amritsar)(Trib)
423. S. 10(38) : Long term capital gains from equities – Business income or capital gains – Two portfolios viz., investment portfolio and trading portfolio – Sale of shares from investment portfolio is entitle to exemption. [S.28(i), 45]
Assessee claimed exemption under section 10(38) in respect of long-term capital gain earned on sale of PSTL shares. Pursuant to SEBI’s investigation, the Assessing Officer declared assessee to be involved in price manipulating of PSTL’s shares and held sale of PSTL shares was business income of assessee denying exemption under section 10(38). It was observed that in balance sheet and profit and loss account, assessee had two portfolios viz., investment portfolio and trading portfolio, and shares of PSTL were always held under investment portfolio and nothing contrary had been brought on record to controvert findings of Commissioner (Appeals) and same were treated as an investment by revenue, in preceding years. Thus, the Commissioner (Appeals) was justified in treating profit earned from sale of PSTL shares as a long- term capital gain eligible for exemption under section 10(38) (AY. 2009-10)
ITO v. Nirmal Kotecha (2023) 200 ITD 52 (Mum.) (Trib.)
424. S. 10AA: Special Economic Zones – The trading activity of import and re-export carried out by the assessee – Falls within the meaning of “services” as defined u/s 2(z) of the SEZ Act, 2005 – Eligible for deduction.[Special Economic Zone Act, 2005, S. 2(z)]
The assessee was engaged in the business of import and re-export of goods carried out from the Special Economic Zone (SEZ) for Free Trade and Warehousing Zone (FTWZ). The AO disallowed the 10AA deduction claimed by the assessee on the ground that the assessee is not involved in the business of manufacturing or producing any article or things nor was the assessee into provision of services. The CIT(A) reversed the findings of the AO and allowed the deduction u/s 10AA. The ITAT observed that the term “services” is not defined under the Act and hence, referred to the definition provided u/s 2(z) of the SEZ Act, 2005 and Rule 76 of the SEZ Rules, 2006 which lists out the activities that fall within the meaning of services for the purpose of s. 2(z) of the SEZ Act, 2005. The ITAT observed that a conjoint reading of both the aforesaid provisions make it clear that the activity of trading falls within the meaning of services as defined u/s 2(z) of the Act. Further, the letter dated 20.06.2011 from the Ministry of Commerce and Industries clarifies that ‘trading’ for the purpose of the Second Schedule of the SEZ Act, 2005 shall mean import for the purpose of re-export. In view of the above observations and relying upon the decision of DCIT v. Goenka Diamond and Jewellers Ltd. 19 taxmann.com 91(Jaipur) the ITAT upheld the order of the CIT(A) and dismissed Revenue’s appeal. (AY. 2015-16, 2017-18)
ACIT v. Bytescale Technologies (P) Ltd. (Mum.) (2003) 201 ITD 760 (Mum.)(Trib.)
425. S. 10AA : Special Economic Zones – Revised return – Audit report was filed during assessment proceedings – Convertible foreign currency – Goods were sold by assessee to parties were exported by merchant exporters and foreign exchange was received by the said exporters and assessee did not receive any convertible foreign exchange on such sales – Eligible for deduction.[S. 139(1) Form No 56, SEZ Rules 2006]
The assessee is a partnership firm engaged in manufacturing business and the factory of the assessee was located at the SEZ. The assessee filed a revised ROI and claimed deduction u/s 10AA. The AO denied the said claim on grounds that ROI was not filed within the due date and deduction was claimed in the revised return without filing form no. 56F and other relevant documents. The assessee was initially installed as a proprietorship concern and later converted into a partnership concern. Furthermore, the assessee executed sales transactions with local parties and neither exported goods nor received converted foreign currency. The AO thus, held that the assessee had not followed basic required conditions for eligibility of deduction u/s 10AA. The ITAT held that an ROI can be revised only in situations where there is an omission or any wrong statement in the ROI filed u/s 139(1). But there is no allegation in the AO’s order that there was no omission or any wrong statement in the ROI of the assessee. Thus, without going into the question of whether there was any omission or any wrong statement in the ROI filed u/s 139(1), the ITAT held that the AO was duty-bound to take note of the revised ROI while framing the assessment. CIT v. Mitesh Impex [2014] 46 taxmann.com 30/225 Taxman 168 (Mag.)/367 ITR 85 (Guj) relied upon.
With respect to time limit to file the ROI where the assessee has claimed the exemption u/s 10AA, it was held that there is no mandate to file the ROI within the time specified u/s 139(1) for claiming the deduction unlike the proviso u/s 10A (IA) requiring the assessee to file the ROI within the time specified u/s 139(1) for claiming the deduction. Thus, in the absence of any specific provision u/s 10AA to file the ROI within the provisions of S. 139(1), the assessee cannot be deprived of the benefit of S. 10AA in the given circumstances. With respect to filing audit report in form 56F at the time of assessment proceedings and not with ROI, it was held that benefit of S. 10AA cannot be denied merely for this reason. With respect to whether the assessee is not eligible for deduction u/s 10AA account of having been converted from proprietorship to partnership firm, it was held that the said conversion was duly approved by the SEZ authorities and there is no prohibition u/s 10AA for denial of deduction on account of change of status of the assessee as long as assessee is not formed after splitting up or reconstruction of the existing business. With respect to earning income in INR and no convertible foreign currency was brought in India, it was observed that, the goods sold by the assessee to the parties were eventually exported by the merchant exporters and the foreign exchange was received by these merchant exporters and not by the assessee. As per SEZ rules 2006, the assessee cannot make local sales but is allowed to make sales to the merchant exporters which will be treated as deemed export. Therefore, the assessee is eligible for deduction u/s 10AA. (AY. 2015-16)
ACIT v. Vishnu Export (2023) 201 ITD 184(Ahd) (Trib)
426. S. 10AA : Assessee deduction claimed – AO disallowed deduction on the ground of assessee not having filed return within due date specified under section 139(1).
Held:
A proviso was S. 10AA-non-filing of return within due date under section 139(1) inserted after clause (ii) of sub-section (1) of section 10AA by the Finance Act, 2023 with effect from 1-4- 2024 inserting a condition for mandatory filing return of income within the due date specified under sub-section (1) of section 139(1) so as to avail exemption under section 10AA. This amendment was brought into statute with effect from 1-4-2024. Therefore, for the year under consideration i.e. assessment year 2018-19 there was no mandatory requirement of filing the return of income within due date specified under section 139(1) for availing exemption under section 10AA. Accordingly, deduction could not be denied.
Arvind Kumar Agarwal v. Income Tax Officer 18(1), Delhi [ITA No.917/Del/2022, dated 26/04/2023] [AY 2018-19].
427. S. 11 : Gross receipt of trust before deducting any sum towards application of income are to be considered for the purpose of Deemed application of income under section 11(1)(a).
Assessee was a charitable trust. AO noticed that administrative and establishment expenses were not directly incurred in relation to charitable purposes of trust nor were these expenditures incurred for achieving the objectives of charity. According to AO the net income after deducting these expenses in the hands of assessee was available for charitable activities. Accordingly, AO computed allowable accumulation of 15% under section 11(1)(a) on the said net income which was calculated after deducting the expenses of Rs. 43,14,446 incurred on account of administrative and establishment.
In case of trust there is no concept of net income but of gross receipts and application of funds. For the purpose of calculation of accumulation of income to the extent of 15% under section 11(1)(a) the gross receipts are to be taken as basis and not the net income after deducting expenses as done by AO. Accordingly, AO was directed to compute income to be accumulated under section 11(1)(a) on the gross receipts.
Sitaram Bhartia Institute of Science & Research v. DCIT (Exemption), Circle-11(1), Kolkata [ITA No.202/Kol/2020, dated 04/01/2023] [AY 2013-14]
428. S. 11 : Property held for charitable purposes – Education – Organizing drama programs for companies for fee – Companies selling tickets for profit – Element of profit involved in organising dramas – Not eligible for exemption. [S. 2(15), 12A]
The Tribunal held that the assessee was organising the drama for institutes and companies for fee. Such institutes and companies, in turn, sold tickets and passes on commercial basis. This showed that the assessee was organising the drama for the payer institutes and companies, who were then exploiting it commercially by selling tickets and earning revenue at their own end. Held that that the assessee earned huge margin on performance of the activity, which was in the nature of business, it ceased to fall within the domain of “charitable purpose”, as the business receipts exceeded 20 percent of the total receipts. The assessee did not satisfy the condition of “advancement of any other object of general public utility” so as to be covered under section 2(15). The assessee was not eligible for exemption. (AY. 2013-14)
Maharaja Shivchatrapati Pratishthan v. ITO (E) (2023)101 ITR 84 / 199 ITD 607 (SN)(Pune) (Trib.)
249. S. 11 : Property held for charitable purposes – Depreciation – Capital asset – Application of income – Matter remanded. [S.11(6), 32]
Assessee Society was engaged in providing and had claimed deduction towards depreciation and claimed same as application of income out of receipts of years. On failure to reply to specific query and showcause letter, Assessing Officer relying provisions of Section 11(6) denied claim of depreciation. CIT(A) also held that claim was not acceptable without any documentary evidence. Tribunal accepted the request of the assessee to allow one more opportunity on merits and restored the matter to the file of Assessing Officer.(AY. 2016-17)
Rajiv Gandhi Vidya Pith Shiksha Sansthan v. ITO (E) [2023] 201 ITD 114 (Jaipur) (Trib)
430. S. 11 : Property held for charitable purposes – Interest received on compensation in respect of compulsory acquisition of land – Not barred from claiming deduction under section 57(iv) of the Act. [S.10(33), 56(2)(vii), 57(iv), 145B(1)]
Assessee-trust, claimed exemption under section 11, claimed deduction under section 57(iv) from interest received on compensation in respect of compulsory acquisition of land. Assessing Officer rejected assessee’s claim on ground that section 11 is a separate code under Chapter III and, therefore, no deduction is allowable under Chapter IV of the Act. Commissioner (Appeals) allowed assessee’s appeal holding that deduction had been claimed in accordance with law. Dismissing the appeal of the Revenue the Tribunal held that the income of an assessee claiming exemption under section 11 could be classified under various heads of income, except Profits and gains of business or profession (PGBP) and entitled to permissible deductions therein. Assessee claiming exemption under section 11 is not barred from claiming deduction under section 57(iv) on account of interest received on compensation in respect of compulsory acquisition of land. Referred DIT(E) v. Jasubhai Foundation (2015) 374 ITR 315 / 58 taxmann. com 218 (Bom)(HC), IAC v. Saurashtra Trust (2007) 106 ITD 1 (SB)(Mum)(Trib) (AY. 2016-17)
ITO (E) v. Shree Sardarshahr Gaushala Samity (2023) 201 ITD 110 (Kol)(Trib)
431. S. 11 : Property held for charitable purposes – Collection of charges from the civilians for community work of spreading awareness related about drug abuse and addiction and rendered services for procuring passport, issuance of NOC, etc – Denial of exemption is not justified – Mater remanded to the AO to verify whether proviso to section 2(15) had been breached. [S. 2(15), 12AA]
The Assessing Officer denied the exemption on appeal the Tribunal remanded back the matter to the A.O. for de novo adjudication. The Tribunal emphasized that assessing authorities must scrutinize whether the activities are in the nature of trade or business and whether they breach the quantified limit. (AY. 2016-17)
Sub Division Saanjh (Community Police) Society v. ITO (E) [(2013) 201 ITD 57 (Amritsar)(Trib)]
432. S. 11: Property held for charitable purposes – Adjustment – A prior intimation is required to be served on assessee, either in writing or electronically, as contained in 1st proviso to section 143(1)(a) – Income should be understood in its commercial sense and computing total income of assessee equal to total receipts for year was not in accordance with commercial prudence and commercial sense – Addition was deleted.[S.12AA, 143(1)(a)]
Assessee Trust, registered under section 12AA, had evidently demonstrated failure on part of revenue to issue prior intimation to assessee before making an adjustment under section 143(1) (a) by way of disallowing its claim of exemption under section 11, such adjustment was to be delete. Also, it was held that revenue was wrong in computing the income of the assessee at total receipts for the year under consideration. It was held that income should be understood in its commercial sense and computing total income of assessee equal to total receipts for year was not in accordance with commercial prudence and commercial sense, despite fact that both revenue and capital expenditure were accepted by revenue in processing of return.(AY. 2020-21)
ITO(E) v. Camellia Educare Trust (2023) 201 ITD 616 (Kok)(Trib)
433. S. 11: Property held for charitable purposes – Foreign travel expenses incurred for obtaining donations, are allowable as a deduction when donations received are utilized towards the fulfilment of the objects of the trust. [S. 12A, Foreign Contribution Regulation Act]
The appeal is against the disallowance of expenditure incurred on foreign travel amount, incurred in the context of foreign travel to seek donations.
The Assessee is a charitable trust registered under section 12A and with a registration under the FCRA – Foreign Contribution Regulation Act. Return of income was filed declaring nil income after claiming exemption under section 11. The Assessing officer disallowed the expenditure incurred on foreign travel under scrutiny assessment.
The assessee’s contention is expenditure incurred on foreign travel was to obtain donations from the donors who were abroad and hence must be allowed. Upon appeal, the Ld. CIT(A) confirmed the Orders of the Assessing Officer.
The Hon’ble Tribunal noted that – the assessee had received substantial portions of donations from abroad. The details of the donations received and utilization of the same was also enclosed in the records. That the expenditure incurred was for obtaining the donations from the various donors who were stationed abroad, and the utilization of the donation was also for the objects of the trust. In view of the judicial pronouncements, the Hon’ble Tribunal held that since the donations received are utilized for charitable purpose, which was never doubted by the Assessing Officer, the foreign travel expenses incurred for obtaining the above said donations is to be allowed as an expenditure.(AY 2016-17)
Agastya International Foundation v. ACIT; [2023] 201 ITD 399 (Ban)(Trib.)
434. S. 11 : Property held for charitable purposes – Grants from State Government for specific infrastructure projects – Grants would not be voluntary contributions and would not constitute income of assessee.[S. 12, 12AA]
Assessee-trust was registered under section 12AA and was constituted for construction of infrastructure on behalf of Government of West Bengal. During relevant assessment year, assessee received specific grants from Government through urban development department for implementation of various infrastructure projects. Assessee showed said funds in balance sheet as part of corpus of trust and did not offer same for tax as income. Assessing Officer opined that only voluntary contributions made with a specific direction that contribution shall form part of corpus of trust could be treated as corpus donation. He, thus, added back government grant in income of assessee on ground that no express direction was given from Government that funds would form part of corpus and basic nature of grant was that it was meant for application. Since grants were given to assessee for specific infrastructure projects and did not belong to assessee and furthermore assessee was not authorized to use said grants for any other purpose and unutilized funds were returned to Government, said grants were not voluntary contributions and would not constitute income of assessee. Thus, impugned additions were to be deleted(AY. 2015-16)
Howrah Improvement Trust v. DCIT(E) (2023) 201 ITD 841 (Kol)(Trib)
435. S. 11 : Property held for charitable purposes – Accumulation of income – Not eligible to claim in respect of deemed income.[S.11(1)(a), 11(2), 11(3), Rule 17]
The Assessing Officer assessed deemed income on the ground that the same could not be subject to provisions of Section 11(1)(a). on appeal the CIT(A) held that exemption under Section 11(1) was not available for deemed income under Section 11(3). On appeal The Tribunal held that ;
Firstly, in view of Circular No. 29 [F. No. 20/22/69 IT (A-1) dated 23rd August, 1969, unapplied amount is deemed income under Section 11(3), hence, benefit of Section 11(1)(a) would be lost.
Secondly, as per the said Circular, the assessee should not be eligible to claim double deduction in respect of the same income.
Thirdly, in the case of Trustees, the B.N. Gamadia Parsi Hunnarshala [2002] 77 TTJ 274 (Mum) (Trib) held that exemption under Section 11 is available only on income and not on deemed income.
Fourthly, clause 10 of Part 1 of Form No. 3A does not allow that assessee to claim exemption under Section 11(b).
It was, therefore, held that assessee trust is not eligible to claim exemption under Section 11(1) (a) and Section 11(2) in respect of deemed income under Section 11(2). (AY. 2015-16, 2016-17) (AY. (AY 2016-17, 2017-18)
Prabhas Patan Jain v. ITO (Exemption), [2023] 200 ITD 323 (Rajkot)(Trib.)
Anand Mercantile Samaj Seva Trust v. ITO (E); (2023) 201 ITD 708 (Ahd) Trib.)
436. S. 11 : Property held for charitable purposes – First proviso to sub-section (2) of section 12A as inserted by Finance (No.2) Act, 2014 with effect from 1-10-2014 is retrospective in nature – Application for registration under section 12AA was made on 9-3-2012, Commissioner granted registration on 28-10-2015 with effect from 1-4-2011 – Claim for exemption is deserved to be allowed for the Assessment year 2011- 12. [S. 12A, 12AA]
The Assessee applied registration under section 12A in the year 1991 (which had not been disposed yet) again moved before the Commissioner, second application for granting the registration in the year 2012. For the concerned Assessment Year, it claimed exemption under section 11 under the premise that deemed registration could be assumed in the event of non-disposal of application by the statutory authority within the statutorily prescribed limit. The Assessing officer denied the exemption under the premise that the trust was not registered under section 12AA and assessed the assessee as an association of persons attracting maximum marginal rates. Meanwhile the Commissioner acting upon the second application of the Assessee, vide its order, granted registration to the assessee up to a certain cut-off year in retrospective, however not applicable to the year in question. The assessee contended that insertion of 2nd proviso to section 12AA of the Act vide Finance (No. 2) Act, 2014 was applicable retrospectively, which was not accepted by the revenue authorities who otherwise considered its applicability to be prospective. The Hon’ble Tribunal observed that the insertion of first proviso to sub-section (2) of section 12A has been explained by Explanatory Notes to provisions of Finance (No. 2) Act, 2014 and it is provided that the same is applicable to earlier assessment years which are pending before the Assessing Officer as on date of such registration. And further concurred with the judgement in SNDP Yogam v. ADIT (E) [2016] 161 ITD 1(Cochin)(Trib) where the registration granted to the assessee under section 12AA was held to be retrospective and not prospective and its claim for exemption under section 11 was allowed. (AY 2011-12) (AY 2009-10, 2010-11)
Alpha Educational Trust v. DCIT (E)(2023) 200 ITD 454 (SMC) (Chennai (Trib.)
Adhyakshya Lok Mela Amlikaran Sammittee v. ITO (2023) 201 ITD 606 (Rajkot)(Trib)
437. S. 11 : Property held for charitable purposes – Exemption cannot be denied only on the ground that audit report was not filed along with the return – Matter remanded to the Assessing Officer.[S. 12, Form 10B]
The assessee was a public charitable trust imparting education. It filed its Return without filing an Audit Report in Form 10B; which was filed subsequently. The AO disallowed the expenses incurred by the assessee for want of an Audit Report. The assessee did not file a request for condonation of delay with CIT(E) in filing an Audit Report, and hence, CIT(A) dismissed the appeal of the assessee. The Tribunal, after referring to various other judgements, observed that the assessee has substantially satisfied all the conditions for availing the benefit of exemption under section 11/12 of the Act, except for filing the audit report in Form 10B, which was filed belatedly. The matter was restored to the Assessing Officer to verify the contents of the Audit Report and to grant the necessary exemptions under the Act. (AY. 2019-20)
Navbharat Charitable Trust v. ITO (2023) 200 ITD 812 (Surat)(Trib)
438. S. 12AA: Procedure for registration – Trust or institution – Application filed but not disposed of – No evidence showing application pending before CIT (E) – One sided correspondence not proof.
Held, that the assessee failed to furnish any evidence whether such application was registered in the office of the CIT (E) or not or any further query was raised by the Commissioner (Exemptions). One-sided correspondence, unless acknowledged by the other party would not be enough to consider the application of the assessee as pending. The assessee was allowed registration under section 12AA from the date of application, which was in order.
Domadia Raiyaben Muljibhai Charitable Trust v. CIT (Exemption) (2023) 101 ITR 14 (S.N.) (Surat) (Trib)
439. S. 12AA : Procedure for registration – Trust or institution – Principe of natural justice – Order was passed without giving an opportunity of hearing – Matter remanded. [S.80G]
The Tribunal held that, Since CIT (E) straightaway rejected application for registration u/s. 12AA without giving an opportunity of being heard to assessee, same was not justified and hence matter remanded back to CIT (E) for deciding matter afresh after providing adequate opportunity of hearing to assessee. (AY. 2022-23)
Braingyan Foundation v. CIT (E) [2023] 200 ITD 138 (Mum)(Trib.)
440. S. 12AA : Procedure for registration – Trust or institution – Denial of registration without considering the information and evidence are brought on record – Matter was remanded back to PCIT to adjudicate application for registration afresh.
PCIT denied registration under Section 12AA without considering the information / evidence brought on record and had not made required examination regarding objects of trust and genuineness of activities while denying registration. PCIT was required to examine and verify activities carried out in lieu of objects so as to ascertain whether they were charitable in nature in consonance to the objects of trust and were carried out not in profit making or fund generation for purpose of personal/commercial benefit, hence, matter was remanded back to PCIT to adjudicate application for registration afresh.(AY. 2018-19)
Peer Panchal Educational and Welfare Trust v. CIT [2023] 201 ITD 170 (Amritsar) (Trib.)
441. S. 12AA : Procedure for registration – Trust or institution – Specific community – Amerili Modh Vanik – Denial of registration is justified. [S.2(15), 11, 13(1)(b)]
The assessee submitted that the trust provides its property to the modh mahajan and other communities’ people on various occasions along with various other charitable activities for general benefit of the community and public at large. The Assessee however did not furnish any documentary evidence to prove that the common purpose hall was available for use of general public. Further, on verification of public trust register, it was revealed that the objects of the trust were restricted to a particular community. The Ld. CIT(E) not being satisfied with the genuineness of the trust rejected the application of the Assesee in consonance with section 13(1) (b) of the Act. On appeal The Hon’ble Tribunal held that the Assessee had not produced copies of the activities carried out by Assessee. Further, there was nothing on record to substantiate that the activities carried out by the trust were open to the general public. In the absence of any such details, the Tribunal held that the trust was hit by section 13(1)(b) of the Act and thereby upheld the order of CIT(E) denying registration under section 12AA of the Act.
Amreli Modh Vanik Community Property v. CIT (E); (2023) 200 ITD 584 (Rajkot) (Trib.)
442. S. 12AA : Procedure for registration – Trust or institution – Christian community – object of the trust mentioned that charity would be done without prejudice to any caste and creed – Rejection of application for registration on the ground that it operated only for Christian community is held to be not valid. [S. 2(15), 12A, 13(1)(b)]
The Assessee is a charitable and religious
trust created for the welfare of general public regardless of caste, creed and religious status. The Assessee filed an application before CIT(E) seeking registration u/s 12A of the Act. The CIT(E) rejected the application of the Assessee citing a violation of section 13(1)(b) of the Act due to operation only for the Christian community. The Hon’ble Tribunal perused the object clause of the Assessee trust and noted that it specifically mentioned that the trust is charitable in nature and the charity would be done without prejudice to any caste and creed. Therefore, primarily the object is not barred by section 13(1)(b) of the Act. Further, it was also noted that the revenue had not made any adverse comment on the activity of the Assessee trust. On the said grounds, the Tribunal allowed the appeal in favour of the Assessee trust and thereby directed revenue to issue registration to Assessee. (AY 2019-20)
Amritsar Diocese of Believers Eastern Church v. CIT (E) (2023) 200 ITD 111 (Amritsar)(Trib.)
433. S. 12AA : Procedure for registration – Trust or institution – non-profit organization established with objective of promoting social and economic development with women’s full participation – Any trust that had been created for purpose of managing statutory obligations of employees of parent trust would certainly fall within ambit of advancement of general public – Directed to grant registration. [S. 2(15) Companies Act, 1956, S.25, Payment of Gratuity Act, 1972
ICRW was a non-profit organization established with objective of promoting social and economic development with women’s full participation and was incorporated as a company registered under section 25 of Companies Act, 1956. Provisions of Payment of Gratuity Act, 1972 were applicable in case of ICRW and, therefore, to protect financial interest of its employees, ICRW set up a trust, namely, ‘ICRW Group Gratuity Trust’. New trust applied for seeking registration under section 12AA. Commissioner (E) held that assessee was formed only for limited purpose of managing statutory obligations in form of gratuity payable to employees of ICRW and said purpose would not fall within ambit of ‘charitable purpose’ as defined under section 2(15). Accordingly, he dismissed application seeking registration. On appeal the Tribunal held that any trust that had been created for purpose of managing statutory obligations of employees of parent trust would certainly fall within ambit of advancement of general public utility and, hence, its activities was to be considered as a charitable as defined under section 2(15)(AY. 2018-19, 2020-21, 2021- 22)
ICRW Group Gratuity Trust v. CIT (E) (2023) 201 ITD 647 (Delhi)(Trib.)
444. S. 12AB: Procedure for fresh registration – Company registered under Companies Act – Objects are not profit motive – Denial of exemption is not justified. [S. 12A, Companies Act, 2013, S. 8(1)]
Assessee, a company registered under section 8 of Companies Act, 2013, applied for registration under section 12AB of the Act. Commissioner rejected the application only on the ground that only part details were submitted. On appeal the Tribunal held that since assessee replied all issues raised by Commissioner and activities undertaken by it were interconnected with objects mentioned in memorandum of association which were not of profit motive, Commissioner was not justified in denying registration to assessee.(AY. 2022-23)
Keeday Makauday Foundation, CIT (E) 200 ITD 39(Jaipur)(Trib.)
445. S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Luxury cars – Trustees did not use the cars – AO did not bring anything on record to rebut the claim of the assessee that the car was used for the principal and staff of the school – Disallowance made by AO to be deleted.[S. 2(15), 11]
The charitable trust was running a school. It replaced its lower model of car with a higher model. The Assessee submitted that the car was used for the travel of the principal and the staff of the school. It was also submitted that the Trustees did not use the car. The lower authorities stated that the assessee needed to maintain logbooks of travels; hence, it was unascertainable as to the purpose for which the car was used. Assessee submitted that maintenance of such records was not required since the car was not used for hiring purposes. The Tribunal held that even though the car is a luxury car, AO did not bring on record anything to rebut the claim of the assessee that the car was used for the principal and staff of the school and hence disallowance made by the AO was to be deleted. (AY. 2016-17)
Manohar Education Society v. ITO (E) (2023) 200 ITD 682 (SMC) (Delhi)(Trib.)
446. S.14A : Disallowance of expenditure – Exempt income – Disallowance cannot exceed exempt income – A.O. to restrict allowance accordingly. [R. 8d]
Held that the disallowance under section 14A cannot exceed exempt income and in view of the fact that the disallowance made under section 14A read with rule 8D was much in excess of the exempt income, the Assessing Officer was to restrict the disallowance under section 14A read with rule 8D to the extent of exempt income earned by the assessee. (AY. 2013-14, 2014-15)
Hero Corporate Service Pvt. Ltd. v. Dy. CIT (2023) 101 ITR 77 (SN)(Delhi)(Trib.)
447. S. 17(3) : Salary – Profits in lieu of salary – Ex-gratia – Voluntary payment – Without establishing letter as non – genuine or without examining sancity of payment made – Addition is not justified.[S. 10(10C), 15, 17(3)(iii)]
Assessee, upon retirement, received an amount from the employer voluntarily, ex-gratia, and out of their sweet will, and without any obligation under any law or a condition. The AO assessed the said receipt under section 17(3)(iii) of the Act on the ground that the tax was deducted by the employer. On appeal the Tribunal held that the department also did not challenge the genuineness of the letter issued by the employer stating the payment was voluntary. Tribunal held that simply invoking the provisions of the Act and bringing the amount under tax was considered an arbitrary exercise. Hence, the case falls outside the purview of S. 17(3)(iii) of the Act. AO is directed to delete the addition. (AY. 2018-19)
Mahadev Vasant Dhangekar v. ACIT (2023) 201 ITD 5 (Pune)(Trib.)
448. S. 22: Income from house property – taxed as house property for many years – No change in facts – Cannot be treated as income from business and profession. [S.28(i)]
Held that the facts of the year under consideration were exactly similar to those of the preceding seven years and there was no change at all. Therefore, the order was not sustainable and income has to be taxed as income from house property. (AY. 2014-15)
Pawa Builders Pvt. Ltd. v. Dy. CIT (2023) 101 ITR 43 (SN.)(Delhi) (Trib.)
449. S. 28(i): Business income – Agricultural income – Apportionment AO is directed to recompute disallowance and only 40% amount to be added to business income. [S. 2(24) (x), 36(1)(v), R. 8(1)]
On appeal, it was held that disallowance of EPF has to be first added before computing 60:40. Thereby, only 40% of amount to be added in business income. (AY. 2019-20)
Hanuman Plantations Ltd. v. ITO (2023) 104 ITR 78 (Kol) (Trib)
450. S. 28(i): Business income -Interest on FDRs – Pledge fixed deposit receipts (FDRs) as margin with the bank – Interest income assessable as business income – High sea sale [S.43(5)]
Interest earned on FDRs was treated as business income by the assessee, while revenue considered the same as ‘Income from other sources’. Revenue had taken the high sea sale of imported goods as a speculative transaction u/s. 43(5) and loss was treated as a speculative loss. However, it was found that when goods were not taken by delivery, the entire issue was treated as a speculative transaction. Held that, since the entire transaction was going through by proper delivery of goods during purchase and documents were provided for evidence of delivery of goods related to high sea sale. Interest earned on these FDRs is a business income. (AY. 2013-14, 2016-17)
Dy. CIT v. G. G. Continental Traders (P.) Ltd. [2023] 201 ITD 440 (Amritsar)(Trib.)
451. S. 28(i): Business loss – Purchase and sale of shares – Scripts manipulated by third parties – No adverse findings against assessee – Assessee made transactions in good faith – Loss not bogus – Loss allowed.
Held that that the Assessing Officer nowhere pointed out any adverse finding against the assessee. The assessee had carried out the transactions in the scrips in question on the stock exchange through a registered broker and these were duly supported by documentary evidence. The Assessing Officer had not found any discrepancies in the documentary evidence. The income earned by the assessee and loss incurred on the script could not be held bogus. Thus, CIT (A) was justified in allowing loss. (AY 2012-13)
ITO v. Champalal Gopiram Agarwal (2023) 101 ITR 22 (SN.)(Ahd)(Trib.)
452. S.28(i) : Business loss – Business expenditure – Money embezzled by director – CIT(A) accepted loss but denied deduction for want of details – AO to verify recovery and allow balance of loss.[S. 37(1)]
Held, that the Commissioner (Appeals) had accepted that the loss was allowable but he had not allowed the deduction for want of details. The assessee had clearly said that it had not made any debit of expenditure as embezzlement loss. It was only a note in the account explaining the loss from which the authorities had come to the conclusion that the assessee had debited the embezzlement loss. On the facts, this issue needed to be remitted back to the file of the Assessing Officer. The Assessing Officer was to factually verify the recovery and allow the balance of loss. (AY. 2014-15)
Wieden+Kennedy India Pvt. Ltd. v. Dy. CIT (2023)101 ITR 63 (SN.) (Delhi) (Trib)
453. S. 28(va) : Business income – Cash or kind – Under an agreement – Non- compete fees – Capital or revenue – Non-compete fees received for the period prior to AY 2017-18 are to be treated as capital receipts and not to be charged under s. 28(va).[S.4]
Tribunal held that Revenue should only look at the agreement and not look through the binding agreements entered between the parties in a manner that suits the Revenue. Tribunal held that the transaction was of a capital nature and not taxable since it pertained to the period before AY 2017-18. (AY. 2014-15)
Nalini Mahajan (Mrs.) v. ACIT (2023) 201 ITD 328 (Delhi)(Trib.)
454. S. 32: Depreciation – Ownership of asset – Asset purchased by sister concern – Mere agreement for use of asset does not vest assessee with any right, title and interest – Depreciation is not allowable.
Held that the assessee should be the owner of the asset and the asset must be used for the purposes of business or profession. By merely entering into an agreement or understanding of user of the asset, a licence may be created in favour of the user, but that did not vest the user with the interest of any nature akin to owner for the purpose of section 32(1) of the Act. No depreciation beyond the law was allowable on the basis of a mutual understanding between the owner and the user. (AY. 2016-17)
Radisson Hospitality Marketing (India) Pvt. Ltd. v. Asst. CIT (2023) 101 ITR 15 (SN.)(Delhi)(Trib.)
455. S. 32: Depreciation – Oil drilling rigs – Entitled to a higher rate of depreciation. [R. 5]
Tribunal held that the oil rigs which form part of plants of ‘specific category’ which was used for drilling operations for purpose of exploration and extraction of mineral oil in field of mineral oil concerns, the assessee was entitled to a higher rate of depreciation (AY. 2013-14)
Addl.CIT v. Quippo Oil & Gas Infrastructure Ltd. (Delhi) 201 ITD 47(Delhi)(Trib.)
456. S. 35: Scientific research expenditure – Weighted deduction – Recognition of facility different from approval – No Approval – Not entitled to exemption. [S. 35(2AB)]
Held that there was no requisite approval as envisaged under section 35(2AB), which was the condition precedent for availing of the benefit of deduction under section 35(2AB) of the Act.. Recognition of the research and expenditure facility is separate and distinct from approval of research and expenditure facility for the purpose of deduction under section 35(2AB) of the Act. In the absence of requisite approval under section 35(2AB) of the Act, the order of the CIT(A) was perverse and was to be set aside. The order of the Assessing Officer was restored. (AY. 2010-11 to 2015-16)
ACIT v. Ajeet Seeds Ltd. (2023) 101 ITR 86 (SN.) (Pune)(Trib.)
457. S. 36(1)(iii) : Interest on borrowed capital – Interest free loans – No business transaction with parties – Notional interest computed at 0.88 % on average – Reasonable.
Held, that the assessee could not controvert the finding of the Commissioner (Appeals) and as to how the proportionate disallowance on average outstanding computed by the Commissioner (Appeals) at 0.88 per cent was unreasonable because there was no business transaction declared by the assessee from these parties. The Commissioner (Appeals) had rightly computed proportionate interest on average outstanding. (AY. 2014-15)
Saranya Agro Foods Pvt. Ltd. v. ITO (2023) 101 ITR 60 (SN)(Chennnai) (Trib)
458. S. 36(1)(iii) : Interest on borrowed capital – Business expenditure – Interest payment to legal heirs of dead partner – Deducted tax at source – Cannot be disallowed on the ground of passing of entry – Matter remanded. [S. 37(1), 40(b) (iv), 194A]
Held that the claim of interest paid to the legal heirs in the nature of loan and the interest, was already subjected to tax deduction at source, it could not be disallowed merely on the ground of passing an entry or on the ground that it was not a loan amount. Accordingly, the order of the Commissioner (Appeals) was modified and the matter was remanded to the record of the Assessing Officer for readjudication of this issue as per law. (AY. 2011-12)
Savla Agencies v. JCIT (2023) 101 ITR 57 (SN.) (All) (Trib)
459. S. 36(1)(va): Any sum received from employees – Employee’s contribution held in trust – Failure to pay within due date under respective Acts – Not allowable as deduction. [S. 2(24)(x), 43B, 139(1)]
Tribunal held that with respect to all the AYs prior to 2021-22, non obstante clause u/s 43B could not apply in case of amounts which were held in trust as was case of employee’s contribution which were deducted from their income and was held in trust by assessee- employer as per S. 2(24)(x), thus, said clause would not absolve assessee-employer from its liability to deposit employee’s contribution on or before due date as a condition for deduction. Thus, the assessee’s appeal was dismissed. Followed Checkmate Services (P.) Ltd. v. CIT / [2022] 448 ITR 518/[2023] 290 Taxman 19 (SC). (AY 2018-19) (Referred CIT v. Madras Radiators & Pressing Ltd (2003) 264 ITR 620 / 129 Taxman 709 (Mad)(HC)
Adani Infrastructure and Developers (P) Ltd. v. Dy CIT (Ahd.) 201 ITD 805(Trib)
Jai Ambe Agricultural Industries v. Dy. CIT (2023) 201 ITD 600 (Varanasi)(Trib)
Microviews Infosystems (P.) Ltd. v. Dy.CIT (2023) 201 ITD 626 (Kol (Trib.)
Ocean Exim India (P) Ltd. v. ITO [2023] 200 ITD 366 (Jaipur) (Trib.)
Precot Ltd. v. ACIT [2023] 201 ITD 350 (Chennai) Trib)
Creative Textile Mills (P.) Ltd. v. Dy. CIT [2023] 201 ITD 871 (Mum)(Trib.)
460. S. 36(1)(vii): Bad debts – Failed to substantiate – Not allowable as deduction. [S. 36(2)]
Tribunal held that the amount written off against the salary advance was also not substantiated and the assessee could not even submit the basic details to support whether the person was actually in employment with the assessee. As the assessee has not substantiated the claim with proper documentary evidence to prove that it was incurred in the regular course of business and that the amount could not be recovered. (AY. 2011-12)
Dinesh Devraj Ranka v. Addl. CIT [2023] 200 ITD 731 (Bang)(Trib.)
461. S. 36(1)(vii) : Bad debt – Sum received – Declared as income in subsequent year – Disallowance not justified. [S. 36(2)]Held that the profit and loss account for the year ended March 31, 2014 showed that the bad debt which was received by the assessee and was declared as income in the subsequent AY. Thus, once the assessee had offered the income to tax in the subsequent AY, there was no basis for the disallowance. (AY. 2013-14)
Vijay Liladhar Mohmaya v. ITO (2023)101 ITR 33 (SN) (Mum) (Trib)
462. S. 36(1)(vii) : Bad debt – Reason for disallowance not stated by CIT (A) – Matter Remanded. [S. 36(2)]
Held that that the CIT (A) provided no reasons for confirming the disallowance as bad debt. The issue was remanded to the CIT (A) for adjudication de novo.(AY 2013-14)
Vijay Liladhar Mohmaya v. ITO (2023) 101 ITR 33 (SN.) (Mum) (Trib)
463. S.37(1): Business expenditure – ESOP – Allowable as revenue expenditure.
Assessee Company issued ESOP and RSU plans to its employees in India. The ESOP expenses resulted from the difference between the fair market value of the shares of the associate parent entity (AE) on the date of the grant and the exercise price. Since the AE first incurred these expenses, it charged them back to the assessee by issuing a debit note. The Assessee booked this cost as employee benefit expenses in its books of accounts. AO denied these expenses under the grounds that these were notional expenses and hence not allowable u/s 37. AO further held that the transaction was a colourable device to shift profits out of India. The Tribunal held that the scheme was for the employees of the assessee; hence, the assessee was the one who had to bear the difference in the cost of shares. By relying upon the coordinate bench, it also held that since the expenditure was for retaining and rewarding the employees, these were revenue expenses.(AY. 2015-16)
Northern Operating Services (P.) Ltd. v. JCIT(2023) 200 ITD 145 (Bang)(Trib)
464. S. 37(1): Business expenditure – Commercial expediency – Professional and consultancy charges – Matter remanded.
The burden of proving commercial expediency of expenditure and establishing a nexus between expenditure and business lies with the assessee. The assessee claimed a deduction towards professional and consultancy charges, however the same was disallowed on grounds that payment was not supported by proper evidence to establish commercial expediency and nexus with business. The income has been offered as ‘Compensation received’ under the head ‘Income from Other Sources’ and not as professional fees. The main ground on which the expenditure is disallowed by the AO is that the assessee could not substantiate the claim in terms of commercial expediency to incur the expenditure and the nexus between the expenditure and the business. Matter was remitted back to the CIT (A) (AY. 2011-12)
Dinesh Devraj Ranka v. Addl. CIT [2023] 200 ITD 731 (Bang)(Trib.)
465. S.37(1): Business expenditure – Capital or revenue – Payment to its Indian counterpart for acquiring part of its business relating to debt collection service – Expenditure incurred for acquiring completely new business set up was income generation tool – Capital in nature. [S. 32]
Tribunal held that payment to its Indian counterpart for acquiring part of its business relating to debt collection service since assessee was not in debt collection service business before acquiring said business, expenditure incurred for acquiring completely new business set up was income generation tool and, hence, capital in nature.(AY. 2010-11)
Genpact Services LLC. v. DCIT (IT) (2023) 200 ITD 48 (Delhi)(Trib)
466. S.37(1): Business expenditure – Travel expenses – No evidence to support claim – Expense not allowable.
Held, that the assessee could not produce anything in support of the claim and hence, this issue of the assessee’s appeal was dismissed. (AY. 2014-15)
Saranya Agro Foods Pvt. Ltd. v. ITO (2023) 101 ITR 60 (SN)(Chennai)(Trib.)
467. S.37(1): Business expenditure – No documents in support of claim of quantum of expenses – Disallowance sustained.
Held, that no proper documents to support such claim having been filed by the assessee before the Assessing Officer, disallowance of expenses made by the Assessing Officer under various heads of expenses was sustained. (AY. 2017-18)
Asst. CIT v. Dhar Construction Co. (2023) 101 ITR 49 (SN)(Gau) (Trib)
468. S.37(1): Business expenditure – Debit of cash discount – Crystalising during Deduction allowable.[S. 145]
Held that the debit of cash discount pertaining to prior period had crystallised during the year and not in a prior or any subsequent year. Allowable as deduction. (AY. 2011-12)
Ganesh Ginning Factory v. ACIT (2023)101 ITR 90 (SN) (Ahd) (Trib)
Gajanand Ginning And Pressing Pvt. Ltd (2023)101 ITR 90 (SN) (Ahd) (Trib)
Premjibhai Vallabhbhai Kukadiya v. ITO (2023)101 ITR 90 (SN) (Ahd) (Trib)
469. S.37(1): Business expenditure – Free samples and distribution of infant and children’s nutrition food – Not allowable as deduction – Expenditure incurred on arranging conferences and seminars – Not allowable as deduction. [Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992 (Relevant Act), S. 4]
Assessee Company was engaged in manufacturing nutritious food for infants and children. It incurred expenses on free samples and distribution of children’s nutrition food. This activity is prohibited under the Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992 (Relevant Act). Thus, these expenses were disallowed. Similarly, expenses incurred by the assessee on conducting conferences and seminars of doctors and medical professionals were also disallowed. The assessee justified the business expediency of the expenses by submitting that the expenses enable the healthcare professional to gather technical knowledge and commercial insights about the products. However, by relying on the Apex Court’s judgement in the case of Apex Laboratories (P) Ltd v. Dy.CIT (2022) 442 ITR 1/ 286 Taxman 200 (SC) these expenses were also disallowed. In the incidental matter where CIT(A) opined that the assessee had conclusively violated the provisions of the relevant Act and initiated the penalty proceedings without offering any opportunity to the assessee, the matter was remanded back to CIT(A).(AY. 2012-13)
Mead Johnson Nutrition (India) (P.) Ltd. v. ACIT (2023) 200 ITD 234 (Mum) (Trib.)
470. S. 37(1) : Business expenditure – Reimbursement of service tax – Commercial expediency – Allowable as revenue expenditure.
Tribunal held that neither the AO nor the CIT(A) disputed the fact that the assessee made payment of service tax to its distributors who had actually paid the amount of service tax to the exchequer and, thus, it was a kind of reimbursement of service tax liability of the assessee to its distributor. It was further noted that application of new taxation of law such as GST and the issue as to whether such liability was to be borne by the distributors of the assessee-company or the assessee was not settled up to that point of time. The ITAT therefore held that CIT(A) was right in concluding that the payment made by the assessee are directly related to the business activity of the assessee and it was incurred wholly and exclusively for the purpose of business of the assessee due to commercial expediency and the same was allowable as business expenditure. Accordingly Department’s appeal was dismissed. (AY 2012-13)
Addl. CIT v. Amway India Enterprises (P) Ltd. (Delhi) 201 ITD 229(Delhi)(Trib)
471. S. 37(1): Business expenditure – Insurance premium of director paid by Company – Not incurred wholly and exclusively for the purpose of business – Not allowable as deduction – Bogus purchases – Entire bogus purchase cannot be added – Addition restricted to 12.5% of alleged bogus purchases. – Delay of 177 days was condoned. [S.133(6), 254(1)]
Held that the insurance premium of director paid by Company was personal liability of directors. Not incurred wholly and exclusively for business, not allowable as deduction. As regards disallowance of bogus purchases the disallowance was restricted to 12.5% of the alleged bogus purchases. Delay of 177 days in filing the appeal was condoned considering the affidavit of taxation manager.(AY 2010-11, 2011- 12)
Lokhandwala Kataria Construction Pvt. Ltd. v. DCIT (2023)104 ITR 84 (Trib)(Mum)
472. S.37(1): Business expenditure – ESOP expenses-Failure to consider the submissions – Matter remanded. [S. 17(2)(vi(c), 192]
Tribunal held that CIT(A) failed to consider various contentions raised by the assessee that ESOP expenditure was a revenue expenditure in the hands of assessee – employer and no reasons were forthcoming for invoking provisions of Section 17(2)(vi)(c), mater was remanded to CIT(A) for reconsideration. (AY. 2017-18)
Nuvama Wealth and Investment Ltd. v. ACIT [2023] 201 ITD 242 (Hyd)(Trib)
473. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Fes for technical services – Reimbursement of expenses made by assessee to its parent company for salary paid to expatriate employees, was in nature of salary cost and was subjected to TDS under section 192, such reimbursement could not be treated as FTS – DTAA-India-Japan [S. 9(1)(vii), 192, 195, Art. 12]
The assessee was subsidiary of Japanese Company. Reimbursement of expenses to its parent company. AO held it to be payment for Fees for Technical services and disallowed the same u/s. 40(a)(i) as the assessee failed to withhold tax u/s. 195 of the Act. Terms of assignment agreement between parent company and assessee made it clear that assigned employees, in respect of whom, disputed payments had been made by assessee were under complete control and supervision of assessee during tenure of assignment agreement and thus, there was employer-employee relationship between assessee and assigned employees. Reimbursement of expenses made by assessee to its parent company for salary paid to expatriate employees, was in nature of salary cost and was subjected to TDS under section 192, such reimbursement could not be treated as FTS under section 9(1)(vii) and article 12 of India Japan DTAA.(AY. 2015-16)
Yamazen Machinery and Tools India (P.) Ltd. v. ACIT (2023) 200 ITD 205 / 107 ITR 113 (Delhi) (Trib.)
474. S. 40(a)(ia): Amounts not deductible – Deduction at source – Contractors/sub-contractors – Obtained PAN of transporters – Mere violation of provisions of s. 194C(7) would not attract disallowance.[S. 194C(6), 194C(7), R. 31A(4)(vi)]
Tribunal held that in accordance with S. 194C(7) r.w.r. 31A(4)(vi) of the Rules, the assessee had filed the TDS return giving the details of payment made towards transporters on which TDS has not been made. Apart from the same as per S. 194C (6), no tax needs to be deducted at the time of making payments to the transporters, if the transporter furnished his PAN to the person making the payment. In this connection, PAN of the parties have been submitted before the AO and the assessee had duly submitted TDS returns giving the details of the payments made to transporters on which no TDS was deducted and a statement showing expenses not in the nature of transportation expenses. Therefore, even if there is a violation of S. 194C (7), disallowance u/s 40(a)(ia) does not arise if assessee had complied with S. 194C(6). In the instant case, the assessee had obtained PAN of the transporters and duly complied with S. 194C (6). Therefore, TDS was not required to be deducted by the assessee. Soma Rani Ghosh v. Dy.
CIT Trib [2016] 74 taxmann.com 90 (Kol.) relied upon. (AY. 2013-14)
Addl.CIT v. Quippo Oil & Gas Infrastructure Ltd. (Delhi) 201 ITD 47(Delhi)(Trib)
475. S. 40(a)(ia): Amounts not deductible – Deduction at source -Additional evidence – NBFC had taken into account interest paid by the assessee while computing the income – Matter remanded to the file of the Assessing Officer. [Form No 26A]
The Assessee produced Form no. 26A as additional evidence certifying that NBFC had taken into account interest paid by the assessee while computing the income. Matter restored to the AO for de novo consideration after taking into account the details produced by the assessee. (AY. 2012-13)
Vivek Bhole Architects (P.) Ltd. v. DCIT (2023) 201 ITD 467 (Mum (Trib.)
476. S. 40(a)(ia): Amounts not deductible – Deduction at source – Salary to partners – Not liable to deduction of tax at source – Deletion of disallowance is affirmed. [S. 15, Explanation 2, 192 194D]
Held that salary, bonus, commission or remuneration received by a partner under the head “salary” and given under section 15 of the Act, there was no infirmity in the findings of the Commissioner (Appeals) that there was no requirement under the provisions of the Act for deduction of tax at source by the partnership firm on salary, bonus, commission or remuneration, etc., or whatever name called given or credited to a partner of a firm. Not laible to deduct tax at source (AY. 2017-18)
ACIT v. Dhar Construction Co. (2023) 101 ITR 49 (SN)(Gau) (Trib)
477. S. 40(a)(ia): Amounts not deductible – Deduction at source – Payment of freight charges to transporters after obtaining PAN of transporters – No disallowance is called for. [S.194C(6), 194C(7)]
Tribunal held that the provisions of section 194C(6) and 194C(7) are independent of each other. As per the provisions of section 194C (6), the assessee had collected PAN of the transporters. Therefore, just because there is violation of provisions of section 194C(7) disallowance of u/s 40(a)(ia) does not arise if the assessee complies with the provisions of section 194C(6) of the Act. (AY. 2011-12)
Sukumar Solvent (P.) Ltd. v. ACIT (2023) 200 ITD 614 (Kol) (Trib.)
478. S. 40(b)(iv): Amounts not deductible – Partner – Interest – Disallowance – Interest to be calculated on actual duration of credit remains and not on closing balance – Disallowance is not justified.
Held that the the interest on the credit balance in the capital account has to be calculated on the actual duration the credit remains in the capital account and not on opening or closing day of financial year. If a partner keeps a credit balance on the opening day but subsequently withdraws the amount then payment of interest on the opening balance will not be proper and justified. Similarly, if the partner withdraws the amount at the fag end of the financial year then the payment of interest only on the closing balance would also be not proper and justified when credit balance remained for the whole financial year except on the last date of the financial year. The approach of the Assessing Officer in calculating the interest on the closing balance as on the end of the financial year was not proper and justified. The Commissioner (Appeals) had not adjudicated the issue by giving a concluding finding. However, since the method of calculating the interest by the assessee was proper and consistently followed year after year it could not be disturbed for the year under consideration. Accordingly, the disallowance made by the Assessing Officer on account of excess payment of interest to the partners was deleted. (AY. 2011-12)
Savla Agencies v. JCIT (2023) 101 ITR 57 (SN) (All) (Trib)
479. S. 40(b)(v) : Amounts not deductible – Partner – Remuneration – Payments as per PSR and according to partnership deed – Permissible limit – Disallowance is not justified. [S. 15, 192]
Held that salary, bonus, remuneration or commission are collectively termed “remuneration” and the remuneration paid during the year was within the permissible limit provided Thus, there was no infirmity in the findings of the Commissioner (Appeals). (AY. 2017-18)
Asst. CIT v. Dhar Construction Co. (2023)101 ITR 49 (SN)(Gau)(Trib)
480. S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Business expediency – Claim not rebutted – Disallowance deleted. [R. 6DD]
Held that since the assessee had made clear averments regarding business expediency and the department had not rebutted them, the Assessing Officer was directed to delete the disallowance. (AY. 2016-17)
Raju Kashyap v. A CIT (2023)101 ITR 37 (SN)(Delhi) (Trib.)
481. S. 40A (3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits –Additional evidence – No reasonable cause for admitting additional evidence – Freight expenses not allowable. [ITATR. 29]
Held, the vouchers and bills for payment towards freight charges were available with the assessee even at the time of assessment proceedings or even at the time of first appellate proceedings but it did not produce them, without any reason. Since there was no reasonable cause for admitting the petition, the application was to be rejected and since there was no evidence for the claim of freight expenses, they were not allowable. (AY. 2014-15)
Saranya Agro Foods Pvt. Ltd. v. ITO (2023)101 ITR 60 (SN)(Chennai) (Trib)
482. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Amount ceasing to be liability – Necessary details not filed – Evidence produced for the first time – Matter remanded
Held that the amounts involved had ceased to be the liability of the assessee for a considerable long period of time. The Commissioner (Appeals) had accepted the assessee’s contention that the Assessing Officer did not make necessary enquiry but there was nothing in the statute which prohibited the Commissioner (Appeals) from making further enquiry as he deemed necessary. Thus, the matter was remanded to A.O. consider the issue afresh after taking into account and examining the factual veracity of submissions of the assessee and material produced. (AY 2010-11 to 2015-16)
ACIT v. Ansal Landmark (Karnal) Township Pvt. Ltd. (2023)101 ITR 6 (SN)(Delhi) (Trib)
483. S. 43(5): Speculative transaction – Foreign exchange fluctuation – Hedging – loss arising on forwards contract cancelled by the assessee prior to the date of settlement – Not speculative – Allowable as business loss.[S. 28(i)]
Tribunal held that the CIT (A) held that the assessee had entered into a forward contract to safeguard against the foreign exchange fluctuation on its revenue receipts from foreign parties. These transactions were in the nature of hedging transactions and they fall under the exempted category of speculative transactions u/s 43(5)(a). The CIT(A) also held that the quantum of hedging was reasonable having regard to the export turnover and that it was actual loss which the assessee had incurred on account of cancellation of forward contracts entered with banks to safeguard realization of export proceeds. Order of Tribunal is affirmed (AY. 2012-13)
ACIT Gimpex (P) Ltd. (Chennai)(2023) 202 ITD 784 / 106 ITR 44 (SN) (Chennai)(Trib).
484. S. 44AD : Presumptive basis – Dissolution of partnership firm – Partner carried on business in capacity as proprietor – Amount taxed in the assessment of firm – Matter set aside to AO for verification of facts. [S. 44ADA, 194 J, Form No. 26AS]
Partnership firm dissolved w.e.f. 01.04.2005 vide dissolution deed dated 31.03.2005. Partner filed affidavit stating that he has been carrying out business of erstwhile partnership firm as proprietor. AO taxed entire amount in the assessment of firm – On appeal, CIT(A) rejected the claim that showing such income in the individual capacity cannot absolve the appellant from filing its own ITR when it is receiving amount in the same PAN. However, directed the AO to treat 50% of the gross receipts u/s 194J of the Act and 8% of the gross receipts u/s 194C of the Act as appearing in Form 26AS of firm as income of the appellant in congruence to provisions of Sec. 44ADA and 44AD of the Act. Before ITAT, appellant submitted that CIT(A) rejected claim of assessee without considering reconciliation statement and applied provisions of S. 44ADA, which was not applicable in AY. 2011-12. In view of the fact that dissolution deed was submitted before AO, ITAT remitted back the matter to AO for fresh verification. (AY. 2011-12)
Mathur Ugam and Associates v. ITO (2023) 104 ITR 442 (Delhi)(Trib)
485. S. 44BB : Mineral oils – Computation – Vessels to be used in Seismic support duties and transport of coated pipes in India – Receipts are covered under section 44BB – Excluded from the definition of royalty – DTAA-India-Singapore. [S. 9(1)(vi), Explanation 2 (via), 115JA, Art. 12]
Assessee, a non-resident corporate entity based in Singapore, entered into charter hire agreements with PDMCC and LT for vessels to be used in Seismic support duties and transport of coated pipes in India respectively. Tribunal held that activities of seismic duties and transport of coated pipes would be covered under Section 44BB and it could not be treated as royalty under Explanation 2(iva) to Section 9(1)(vi). Followed Valentine Maritime (GULF) LLC (2017) 163 ITD 37 (Mum) (Trib) Dy. CIT v. Western Geco International Ltd. TS-943-ITAT-2022, Larsen & Toubro Ltd. v. Girish Dave DIT (IT) 442 ITR 217 (Bom)(HC). (AY. 2012-13)
Pacific Crest Pte. Ltd. v. Dy. CIT (IT), [2023] 201 ITD 11 (Delhi)(Trib)
486. S. 44BBB : Foreign companies – Civil construction – Turnkey power projects – Not engaged in turnkey project – Provisions are not applicable – Even otherwise, 44BBB(2) overrides 44BBB(1) – Assessee maintains books of accounts u/s. 44AA which are audited – AO could not have estimated NP @10%. [S.44AA]
Tribunal held that the provisions of Section 44BBB(1) is not applicable to the assessee and assessee setup PE for expansion of oil refinery project and not related to turnkey project approved by Central Government. Even otherwise, if assumed that 44BBB(1) applicable, then 44BBB(2) overrides 44BBB(1). Where assessee had maintained books of accounts as per 44AA and audited as per 44AB, then provisions of S. 44BBB(1) not applicable. AO could not have estimated net profit @10%. Addition made by AO deleted. (AY 2019-20)
Technip Energies Italy v. DCIT (2023) 104 ITR 592 / 225 TTJ 562 (Delhi) (Trib)
487. S. 45 : Capital gains – Oral agreement – No oral agreement can outweigh the registered document as per provisions of Section 93 of the Indian Evidence Act – The capital gain is taxable in the year of the registered sale deed. [S. 2(47(v), Indian Evidence Act,1872, S. 93]
The Hon’ble Tribunal held that the transfer of immovable property through the oral agreement does not fall in any of the limb of section 2(47). The instant case is neither a case of sale nor exchange nor relinquishment or extinguishment of any right in the assessment year 1995-96. In fact, the registered sale deed was executed by the assessee in favour of the purchaser in 2003. Therefore, the transfer has taken place in the assessment year 2004-05. Further no oral evidence can be given as against the registered document as per provisions of section 93 of the Indian Evidence Act. Moreover, in case of conflict between the oral statement and the written document, the contents of written document shall prevail as against the oral statement/agreement. Further the letter furnished by the Assessee of the Purchaser does not bear the date of taking over the possession of the land and the letter is also undated. In the said letter it was mentioned that the possession was taken over through the Irrevocable General Power of Attorney in the year 1994. However, no such power of Attorney was produced by the assessee. Further the assessee had not brought on record the evidence to show that the land was the capital asset in the records of the purchaser with effect from 1994 nor was any capital gain declared. The Hon’ble Tribunal thus held that considering the case from any point of view, the order of the Commissioner (Appeals) is affirmed. (AY 2004-05)
Allam Adavaiah v. ACIT [2023] 200 ITD 557 (Hyd (Trib.)
488. S. 45 : Capital gains – Agricultural land – Joint development agreement – Licence to enter property for purpose of carrying out development – Capital gain offered in the year 2013-14 – Assessing the capital gain in the year 2011-12 was deleted. [S. 2(47)(v), 48, Transfer of Property Act, 1882, S.53A]
Held that the assessee entered into a joint development agreement with a developer vide registered agreement dated 16-9-2010 in respect of agricultural land for formation of sites and received certain amount, since joint development agreement regarding possession clearly stated that what was given was not possession contemplated under section 53A of Transfer of Property Act and that it was merely a license to enter property for purpose of carrying out development, invocation of provisions of section 2(47)(v) on basis of joint development agreement was not proper. The assessee rightly offered the capital gains tax in the assessment year 2013-14. (AY. 2011-12)
K.V. Satish Babu [HUF] v. ITO (2023) 201 ITD 876(Bang)(Trib)
489. S. 45 : Capital gains – Conversion of capital asset into stock in trade – MOU with co-owners is notarised – Not submitted accounting entry – Conversion of land as stock-in-trade is not proved – Sale is treated as capital asset – Liable to capital gains tax – Amendment in third proviso to section 50C would be applicable retrospectively – The AO is directed to consider valuation difference of 10% of tolerance limit while computing the capital gains. [S.5oC]
The assessee sold non-agricultural land and claimed that said land was converted into stock-in-trade by entering into MoU with co- owners before its sale, since MoU was not notarized and also assessee had not submitted any accounting entry passed in books of account for such conversion on date of MoU and failure to obtain such audited books of account clearly proved that entire theory of conversion of agricultural land as stock-in-trade was baseless and afterthought and, therefore, Commissioner (Appeals) was justified in holding that non- agricultural land sold by assessee were capital asset. Tribunal also held that the amendment in third proviso to section 50C would be applicable retrospectively(AY. 2013-16)
Girdharbhai Haribhai Gajera v. ITO (2023) 200 ITD 485 (Surat) (Trib)
490. S. 45 : Capital gains – joint development agreement (JDA) – Only permissible possession of land transferred to the developer while executing JDA – Ownership had not been transferred – No taxable event happened – Not liable to capital gains taxation. [S. 2(47)(v), 48, Transfer of Property Act, 1882, S.53A]
The assessee has entered into a joint development agreement (JDA) with developers for the development of a property. The assessee has received a sum in Feb, 2010 as a refundable deposit and a sum of Rs. 1 crore as a non- refundable deposit on Oct, 2010. The AO computed the capital gain by considering the guideline value and the non-refundable deposit of Rs. 1 crore as the full value of consideration. The Tribunal held that, from the relevant clauses of the JDA, it becomes clear that the assessee has given only the permissible possession of the land to the developer at the time of executing the JDA and the ownership is not transferred. Further the assessee offered the capital gains to tax as and when the developer handed over the flat as per the JDA. Overall view that no taxable event happened during the year under consideration and the basis on which the capital gain is computed by the AO is not tenable. The capital gain computed by the AO needs to be deleted. (AY. 2011-12)
Dinesh Devraj Ranka v. Addl. CIT [2023] 200 ITD 731 (Bang)(Trib.)
491. S. 49 : Capital gains – Mode of Computation – Indexed cost – Acquired under will – Previous owner – Computed with respect to year in which previous owner first held asset and not in year in which assessee became owner of asset – Brokerage and commission – Legal expenses – Allowable as deduction – Payment of compensation to vacate the premises – Allowable as deduction. [S. 45, 48]
Dismissing the appeal of the Revenue the Tribunal held that while computing capital gains arising on transfer of capital asset acquired by assessee under will, indexed cost of acquisition has to be computed with respect to year in which previous owner first held asset and not in year in which assessee became owner of asset. Held that the brokerage expenses having been incurred wholly in connection with transfer of property under section 48 would be fully allowable as deduction while computing capital gains of assessee and the Assessing Officer cannot merely restrict allowability of same on basis of excessiveness. Payment to solicitors to look after legal aspects of transaction of transfer of subject property and claimed it as deduction, only works which were carried out by solicitors in connection with transfer of subject property would be allowable as deduction. Compensation paid to licensee to get premises vacated before lock in period of 12 months so that vacant possession of property could be given to buyer, would certainly be construed as an expenditure incurred in relation to transfer of property and therefore, allowable as deduction (AY. 2016-17)
ITO v. Sohrab Fali Mehta (2023) 200 ITD 694 (Mum)(Trib)
492. S. 49 : Capital gains – Previous owner – Cost of acquisition – Release deed – Indexation – Property acquired through the release deed – Indexation only from the date of execution of the release deed. [S. 45, 48]
The assessee inherited one-fourth of the property upon his father’s death. His sisters executed release deeds for the remaining three-fourth share in the property in favour of the assessee much later. Upon the sale of the property, the assessee claimed the indexation benefit on all four parts of the property from the date of acquisition by his father. The Department objected to the calculation of the assessee on the grounds that s. 49 of the Act does not recognise the acquisition of an asset by way of a release deed to consider the cost of acquisition from the date from which the previous owner held the asset. Concurring with the view of the Department, Hon’ble ITAT held that the cost of acquisition and indexation for the one-fourth share in the property will be from the date on which it was acquired by the assessee’s father and in the rest of the case, it will be from the date on which the sisters executed a release deed in favour of the assessee. (AY. 2012-13)
R. Mohan v. ITO (2023) 200 ITD 98 (Chennai)(Trib.)
493. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Additional ground is admitted – Matter remanded to the CIT(A).
Tribunal remanded the matter to CIT (A) and provide another opportunity to the Assessee without getting into merits, albeit at a cost. (AY 2010-11)
Ahmed Ali Khan v. ITO [2023] 200 ITD 707 (Jaipur) (Trib.)
494. S. 50C: Capital gains – Full value of consideration – Stamp valuation – Date of agreement to sell – Date of registration – Amendment by way of Finance Act, 2016 effective from 01.04.2017 – insertion of proviso to S. 50C(1) is clarificatory in nature – Applicable on pending matters – Sale value lesser than stamp duty valuation – addition made by the AO is deleted. [S. 45]
The issue before the ITAT was whether the stamp duty valuation has to be taken on the date of agreement to sell or on the date of sale deed, since both the dates are falling within the same FY. It was not disputed that the stamp duty was actually paid on the date of agreement to sell as per the circle rate prevailing at that point of time. The ITAT followed the decision given in the case of Amit Bansal v. ACIT (2018) 100 taxmann.com 334/ 174 ITD 349 wherein it was held that the amendment to S. 50C, by way of insertion of proviso to S. 50C(1), is clarificatory in nature and can be applied on pending matters and where the date of the agreement fixing the amount of consideration and the date of registration regarding the transfer of the capital asset in question are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of the agreement is to be taken for the purpose of full value of consideration. Accordingly, Revenue’s appeal was dismissed. (AY. 2014-15)
ACIT v. Thomson Press (India) Ltd. (Delhi) 202 ITD 149 (Delhi)(Trib)
495. S. 54 : Capital gains – Profit on sale of property used for residence – Bonafide mistake – Claim made under section 54F – Entitled to avail the benefit. [S. 54F]
While filing the Income Tax Return, the assessee made a claim under S. 54F against the sale of a residential property. Later on, when the case was picked up for scrutiny, the assessee submitted that the claim should be accepted under s. 54 instead of s. 54F. Since s. 54F is not applicable in the case of the sale of residential property; AO not submitting to the assessee’s view made an addition to the income. CIT(A) also concurred with the AO’s view. On appeal the Tribunal held that the assessee had not made any fresh claim in any of the proceedings so far. Also, the lower authorities had not taken the view that, based on the facts of the case, the assessee was not eligible for benefit under S. 54 as requested by the assessee. The Tribunal held that since this was a genuine mistake by the assessee, the claim was to be allowed under S 54 of the Act. (AY. 2016-17)
M M Pandit HUF v. ACIT (2023) 201 ITD 104 (Lucknow)(Trib.)
496. S. 54B : Capital gains – Land used for agricultural purposes – Order of CIT(A), allowing the claim is affirmed. [S. 45]
Tribunal held that Commissioner (Appeals) on basis of agriculture income and other evidence shown in earlier years held assessee eligible for deduction under section 54B, finding of Commissioner (Appeals) being based on appreciation of evidence about claim of deduction under section 54B was justified.(AY. 2014-15)
ITO v. Bharatkumar Laljibhai Tejani (2023) 201 ITD 550 (Surat)(Trib)
497. S. 54B: Capital gains – Land used for agricultural purposes – Capital asset – Land sold for residential purposes as per sale deed – CIT(A) is directed to allow additional evidence – Matter Remanded. [S. 2(14) (iii), 45, R. 46A]
Held, that the Assessing Officer had fallen in error in reading the revenue records without seeking due clarification from the assessee. The Commissioner (Appeals) had not allowed the assessee to produce further evidence to show that land falling in the share of the assessee was not converted, before its transfer by the assessee. The crucial point needed to be restored to the Commissioner (Appeals) to allow the additional evidence of the assessee and to let the assessee establish that the land falling in the share of the assessee which was sold by the impugned sale deed was not converted to non-agricultural purposes by any order of the Revenue authorities. If that was established the fact that it was sold for the purpose of residence of the vendor or that it was valued for the purpose of stamp papers by the registered authority as a non-agricultural land would not be material and the assessee would be entitled to benefit of section 54B of the Act. Matter remanded. (AY. 2011-12)
Vipin Kumar v. ITO (2023) 101 ITR 68 (SN)(Delhi) (Trib)
498. S. 54B : Capital gains – Land used for agricultural purposes – Purchasing of agricultural land in the name of third person (i.e. wife) – Not entitled to claim exemption. [S. 45]
The assessee purchased agricultural land in the name of his wife and claimed exemption against the capital gains earned by him on sale of his urban agricultural land. However, the AO denied the exemption to the assessee for the reason that the legislature had not intended to advance the benefit of the said section to an assessee who purchases agricultural land in the name of a third person. The CIT(A) upheld the view taken by the AO. The Tribunal, by following the judgments in the case of Kamal Kant Kamboj v. ITO [2017] 88 taxmann.com 541/397 ITR 240 (Punj. & Har.) (HC) Jai Narain v. ITO [2008] 306 ITR 335 (Punj. & Har.)(HC) and CIT v. Dinesh Verma [2015] 60 taxmann.com 461/233 Taxman 409 (Punj. & Har.) (HC) confirmed the order passed by the CIT(A). (AY. 2012-13)
Surta Ram v. ITO [(2013) 201 ITD 459 (Chd (Trib)
499. S. 54B – Capital gain – Disallowance agricultural land – new agricultural land purchased by assessee – prior to the date of sale of agricultural land – Purchase of new property was made out of advances received towards sale of agricultural properties
New property was primarily purchased out of advances received from sale of two agricultural properties. Evidently, advances so received by assessee were invested in the new agricultural property after the same were received and within a period of 2 years from the date of receipt of advance. Accordingly, assessee was to be allowed benefit of exemption under section 54B since purchase of new property was made out of advances received towards sale of agricultural properties held by the assessee.
Dharmendra J. Patel v. DCIT, Anand Circle, Anand [ITA No. 561/Ahd/2020; dated 22/03/2023] [A.Y.: 2017-18]
500. S.54F : Capital gains – Investment in a residential house – Inheritance of land – Six owners – Construction of six flats – Five flats were occupied by other Co-owners – Entitle to exemption.[S. 45]
The assessee along with other five family members had inherited land on which all members constructed six flats which were occupied by each owner. The assessee claimed exemption under section 54F in respect to flat constructed by her against capital gain earned during the previous year relevant to AY.2016-17. The assessee also produced electricity bills to establish that other flats were owned by respective members of the family. The AO, after referring to decision of Hon’ble Supreme Court of India in the case of M.J. Siwani v. CIT Income-[2015] 232 Taxman 335 (SC) denied exemption on ground that assessee owned six residential house properties though jointly i.e. more than one residential house contemplated in section 54F of the Act. Before the Tribunal, the assessee relied on series of decisions in favour of the assessee and contended that the where there are different views of non-jurisdictional High Court, then one favourable to the assessee has to be followed. Referred Dr.(Smt).P.K. Vasanthi Rangarajan v.CIT (2012) 209 Taxman 628 (Mad) (HC). The Tribunal held that the assessee is entitle to claim exemption since there was no material to show that assessee was exclusively owner of other five flats.(AY. 2016-17)
Zainul Abedin Ghaswala v. CIT(A) NFAC (2023) 201 ITD 829 (Mum) (Trib.)
501. S.54F : Capital gains – Investment in a residential house – Capital gains account – Paid the purchase price of property and construction thereon were within relevant period – Denial of exemption is not valid.[S. 45]
The assessee sold a plot of land and invested the Long-Term Capital Gains earned thereon in a residential house. The AO allowed the claim of the assessee u/s. 54F of the Act after making disallowance in respect of indexed cost of acquisition. On appeal, CIT(A) disallowed entire exemption on the ground that the construction timeline was not being met. The CIT(A) also observed that the assessee had not deposited any amount in the capital gains scheme account whereas the amounts were duly deposited in the capital gains scheme account and duly utilized from the said account only.The Tribunal quashed the order of the CIT(A) and held that since the amounts for property purchase and construction were paid within the relevant period from the Capital Gains Account, the disallowance lacked basis. It emphasized that completion of construction or possession within the stipulated time is not crucial. The appeal was allowed.(AY. 2015-16)
Subramanian Swaminathan v. ACIT (IT) (2023) 201 ITD 487 (Delhi) (Trib.)
502. S.54F : Capital gains – Investment in a residential house – Non-Resident – Co-owner of a property at USA – Not entitled to the benefit of deduction. [S. 45]
The assessee is a resident of USA, sold certain immovable properties and claimed exemption under section 54F. The AO denied the exemption. CIT(A) allowed the exemption. On appeal by the Revenue the Tribunal held that since the assessee was a co-owner of a property situated in USA where assessee habitually resided and had also disclosed address of said property in its passport, assessee was not entitled to benefit of deduction under section 54F as assessee owned more than one residential house at time of transfer of original asset. The Tribunal also held that, the provisos (a) and (b) to s.54F, makes it clear that if the assessee owns more than one residential house other than the new asset on the date of transfer of an original asset, the benefit of deduction u/s. 54F cannot be availed by the assessee.(AY. 2011 -12)
Dy. CIT v. Babu Rajendra Prasad [2023] 201 ITD 704 (Vishakha)(Trib.)
503. S. 56 : Income from other sources -Share premium – DCF method – Holding company – Bringing the premium received from the holding company to tax net under these deeming fictions would tantamount to stretching the provision to an illogical length and will lead to some kind of absurdity in taxing own money of shareholders without any corresponding benefit – Addition is deleted. [S. 56(2)(viib), R.11 UA]
The Assessee Company issued certain shares to its holding company against a face value of Rs. 10 per share. It adopted the discount cash flow (DCF) method for the determination of fair market value (FMV) of shares as per the valuation report of the independent valuer. The AO held that the FMV of shares determined as per the DCF method was without any sound factual basis and computed the fair market value of shares at Rs.11.54 per share by applying the NAV method and considering the difference between FMV as per DCF method qua NAV method a chargeable income of assessee u/s. 56(2)(viib) and added amount in assessee’s income. On appeal the Tribunal held that S. 56(2)(viib) creates a legal fiction whereby the scope and ambit of expression ‘income’ has been enlarged to artificially tax a capital receipt earned by way of premium as a taxable revenue receipt. Hence deeming fiction ordinarily requires to be read to meet its purpose of taxing unaccounted money and thus needs to be seen in the context of peculiar facts. The legal fiction has been created for a definite purpose and its application need not be extended beyond the purpose for which it has been created. Bringing the premium received from the holding company to tax net under these deeming fictions would tantamount to stretching the provision to an illogical length and will lead to some kind of absurdity in taxing own money of shareholders without any corresponding benefit. Held that the action of AO was contrary to provisions of section 56(2)(viib) and therefore addition deleted. (AY. 2016-17)
Dy. CIT v. Kissandhan Agri Financial Services (P.) Ltd. [2023] 201 ITD 159 (Delhi)(Trib.)
504. S. 56 : Income from other sources-Share application – Date of allotment – Provision can be invoked on the date of allotment and not on the date of share application – The Assessing Officer can refuse method of valuation after proving that methodology resorted by assessee is incorrect or not as per standards laid down. [S. 56(2)(viib), R. 11UA(2)]
Tribunal held taht share allotment date and not share application, is relevant date to trigger provisions of section 56(2)(viib) as after a subscriber entity advances amount for allotment of shares, subscriber entity has every right to withdraw or cancel its request for allotment Therefore, where assessee received money for allotment of shares in assessment year 2011-12 and shares were allotted in assessment year 2015-16, provisions of section 56(2)(viib) had to be invoked when assessee allotted shares on finalization of share allotment. Tribunal also held that Rule 11UA(2) prescribes two methods-Book Value method and DCF method for valuation and lays down that option to choose method to be adopted to determine FMV of unquoted shares is not with Assessing Officer but with assessee. However, Assessing Officer can refuse method of valuation after proving that methodology resorted by assessee is incorrect or not as per standards laid down.(AY. 2015 -16)
ITO v. Appealing Infrastructure (P.) Ltd (2023) 201 ITD 719 (Delhi)(Trib)
505. S. 56 : Income from other sources -Share premium – Discounted cash flow method (DCF) – Not justified in rejecting the method followed by the assessee – Matter remanded. [S. 56(2) (viib), R. 11UA]
Tribunal held that, the DCF method followed is one of the permissible method of valuation of shares in terms of rule 11UA of IT Rules, 1962 and said method is based on free cash flow of future years on the basis of projected financial statements. The projected financials under DCF method need not be equal to the actual performance of the company in subsequent years. However, there should be some degree or fair estimation and assumption while arriving at projected free cash flow. only on the ground that there was a vast difference between projected financials and actual performance of the company for two assessment years. The issue set aside to the file of the AO and directed to re-consider the issue of addition towards share premium u/s. 56(2) (viib). The AO is free to examine method followed by the assessee, however, he does not have power to change method followed by the assessee from DCF method to NAV method, and to decide the issue in accordance with law. (AY. 2015-16)
Brio Bliss Life Science (P.) Ltd. v. ITO [2023] 200 ITD 167 (Chennai)(Trib.)
506. S. 56 : Income from other sources – Stamp valuation – Circle rate – Unexplained investments – Purchase was done at circle rate – Reference to valuation officer is not valid – Addition is deleted. [S. 56(2) (vii), 69]
The assessee had purchased four properties with his brothers at circle rate/stamp duty value and had 1/4th share in all four properties. The AO has referred the valuation of the property purchased by the assessee to the DVO and assessed the difference between the purchase price i.e. circle rate/stamp duty value and the value determined by the DVO treated as income of the assessee u/s 56(2)(vii) r.w.s. 69. The CIT(A) upheld the order of the AO. The Tribunal accepted the contention of the assessee that the purchase was done at circle rate and there was no understatement of purchase rate whatsoever and therefore, section 56(2) (vii) could not be invoked. The Tribunal further held that property could be referred to DVO only if assessee disputes stamp duty value of property Therefore, impugned invocation of section 56(2)(vii) was unjustified and said addition made by Assessing Officer was to be deleted.(AY. 2017-18)
Vinit Kumar v. Dy.CIT (2023) 201 ITD 499 (Delhi) (Trib.)
507. S. 56 : Income from other sources – Capital gains – Income from house property – lease agreement – Forfeiture of part of advance rent received – No extinguishment of rights as the right to the rent – Neither assessable as capital gain nor income from house property – Assessable as income from other sources.[S. 22, 45]
The assessee had leased its property and received an advance rent. The said lease agreement was cancelled and certain amount was retained by the assessee. The assessee treated the same as capital gains, being extinguishment of rights and offered the same to tax at a concessional rate of 20%. AO assessed this income as being ‘income from other sources’ and subjected to tax at normal rates of tax. The ITAT concurred with the findings of CIT(A) and held that there is no extinguishment of any right as the right to rent is not transferred to anyone by the assessee and also because the assessee can very well rent the property to any other person as it wishes after the forfeiture of deposit. Further, the amount was received as a security deposit and a part of the same has been forfeited by the assessee, which changed its character and the same becomes an income of the assessee and cannot be assessed as capital gains. The same could not be taxed under ‘house property’ as the amount received did not remain like ‘advance rent’ therefore, the income was liable to be taxed as ‘income from other sources’. (AY. 2012-13)
ACIT v. Gimpex (P) Ltd. (Chennai)(2023) 202 ITD 784 / 106 ITR 44 (SN) (Chennai) (Tib).
508. S. 57 : Income from other sources – Deductions – Compulsory acquisition of property – Interest on enhanced compensation.[S. 28(i), 56(2)(viii), 57(iv), 145B(1)]
The AO disallowed the claim of deduction @ 50% under section 57(iv) of the Act in respect of interest received on enhanced compensation on the ground that as the assessee is in the business of real estate the interest income arising from compulsory acquisition of property is taxable under the head profit and gains of business and profession (PGBP) and not income from other sources. CIT (A) up held the disallowance. On appeal the Tribunal held that in view of overriding nature of provisions of Section 56(2) (viii), assessee’s nature of business was of no relevance, and, consequently, assessee was entitled to statutory deduction under Section 57(iv) in respect of interest received on enhanced compensation for compulsory acquisition of property. (AY. 2015-16)
Phila Estates Developers (P) Ltd. v. ACIT [2023] 201 ITD 239 (Delhi)(Trib.)
509. S. 57: Income from other sources – Deductions – Premature encashment of Fixed Deposit – Loss of interest on account of premature encashment of fixed deposits – No expenditure incurred to earn interest income – Deduction disallowed – No evidence that loan taken from third party with whom deposit placed had connection with earning of any interest. [S. 56]
Held, that the loss of interest income on account of premature encashment of fixed deposits was not an expenditure incurred by the assessee to earn interest income. Therefore, CIT (A) was justified in disallowing deduction. Furthermore, assessee had failed to produce any evidence before the Assessing Officer or before the Commissioner (Appeals) to prove that the loan taken had connection with earning of interest income. Thus, deduction was rightly disallowed by the CIT(A). (AY 2014-15)
Jatinder Kumar Suri v. Dy. CIT (IT) (2023) 101 ITR 47 (SN) (Delhi) (Trib)
510. S. 60 : Transfer of income where there is no transfer of assets – Revocable transfer – Reduction of share capital and subsequently, conversion of FCD into equity shares – Written off its investment in its Profit and Loss account – There is no generation of income in the transaction of reduction in share capital and conversion of FCDs into shares – Addition is deleted.[S. 63]
The assessee, TBHPL, had invested in shares of Group Company named TGSPL. Under the scheme duly approved by High Court, TGSPL carried out reduction of capital. Hence, the assessee had written off its investment in its Profit and Loss account as exception item. Subsequent to reduction of capital, TGSPL issued shares to Serco Netherlands and Serco International on conversion of FCDs held by them. The AO held that reduction in share capital by TGSPL of the shares allotted to the assessee, has resulted in benefit to another group company Serco International SARL and made addition u/s. 60 r.w.s. 63 of the Act by taking into account FMV of shares of TGSPL. The CITA(A) confirmed the addition. On further appeal, the addition was deleted by the Tribunal holding that there is no generation of income in the transaction of reduction in share capital and conversion of FCDs into shares. (AY. 2016-17)
Teleperformance BPO Holdings (P.) Ltd. v. NFAC (2023) 200 ITD 60 (Mum)(Trib.)
511. S. 68: Cash credits – Unsecured loan – Proved identity, genuineness and creditworthiness of the loan transactions – Order of CIT(A) deleting the addition is affirmed.
Held that by submitting PAN number, address, income tax returns, audited financial statements of creditors and bak statement of share applicants had discharged onus to prove identity, creditworthiness and genuineness of its loan transactions with various companies and source of source had also been proved by assessee, accordingly the loan transactions could not be treated as unexplained cash credit under section 68 of the Act. (AY. 2013-14)
ITO v. Mega Collections (P) Ltd (2023) 201 ITD 404 (Surat)(Trib)
512. S. 68: Cash credits – Assessee filed confirmation of parties and repayment – Matter Remanded for fresh adjudication.
Held that the CIT (A) had not taken cognisance of reconciliation filed by the assessee. Therefore, matter was remanded for fresh adjudication. (AY. 2011-12)
Ganesh Ginning Factory v. ACIT (2023)101 ITR 90 (SN) (Ahd) (Trib)
Gajanand Ginning and Pressing Pvt. Ltd v.ITO (2023)101 ITR 90 (SN) (Ahd) (Trib)
Premjibhai Vallabhbhai Kukadiya v. ITO (2023)101 ITR 90 (SN) (Ahd)(Trib)
513. S. 68: Cash credits – Burden of proof – Receipts of sums of deposits, receipts of sums refunded furnished by the assessee – Details not untrue – Burden discharged – Additions is not justified. [S.292C]
Held, that the explanations submitted by the assessee before the authorities revealed that the assessee has, given the details of the amount received, the receipt number and the details of the amount which were refunded including the cheque number and date Thus, the assessee had discharged the onus cast upon it. The presumption under section 292C of the Act was a rebuttable presumption and could not be applied mechanically ignoring the facts of the case and the surrounding circumstances. Thus, the additions were deleted. (AY. 2011-12)
Godwin Construction Pvt. Ltd. v. ACIT (2023) 101 ITR 74 (SN) (Delhi)(Trib)
514. S. 68 : Cash credits – On money received for sale of units in housing projects – Improbable to make profits upto 50% – Properties sold not high end – On money element added at 50% of booked price very high – Additions to be restricted to 15%. – Order to be not treated as precedent.[S. 153C]
Held that it was highly improbable in this line of business to make profits up to the extent of 50 per cent. or more of the turnover on sale of small sized properties. Therefore, making addition of the entire on-money received by the assessee was not justified. Directed the A.O. to restrict the addition by estimating gross profit on the on- money receipts, at the higher of the rate in this line of business or as agreed to by the assessee before us at 15 per cent. Thereof. [The Tribunal clarified that this decision having been rendered in the peculiar facts and circumstances of the case was not to be treated as precedent in any other case. (AY. 2013-14, 2015-16, 2016-17)
Padmavati Housing Corporation v. Dy.CIT (2023)101 ITR 62 (SN) (Ahd) (Trib)
515. S. 68: Cash credits – Burden of proof – Share Application money and share premium – Availability of sufficient funds – Statements of directors recorded, confirmed decision of the board to invest in assessee – Burden of proof of assessee to prove identity and creditworthiness discharged – A.O not making any inquiry or finding any discrepancy in evidence – Proviso requiring assessee to prove source of credits not applicable – Additions are not justified.
Held that details were filed by the assessee, i.e., bank account, Income-tax return, audited balance-sheet of the investor companies at the time of subscribing to the equity shares of the assessee to show the sufficient availability of funds during the year and most importantly the statements of the directors of the assessee as well as investor companies had been recorded by the Assessing Officer, wherein, the transaction had been confirmed to have been carried out between the investor companies and the assessee pursuant to a decision in the board meeting to invest in the equity share capital of the assessee at a premium. Thus, all the limbs of section 68 required to be fulfilled about the identity and creditworthiness of the share subscriber and genuineness of the transaction had been successfully proved. The assessee having discharged initial burden upon it to furnish the evidence to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the Assessing Officer to examine the evidence furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidence furnished by the assessee and confronting with the same to the assessee. The Assessing Officer had not made any independent enquiry to verify the genuineness of the transactions nor pointed out any discrepancy or insufficiency in the evidence and details furnished by the assessee before him. The proviso inserted in section 68 of the Act by the Finance Act, 2012 that the assessee receiving share capital and share premium is required to prove the source of the source of the credits to the satisfaction of the Assessing Officer having been inserted with effect from April 1, 2013 was not applicable in the case of the assessee for the AY 2012-13. Thus, additions was to be deleted. (AY. 2012-13)
Toplink Developers Consultancy Pvt. Ltd. v. ITO (2023) 101 ITR 24 (SN) (Kol) (Trib)
516. S. 68: Cash credits – Income from undisclosed source – Cash deposited in the bank account – Claim that cash deposited was out of cash withdrawals – No document to substantiate claim – Link not established – Addition is justified. [S.69]
Held, that apart from referring to this bank statement to substantiate his claim that the cash deposited in the bank account was out of cash withdrawals, no other document was placed on record to prove the utilisation of cash withdrawn by the assessee. The assessee had also not established the link between cash withdrawals and cash deposits in his bank account. There was no proof regarding other transactions in the bank account. Merely because cash withdrawals by the assessee were more than the cash deposited in the bank account that could not lead to the conclusion that the cash deposit was out of the cash withdrawal without complete details of the utilisation of money. Thus, in the absence of necessary explanation and details, there was no infirmity in the findings of the Commissioner (Appeals) (AY. 2012-13)
Zakir Ali Yarbali Khan v ITO (2023) 101 ITR 35 (SN.)(Mum) (Trib)
517. S. 68 : Cash credits – Penny stocks – Report of Kolkata Investigation Directorate – Shares held for more than 15-25 years – Not justified in doubting the transactions – Order of CIT(A) deleting the addition is affirmed – Issue not raised before the CIT(A) cannot be raised under rule 27 of the ITAT Rules, 1963. [ITATR. 27]
Assessee had purchased the shares of ETTL in FY 1999-00 and sold the same in FY 2014- 15. She had also received some shares as a gift from her son who was holding the same since 1989-90. Thus the shares were held for around 15-25 years before they were sold in the market through stock exchange. The AO on the basis of a report of Kolkata Investigation Directorate and other circumstantial evidence alleged that the assessee had entered into a colourable device to evade tax by obtaining accommodation entry in the form of LTCG on sale of penny stocks and held the same liable to tax u/s 68 of the Act. The ITAT observed that, a taxpayer will not wait for 15-20 years to convert their black money through some non-genuine price-rigging in the very distant future. The ITAT further observed that the genuineness of transactions is doubted merely on the basis of the report of investigation wing and recording of statement of various unidentified promoters/ brokers/ associated persons/ intermediaries, etc. who were neither shown to be linked to the assessee nor any allegation was shown to be made qua the assessee or the transaction under consideration. It was further observed that no SEBI report or Stock Exchange report or cross examination of the operators / intermediaries was provided/ carried out. Thus the ITAT held that the AO had taken action against the assessee on the basis of generalised inputs received by him without taking cognizance of the overwhelming fact of the holding period of shares and without showing any nexus or live link with the assessee, which facts, according to the ITAT, were recognized by the CIT(A). The ITAT therefore held that the overwhelming factor of extraordinary period of holding shares prior to sale transcends all other considerations and exonerates the assessee from any kind of impropriety. Revenue’s appeal was accordingly dismissed. The assessee filed an application under Rule 27 of the ITAT Rules 1963 and contened that section 68 could not have been invoked in the absence of books of books of account. The Tribunal held that the issue not raised before the CIT(A) cannot be raised under rule 27 of the ITAT Rules, 1963 (AY.2015-16)
ACIT v. Anju Jain (Smt.)(2023) 200 ITD 389 (Delhi) (Trib)
518. S.68 : Cash credits – demonetization – Large cash deposited – Sale bills – Each sale bill less than Rs. 2 Lakhs – Books of account is not rejected – Addition cannot be made merely because bills did not contain name of customers.[S. 115BBE, 145(3)]
Assessee is engaged in business of sale of gold and silver ornaments and deposited Rs. 84 Lakhs in bank account. Cash transactions are duly recorded in books of accounts. Stock register produced before AO. Sales made in cash are out of stock in trade and complete quantitative details maintained by assessee. Books of accounts of the assessee are audited by an independent chartered accountant. Where assessee has admitted the sales as revenue receipts, there is no case for making addition u/s. 68 or to tax the same u/s. 115BBE. Addition u/s. 68 of Rs. 80 Lakhs made by AO without rejecting books of accounts u/s. 145(3) deleted. (AY. 2017-18)
Mahesh Kumar Gupta v. ACIT (2023) 104 ITR 519 (Jaipur) (Trib)
519. S. 68 : Cash credits – Share capital – Share premium – Discharged the burden by filing copy of ITR, balance sheet of investors, PAN address, confirmation of account, bank statement and valuation report – DCF method – Addition is deleted.[S. 56(2)(viib), 133(6), R.11UA]
During the assessment proceedings, the notice u/s 133(6) was sent to the investing companies, which were returned without any response. In response to the show cause notice issued to the assessee, the assessee submitted copies of the investing companies’ ITR, balance sheet, bank statements, and incorporation documents. The AO made an addition to the assessee’s income ignoring these submissions and merely because investing companies did not respond to the notices and without making any additional and independent enquiries. It was held that since AO did not bring anything to the contrary to what was submitted by the assessee, the onus to prove the transaction was not genuine shifted to authorities. Hence, the addition made by the AO was not considered sustainable without any contrary evidence. The registered valuer of the assessee applied one of the permissible valuation methods as per Rule 11UA, via. DCF method. AO did not concur with the method used and made the addition u/s 56(2)(viib). It was held that since the legislature itself allows any of the valuation methods and in the absence of any mechanism wherein the AO can adopt the other valuation method, the addition made was not sustainable. (AY. 2016-17)
Movefast Automobiles (P.) Ltd. v. Income-tax Officer (2023) 201 ITD 766 (Delhi) (Trib.)
520. S. 68:Cash credits – Unexplained money – Demonetisation – Cash available in old demonetised currency – Withdrawal from bank upto November 8, 2016 – Disallowance to that extent not sustainable – Balance disallowance of cash is proper.[S. 69]
The Hon’ble Tribunal held that cash in hand till November 8, 2016 in old currency notes alone could be considered to have been deposited by the assessee on December 1, 2016. To this extent, the disallowance was to be deleted. As regards the balance amount, the assessee having not given a satisfactory explanation, the disallowance was to be affirmed. (AY. 2017-18)
Shail Jayesh Shah v. ITO (2023) 101 ITR 38 (SN.) (Mum) (Trib)
521. S. 68: Cash credits – Unexplained money – Demonetisation – Books of account is audited – Matter remanded. [S. 69]
In the course of assessment processing the assessee submitted the details called for along with the cash book, bank statement, balance sheet, and profit and loss account for the years ending 31-3-2017 and 31-3-2016. The sale figures and cash deposits were also furnished for the aforementioned periods. However, AO proceeded to hold that the assessee company had tried to show the bogus sales to substantiate its cash deposit made during the demonetisation period under the well-thought process and thereby treated the cash deposit during demonetisation as unexplained income under s. 69A of the Act. When the matter reached ITAT, AR submitted that the AO did not take into consideration all the documents provided to him along with the Audit Report but rejected it on the ground that the ITR of the earlier year ended on 31-03-2016 was filed by the assessee on 24-03-2017. The AR further argued that neither the closing balance as of 31- 03-2016 nor the balance reported on 31-03-2017 was disputed by the AO while making additions to the income. The matter was remanded back for a fresh examination of submissions made by the assessee.(AY. 2017-18)
Moss Hospitality (P.) Ltd. v. ITO (2023) 201 ITD 726 (Mum) (Trib.)
522. S. 68: Cash credits Unexplained money – Shares – Accommodation entries – Penny stock – Bogus entries of long term capital gains – Tax on specified income – Determination of tax in certain cases – Addition is affirmed under section. 115BBE of the Act. [S. 45, 69. 115BBE, 133(6)]
Assessing Officer held that the assessee had obtained bogus entries of Long Term Capital Gain (LTCG) from purchase and sale of CCL International Ltd shares. After thorough verification it was determined that assessee had introduced undisclosed funds in garb of said transaction. Seven accommodation entry providers / brokers of bogus companies had in their respective statements admitted and confirmed that shares of CCL International Ltd were bogus scrip of a penny stock company which were used for providing bogus accommodation entries to various beneficiaries. The fact that 3000 shares of CCL International Ltd were sold by assessee to Genuine Dealtrade Pvt.Ltd i.e. a paper company whose one of the Director was also Director of broker company from whom assessee have purchased shares clearly demolished its claim of having entered into genuine transaction of sale and purchase of said shares. It was held that assessee had not carried out any genuine transaction of sale and purchase of shares and obtained bogus entry of Long Term Capital Gain. It was held as unexplained money under Section 69A which it was routed back through banking channel in form of sale consideration, hence, the impugned amount was taxed under Section 115BBE. (AY. 2015-16)
Rahul Gupta (HUF) v. ACIT [2023] 201 ITD 302 (Raipur)(Trib)
523. S. 68: Cash credits – Demonetization – Withdrawals of family members – Addition is deleted. [S. 69]
Tribunal held that considering that the assessee was able to explain the entire cash withdrawal of the family and also giving weightage to the family expenses, and in the absence of any proof that the assessee has spent the the entire available funds for personal needs, the demonetized cash deposit stands explained. Further, though the CIT (A) has restricted the disallowance to 50% and the balance was treated as unexplained, no reason was given by the CIT(A) as to how the assessee has spent the amount of said family withdrawals. Addition is deleted. (AY. 2017-18)
Abdul Razak v. ITO (IT) (Chennai) 202 ITD 161 (SMC) (Chennai)(Trib)
524. S. 68: Cash credits – Unexplained money – Demonetization – Cash deposits in the bank accounts were not abnormal as compared to the transaction in the earlier period – Appeal is allowed.[S. 69]
The assessee is engaged in the business of financial services and has dealerships of IFTSPL and FRPL. Thus the assessee was a distributor and used to act as a commission agent for promotion, marketing and distribution of various cash products. The primary issue raised by the assessee was with respect to high-pitch addition made by the AO on account of cash deposit made during the demonetization period ignoring the business carried out by the Appellant. The facts of the case are that in the course of business, the assessee used to deposit daily cash collected from retailers who were working under the assessee and used to deposit the same in the bank account which was transmitted into bank of IFTSPL and FRPL through RTGS/NEFT which is evident from the bank statement. All the deposits were sale proceeds of distributorship. The assessee had placed the relevant agreements with the aforesaid two entities and their bank statement. The ITAT observed that the perusal of bank accounts clearly show that the cash deposited by the assessee prior to the demonetization period was immediately transferred to the accounts of FTSPL and FRTPL. Further, the cash deposits in the bank accounts were not abnormal as compared to the transaction in the earlier period. Therefore, the AO wrongly taxed the deposits u/s 115BBE as the deposits in bank accounts were a part and parcel of their business or transaction. (AY. 2017-18)
Bipinbhai Naik v. ITO (Surat) 201 ITD 858(Surat) (Trib)
525. S. 69: Unexplained investments – Loan received in USD and deposited in Indian bank account – Investment on same day in mutual funds – Source of funds outside India not taxable in India – CIT (A)’s direction to obtain certified true copies of source of income is justified – Order of CIT(A) is affirmed.
The CIT (A) directed the Assessing Officer to obtain from the assessee, the certified true copies of the above documents from the bank and furnish them before the Assessing Officer while giving effect to the appellate order. The CIT (A) further directed the Assessing Officer to delete the addition after satisfying himself that the source of such investment was from outside India. The Tribunal held that there was no infirmity in the direction issued by the CIT (A). (AY. 2009-10)
ACIT (IT) v. Vijaykumar Vasantbhai Patel (2023) 101 ITR 1 (SN) (Ahd) (Trib)
526. S. 69: Unexplained investments – Survey – Income from undisclosed source – Discrepancy in stocks – Excess stocks not properly verified by AO – Matter remanded for readjudication. [S. 133A, 145(3)]
Held that the reconciliation filed by the assessee showed that the excess stocks claimed by the Assessing Officer was not properly verified. Therefore, the matter was to be remanded to the Assessing Officer for proper adjudication after taking cognisance of the reconciliation filed by the assessee. (AY. 2011-12)
Ganesh Ginning Factory v. ACIT (2023) 101 ITR 90 (SN) (Ahd) (Trib)
Gajanand Ginning And Pressing Pvt. Ltd v. ITO (2023)101 ITR 90 (SN) (Ahd) (Trib)
Premjibhai Vallabhbhai Kukadiya v. ITO (2023) 101 ITR 90 (SN) (Ahd) (Trib)
527. S. 69: Unexplained investments – Profits from sale of land – Contention that assessee only acted as aggregator and seller offered income as tax – AO to examine contention of the assessee – Matter remanded. [S. 68]
Held that the issue was to go back to the Assessing Officer for both AYs to re-examination of the claim of the assessee in the light of agreement between the parties and the claim of the assessee that seller had offered the income in its hands. Matter remanded. (AY. 2003-04 to 2005-06)
Pawan Green Channels Pvt. Ltd. v. Dy. CIT (2023)101 ITR 19 (SN) (Chennai) (Trib)
528. S. 69: Unexplained investments – Loan received in USD and deposited in Indian bank account – Investment on same day in mutual funds – Source of funds outside India not taxable in India – CIT (A)’s direction to obtain certified true copies of source of income is justified – Order of CIT(A) is affirmed.
The CIT (A) directed the Assessing Officer to obtain from the assessee, the certified true copies of the above documents from the bank and furnish them before the Assessing Officer while giving effect to the appellate order. The CIT (A) further directed the Assessing Officer to delete the addition after satisfying himself that the source of such investment was from outside India. The Tribunal held that there was no infirmity in the direction issued by the CIT (A). (AY. 2009-10)
ACIT (IT) v. Vijaykumar Vasantbhai Patel (2023) 101 ITR 1 (SN) (Ahd) (Trib)
529. S. 69: Unexplained investments – Survey – Income from undisclosed source – Discrepancy in stocks – Excess stocks not properly verified by AO – Matter remanded for readjudication. [S. 133A, 145(3)]
Held that the reconciliation filed by the assessee showed that the excess stocks claimed by the Assessing Officer was not properly verified. Therefore, the matter was to be remanded to the Assessing Officer for proper adjudication after taking cognisance of the reconciliation filed by the assessee. (AY. 2011-12)
Ganesh Ginning Factory v. ACIT (2023) 101 ITR 90 (SN) (Ahd) (Trib)
Gajanand Ginning And Pressing Pvt. Ltd v. ITO (2023)101 ITR 90 (SN) (Ahd) (Trib)
Premjibhai Vallabhbhai Kukadiya v. ITO (2023) 101 ITR 90 (SN) (Ahd) (Trib)
530. S. 69: Unexplained investments – Profits from sale of land – Contention that assessee only acted as aggregator and seller offered income as tax – AO to examine contention of the assessee – Matter remanded. [S. 68]
Held that the issue was to go back to the Assessing Officer for both AYs to re-examination of the claim of the assessee in the light of agreement between the parties and the claim of the assessee that seller had offered the income in its hands. Matter remanded. (AY. 2003-04 to 2005-06)
Pawan Green Channels Pvt. Ltd. v. Dy. CIT (2023)101 ITR 19 (SN) (Chennai) (Trib)
531. S. 69 – Unexplained investments – on account of difference in excess – stock of 22Kt gold and polka jewellery
The object of the Assessee company Chawla Jewellers, is a corporate entity engaged in the business of gold and diamond jewellery. After filing the return of income, a survey of the Act was carried out at the business premises of the assessee on 03-01-2018, where stocktaking was done. Based on stock taking on the date of the survey ang the stock position calculated by regis valuers on the day of the survey, the Assessing Officer (AO) made an addition towards the difference between 22kt Gold Jewellery and 20kt Polki Studded Gold Jewellery.
The Hon ITAT observed that, The Tribunal observed that the total weight of items of 22KT Gold jewelry and 22KT Gold Polki jewelry was 36,943 gms, and as per the estimated value, the difference was merely 113.50 gms, which is 0.32%. While weighing more than 34,000 gms of jewelry, the difference of 113 gms could be considered as an error, and no adverse inference can be drawn on this issue. After reviewing the facts and records, the two-member bench of Dr. B. R. R. Kumar (Accountant Member) and Astha Chandra (Judicial Member) deleted the addition made under Section 69 of the Income Tax Act, 1961, on account of the difference in the excess stock of 222Kt Gold and Polki Jewellery, the ITAT allowed the appeal of the assessee.
Chawla Jewellers v. DCIT Cental Circle 19, ITA NO.576/DEL/2023 dt.08/11/2023 (Del)(Trib.)
532. S. 69 : Unexplained investments – Receipts surrendered – during survey offered- part of total business receipts – return of income
AO observed that assessee voluntarily surrendered receipt of Rs. 3,00,000. However, while filing return of income, assessee did not declare any income under section 69A/115BBE. Assessee submitted that these were normal business receipts from gymnasium business and aerobic classes and these receipts of Rs. 3,00,000 formed parts of the total receipt of Rs. 16,00,600 declared by assessee in his return of income filed under section 44AD.
Assessee submitted a cash book containing date-wise receipts from gym activities and total receipts reflected therein amounts to Rs. 16,00,600 and individual receipts totaling Rs. 3,00,000 were included therein. It is true that the assessee was not maintaining regular books of account but at the same time, as evident from the statement recorded during the course of survey as well, assessee was maintaining receipts book/bills in respect of his gym activities. Where entries corresponding to the entries in the receipts books were reflected in the cash book and were accepted by the revenue, there was no justifiable reason to not accept the entries in the cash book corresponding to receipts surrendered during the course of survey. It was a case where assessee surrendered business receipts amounting to Rs. 3,00,000 during the course of survey and the said receipts had subsequently been offered as part of the total business receipts in the return of income so filed by assessee under section 44AD. In the result, addition under section 69 could not be sustained.
Shri Vijay Bajaj v. Central Circle, Patiala [ITA No.569/Chd/2020, dated 19/01/2023] [AY 2018-19]
533. S. 69A: Unexplained money – Compensation on land acquisition – Received on husband’s bank account – Withdrawn from and deposited in assessee’s bank account – No material to prove that money utilised for other purpose – Addition is deleted.[S. 68]
Held, that it was the explanation of the assessee that the amount was deposited withdrawn from her husband’s bank account. The material placed on record showed that in the year under consideration, assessee’s husband received an amount towards compensation on land acquisition. The compensation was deposited in the account of the husband. There was no material brought on record that amount withdrawn from the bank account was utilised for some other purposes and was not available with the husband of the assessee. Since, the explanation furnished by the assessee regarding the source of deposits was a plausible explanation, the addition was to be deleted. (AY. 2011-12)
Santosh v. ITO (2023) 101 ITR 32 (SN.)(Delhi) (Trib)
534. S. 69A: Unexplained money – Compensation on land acquisition – Received on husband’s bank account – Withdrawn from and deposited in assessee’s bank account – No material to prove that money utilised for other purpose – Addition is deleted.[S. 68]
Held, that it was the explanation of the assessee that the amount was deposited withdrawn from her husband’s bank account. The material placed on record showed that in the year under consideration, assessee’s husband received an amount towards compensation on land acquisition. The compensation was deposited in the account of the husband. There was no material brought on record that amount withdrawn from the bank account was utilised for some other purposes and was not available with the husband of the assessee. Since, the explanation furnished by the assessee regarding the source of deposits was a plausible explanation, the addition was to be deleted. (AY. 2011-12)
Santosh v. ITO (2023) 101 ITR 32 (SN.)(Delhi) (Trib)
535. S. 69C : Unexplained expenditure – Excess stock – Survey – Addition is restricted only to profit element of stock. [S.133A]
Tribunal held that alleged stock being part of business income. Only net profit of 12% on alleged income is directed to be estimated. (AY. 2011-12)
Sukumar Solvent (P.) Ltd. v. ACIT (2023) 200 ITD 614 (Kol) (Trib.)
536. S. 80 : Return for losses – Non-resident Indian – Tax audit – Audit as per Reserve Bank of India permission – Due date for filing of return was 30-9-2016 – Return was filed on 17-10-2016 – Loss not allowed to be cary forward. [S.44AB, 72, 139(1), Explanation 2(a)(ii), 139(3)]
Assessee, a NRI, was carrying on business of agencies of shipyards and marine electronics. Accounts of assessee were audited by a Chartered Accountant on 15-10-2016 and return of income for assessment year 2016-17 was filed on 17- 10-2016 and assessee claimed business loss. Assessing Officer observed that since return was not filed within due date prescribed under section 139(1), in terms of section 139(3), read with section 80, loss claimed by assessee would not be allowed to be carried forward to subsequent years. Assessee placed on record copy of press release dated 9-9-2016 issued by CBDT extending due date of filing of returns to 17-10- 2016 for assessment year 2016-17. It was found that CBDT had sought to extend due date from 30-9-2016 to 17-10-2016 only in respect of those cases where accounts are required to be audited under provisions of Act while filing income tax. Since assessee’s case herein did not fall under ambit of Explanation 2(a)(ii) to section 139(1), as assessee was liable for audit under any other law for time being in force, due date for assessee was only 30-9-2016 and not 17-10-2016 and, hence, assessee was not entitled to carry forward business loss incurred during year to subsequent years.(AY. 2016-17)
Gulu Hassanand Raney v. ADIT (IT)(2023) 201 ITD 63 (Mum)(Trib)
537. S. 80G : Donation – Rejection of application – object of a general public utility – Section 2(15) allows trust to carry on trade, commerce, or business in the course of achieving the object of a general public utility provided the receipts do not exceed 20 percent of total receipts in the previous year – PCIT is directed to adjudicate matter as per the provisions of the Act.[S. 2(15), 11, 80G(5)]
Commissioner has rejected the application for grant of approval under section 80G(5) of the Act. On appeal the Tribunal held that Section 2(15) allows trust to carry on trade, commerce, or business in the course of achieving the object of a general public utility provided the receipts do not exceed 20 percent of total receipts in the previous year. Accordingly the PCIT is directed to adjudicate matter as per the provisions of the Act. (AY 2017-18)
Alnoor Charitable Educational Trust v. CIT (E); [2023] 202 ITD 375 (Amritsar) (Trib.)
538. S. 80G: Donation – Spent more than 5 percent for religious purposes – Violation of section 80G(5B) – Commissioner is justified in denying the exemption.[S. 12AA, 80G(5B)]
Held that the assessee trust registered under section 12AA, had spent more than 5 per cent for religious purposes from its total income, there was clear violation of section 80G(5B) and thus Commissioner was correct in denying exemption under section 80G of the Act.
Kalaram Sansthan v. CIT (E) (2023) 201 ITD 749(Pune)(Trib)
539. S. 80P : Co-operative societies -Delay in filing of return – Deduction cannot be denied.[S. 80IA, 139(1), 139(4), 143(1)(a)(ii), 143(1)(a)(v), 153A]
Assessee is a co-operative society claimed deduction under section 80P & the Assessing Officer denied the said deduction holding that return of income was not filed within due date prescribed under section 139(1). However, the assessee had filed its return of income belatedly on 30-11-2020. It was noted that denial of claim under section 80P would not come within purview of prima facie adjustment under section 143(1)(a)(v) for reason that said section was not in force during period under consideration i.e. assessment year 2019-20. Further case of assessee would also not fall within purview of prima facie adjustment under section 143(1)(a) (ii) since return of income was filed within due date permissible under section 139(4), in which claim for deduction under section 80P was made. (AY. 2019-20)
Lunidhar Seva Sahkari Mandali Ltd v. AO(CPC) (2023) 200 ITD 14 (Rajkot)(Trib)
540. S. 80P : Co-operative societies – Delay in filing of return – Failure to file the return on due date – Not entitle to deduction – adjustment made while processing return of income is valid – Not entitled to deduction – Liable to pay fee of Rs 5000. [S. 80 (P)(2)(A)(i), 80AC, 139(1), 139(4), 143(1)(a), 234F]
Held that assessee was required to file its return of income within the due date for claiming the deduction, whereas the assessee had filed its return of income on beyond the due date. Therefore, the assessee was not entitled to claim the benefit of deduction under section 80P(2)(a) (i) of the Act. The adjustment can be made while processing the return of income under section 143(1) of the Act. For delay in filing of return liable to pay fee of Rs.5000. (AY. 2018-19)
Syndicate Bank Staff Co-Operative Society Ltd. v. Dy. CIT (2023)101 ITR 46 (SN.)(Bang) (Trib)
541. S. 80P : Deduction – Co-operative society-Interest credited to bank accounts on credit balances
Assessee-co-operative credit society was carrying on business of extending loan facilities to its members. Assessee in that process, routed both disbursement of loans and repayment thereof through its accounts with banks. The banks credited the interest on credit balances periodically.
In view of decision of High Court in the case of The Vavveru Co-operative Rural Bank Ltd. v. The Chief CIT (2017) (396 ITR 371) (AP), if original source of investments made by assessee co-operative society in nationalized banks is admittedly the income that the assessee derived from activities listed in sub-clauses (i) to (vii) of clause (a) to section 80P(2), then character of such income may not be lost, especially when the statute uses the expression “attributable to” and not any one of the two expressions, namely, “derived from” or “directly attributable to”. In instant case, undisputedly, interest arose on credit balances, was with reference to regular course of business of assessee. Thus, the interest credited to the account of the assessee on credit balances, did not lose its character as the income derived from activities of the assessee covered by section 80P(2)(a)(i). Hence, such interest was eligible for deduction under section 80P(2)(a)(i).
The Tirumala Tirupati Devasthanams Employees Co Op. Credit Society, Tirupati v. The Income Tax Officer, Ward-1(1), Tirupati [ITA No.106/Hyd/2023, dated 11/04/2023] [AY 2016-17]
542. S. 90 : Double taxation relief – Credit for foreign tax paid – Delay in filing Form No. 67 – Directed the Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee – DTAA-India-Netherland [S. 90A,154, Form, 67 R. 128(9), Art. 23]
Tribunal held that mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as they stood during the year under consideration will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India. Since the claim of the assessee was denied on technical aspect without going into the merits, therefore, Tribunal deemed it appropriate to direct the jurisdictional Assessing Officer to decide the claim of the foreign tax credit on merits, after accepting the Form No. 67 and other related documents filed by the assessee. Followed, Sonakshi Sinha v. CIT(2022) 197 ITD 263 (Mum)(Trib) Anuj Bhagwat v. DCIT (Mum) (Trib) (ITA No. 1844/1845/Mum/2022 dated 20th September, 2022).(AY. 2019-20)
Priya Savina Murzello v. Dy. CIT [2023] 200 ITD 69 (Mum (Trib.)
543. S. 90 : Double taxation relief – Filing of Form 67 is a procedural/ directory requirement – Non-filing of Form 67 within the prescribed due date would not extinguish the substantive right of claiming credit of foreign tax credit.[S.90A, R. 128, Form No. 67]
Tribunal held that filing of Form 67 is a procedural/ directory requirement and is not a mandatory requirement. Further, violation of procedural norms would not extinguish the substantive right of claiming credit of foreign tax credit of the Assessee. While holding so, the Tribunal observed that, if the intention of the legislature was to deny foreign tax credit, either the Act or the Rules would have specifically provided that credit would not be allowed if Form 67 is not filed within the prescribed due date. Such language is however not used in Rule 128(9) of the Rules. (AY. 2018-19, 2019-20)
Amitsingh Baid Mehta v. ADIT (2023) 202 ITD 548 (Chennai) (Trib.)
544. S. 92C : Transfer pricing – Arm’s length price – Profits attributable to PE – Business Profits – AO failed to demonstrate as to how payments / expenditure was unreasonable / more than FMV – Addition deleted. [S.40A(2(b)), 92BA]
Tribunal held that the AO estimated profit @10% of gross receipts which is in violation of principles of natural justice without considering that assessee has maintained books of accounts which have been audited. Tribunal also held that AO failed to demonstrate as to how payments / expenditure was unreasonable / more than FMV. Addition is deleted (AY 2019-20)
Technip Energies Italy v. DCIT (2023) 104 ITR 592 / 225 TTJ 562 (Delhi) (Trib)
545. S. 92C: Transfer pricing – Arm’s length price – Selection of comparable – Turnover filter – Turnover of assessee 332 crores – DRP is justified in directing turnover of 200 crores to 2000 crores – Multiple of 10 times turnover could not be adopted. [S.92CA]
Held, that the Dispute Resolution Panel was justified in its directions that the turnover filter was to be applied and only those companies having turnover of more than Rs. 200 crores and less than Rs. 2,000 crores were to be taken as comparable for the purpose of the transfer pricing study. (AY. 2011-12)
Dy. CIT v. Harman Connected Services Corporation India Pvt. Ltd. (2023) 101 ITR 3 (SN)(Bang) (Trib)
546. S. 92CA : Reference to Transfer Pricing Officer – Arm’s Length Price – Payment to associated enterprise for services rendered – TPO cannot question necessity of expenses occurred – Assessee liable to prove that actual services rendered – Assessee failed to prove-no evidence or documentation or agreement between assessee and associated enterprise – No infirmity in the order of TPO – Arm’s length price – Nil.[S.92C]
Held, that admittedly there was no agreement between the assessee and its associated enterprise to incur the expenses in question. The Transfer Pricing Officer had noted that the assessee had not proved with proper documentation and evidence that services were actually rendered. The reimbursement of expenses was guided by the profitability of the associated enterprise and was not based on services rendered by the associated enterprise to the assessee. Accordingly, the Assessing Officer concluded that though arm’s length price could not be determined at “nil”, such expenditure could be allowed only after the assessee proved conclusively that there was actual rendition of services by the associated enterprise. The assessee had not been able to prove the actual rendering of services and expenditure in respect of the assessee’s business by its overseas associated enterprise either by producing the necessary agreement in respect of rendering of services or in the form of any other communication which could convincingly or conclusively establish such rendering of services or incurring expenditure, the Transfer Pricing Officer was justified in determining the arm’s length price at “nil”. There was no infirmity in the order of the Transfer Pricing Officer or the Dispute Resolution Panel.(AY. 2015-16)
Yanfeng India Automotive Interior Systems Pvt. Ltd. v. JCIT (OSD) (2023) 101 ITR 78 (SN) (Ahd) (Trib)
547. S. 115A: Foreign companies – Tax – Dividends – Royalty – Technical services fees – Non-resident – Fees For Technical Services – Special rate of tax – Contract, right or property to be effectively connected – Fees for technical services taxable at special lower rate – The addition made under section 44DA of the Act is deleted. [S.44DA]
Tribunal while dealing with a similar issue for the AY 2010-11 in the assessee’s own case having held that the Assessing Officer had justified the addition based on “relation” of services to the project office whereas the provisions of section 44DA require the contract, right or property to be “effectively connected” as against mere “related”, that since in this case, the situs of performance of the activities was outside India, the effective connection was not there with the project office, that the assessee had offered the fee for technical services on gross basis and the activities conducted outside India were not effectively connected with the project office in India, that the assessee had rightly offered the overseas consultancy income as fees for technical services under the provisions of section 115A of the Act, the addition made under section 44DA of the Act was liable to be deleted.(AY. 2011-12)
Dy. CIT (IT) v. Aecom Asia Company Ltd. (2023)101 ITR 75 (SN)(Delhi) (Trib)
548. S. 115JB : Company – Book profit Unabsorbed depreciation – Adjustment of carried forward business loss or unabsorbed depreciation which ever is lower for purposes of section 115JB.[S. 32(2), 72, 115JB(2)]
Tribunal held that the assessee has correctly considered the unabsorbed depreciation for Financial Year 2010-11 in its working which portion has remained unabsorbed against the existing book profits of that year. Explanation 1 to Section 115JB(2) used the expression unabsorbed depreciation which has distinct conotations via- a-vis total depreciation. Tribunal held that the claim of the assessee being lower of unabsorbed depreciation and business loss deserves to be set- off against the current year book profit in terms of the provisions of clause (iii) of Explanation 1 of Section 115JB(2) of the Act. The claim of the assessee was allowed. (AY. 2012-13)
PVR Pictures Ltd. v. Dy. CIT [2023] 200 ITD 568 (Delhi) (Trib)
549. S. 115JB : Company – Book profit Computation under clause (f) of Explanation (1) to section 115JB(2) of the Act, is to be made without resorting to the computation as contemplated u/s. 14A of the Act.[R.8D]
Held that computation under clause (f) of
Explanation (1) to section 115JB(2) of the Act, is to be made without resorting to the computation as contemplated u/s. 14A of the Act.(AY. 2013-14)
Manali Petrochemical Ltd. v. Dy. CIT (2023) 201 ITD 317 (Chennai)(Trib.)
550. S. 127: Power to transfer cases – Jurisdiction – CBDT Notification – Survey cases where material impounded to be centralised – AO was aware of the transfer – Assessment by AO without jurisdiction.[S.133A]
Held, that by notification, the Central Board of Direct Taxes issued directions that all cases covered under section 133A of the Act having impounded material would be transferred to the Central Charge under section 127 of the Act. The Assessing Officer while framing assessment was very much aware about the impounded material. It was the duty of the Assessing Officer transferring the file to inform the assessee of the change in jurisdiction and not the other way round. There was almost one month available for transferring the file to the Central Circle. The assessment framed was without jurisdiction. The assessment framed was without jurisdiction.(AY. 2003-04 to 2005-06)
Prabhakar v. Add. CIT (2023) 101 ITR 82 (SN) (Chennai) (Trib)
551. S. 143(1)(a): Assessment – Intimation – Prima facie adjustments – Business expenditure – Employees’ contribution to provident fund-Payment date beyond date but before filing of return of income – Auditor merely stating time of remittance in report – Contribution allowable. [S. 36(1)(va), 43B]
Held that the tax auditor had not stated to disallow employees’ contribution to provident fund wherever it was remitted beyond the due date under the respective Act. The tax auditor had merely recorded facts and made a mere statement in his audit report. Hence, the action of the Assessing Officer in disallowing the employees’ contribution to provident fund while processing the return under section 143(1) of the Act was against the provisions of the Act as it would not fall within the ambit of prima facie adjustments. The Assessing Officer was to delete the addition made in respect of employees’ contribution to provident fund, in the facts and circumstances of the case. (AY 2019-20)
P. R. Packaging Service v. ACIT (2023) 101 ITR 8 (SN)(Mum) (Trib)
552. S. 143(1)(a) : Assessment – Intimation – Once auditor had mentioned actual dates of ESI/PF remittance and due dates of ESI/PF remittance by assessee in audit report, then requirement of section 143(1) stood satisfied and Assessing Officer was permitted to make disallowance in terms of section 143(1). [S. 36(1)(va)]
Dismissing the appeal of the assessee the Tribunal held that when the assessee made payment of employees’ contribution towards PF and ESI beyond due date specified in respective Acts and auditor had mentioned actual dates of ESI/PF remittance and due dates of ESI/PF remittance by assessee in audit report, disallowance under section 143(1) in respect of late deposit of such PF/ESI was valid.(AY. 2019-20) (AY. 2018-19)
Kwality Motel Shiraz-1 v. ADIT (Indore) 200 ITD 402(Indore)(Trib)
Sudhakar Rao Dondapati v. ITO (2023) 201 ITD 264 (Hyd (Trib.)
Prashanti Engineering Works (P.) Ltd. v. ACIT, CPC [2023] 200 ITD 408 (Indore) (Trib)
553. S. 143(1)(a) : Assessment – Intimation – No adjustment could have been made unless notice was issued to assessee – Disllaownce is deleted. [S.80P(2)(a)(i)]
Tribunal held that, since assessee had made claim u/s. 80P (2)(a)(i) albeit in Schedule BP clearly filling up column of exempted income of co- operative society, deduction ought to have been allowed. No adjustment could have been made u/s. 143(1) unless notice was issued to assessee. Disallowance was deleted. (AY. 2016-17)
Changanacherry Co-op. Agrl & Rural Development Bank Ltd. v. CIT [2023] 201 ITD 755 (Cochin)(Trib.)
554. S. 143 (1)(a) : Assessment – Intimation Adjustments – A mere mistake on part of tax auditor in reporting income not forming part of business income – Would not ipso- facto lead to addition or adjustment in business income.[S. 10, 22, 28(i), 44AB, 56, Form No 3CD]
The assessee declared an income comprising of HP Income, Interest Income, and Dividend income under the respective heads of income as well as claimed the interest on PPF and REC tax free bonds as exempt income u/s. 10. The CPC processed the return u/s. 143(1) and based on the tax auditor’s report, wherein the auditor had reported the income under clause 16(d) of Form No. 3CD, made addition/adjustment under the head any other item or items of addition u/s.28 to 44DA. The CIT (A) upheld the adjustment. The Tribunal held that, since nature of income in question was non-business income of the appellant, a mere mistake on part of tax auditor in reporting income not forming part of business income in clause 16(d) of Form No. 3CD would not ipso-facto lead to addition or adjustment in business income. As the assessee had already declared said income in return of income under respective heads of income as well as claimed certain income as exempt income. Hence adjustment made by CPC deserved to be deleted. (AY. 2021-22)
Brajesh Agrawal v. ADIT [2023] 201 ITD 135 (SMC) (All)(Trib.)
555. S. 143(1)(a): Assessment – Intimation Adjustments – Deduction of tax at source – Credit for tax deducted – Employer deducting the tax and not depositing – Credit cannot be denied – Section 143(1)(c) does not lay down the condition that tax deducted at source has to be paid to the Government for the credit to be allowed as opposed to the case of payment of advance tax.[S. 143(1)(c), 199, 209(1)(d), 234B]
The employer deducted the tax for a whole year, but it was not deposited with the Government from May 2018 onwards. Even the salary was not paid to the assessee from October 2018. However, the assessee continued to remain under employment for the entire year. Owing to the stipulation of s. 15, the assessee offered to tax all the salary income (whether paid or not) while filing an Income Tax Return. The CPC did not allow the credit of tax to the extent deducted but not paid. The Tribunal held that credit for the amount of tax deducted at source is not dependent upon its subsequent deposit by the deductor. Once there is a tax deduction at source, the benefit of such tax deduction has to be allowed in the hands of deductee u/s 143(1) of the Act irrespective of its subsequent deposit or non-deposit by the deductor.(AY. 2019-20)
Mukesh Padamchand Sogani v. ACIT (2023) 200 ITD 104 (Pune)(Trib)
556. S. 143(2) : Assessment – Notice – Issue of notice beyond statutory limit – Assessing Officer has no power to issue notice under section 143(2) after expiry of 6 months from end of financial year in which return has been field -N Reassessment is bad in law. [S. 143(3), 147, 148, 292BB]
Assessing Officer is under obligation to issue a notice under section 143(2) for making assessment or reassessment as case may be; in case Assessing Officer has not done so, order framed under section 143(3) read with section 147 becomes invalid. Assessing Officer has no power to issue notice under section 143(2) after expiry of 6 months from end of financial year in which return has been field. Any assessment made based on notice which itself is not valid will also become void ab initio. Therefore, where notice under section 143(2) had been issued beyond prescribed time, assessment order framed under section 143(3) read with section 147 would become invalid. Where mandatory notice under section 143(2) was issued beyond statutory time limit prescribed, provision of section 292BB would not extend any benefit to revenue.(AY. 2011-12, 2012-13)
Girishbhai Nanjibhai Solanki v. ITO (2023) 200 ITD 686 (Rajkot)(Trib)
557. S. 143(3): Assessment – Notice issued to a non-existing entity – Amalgamation – AO was informed – Assessment order passed in the name of a non-existent entity is void and liable to be quashed. [S. 144C]
Solvay Pharma filed its ROI for the relevant AY 2008-09 on 30.09.2008. Subsequently, the Hon’ble Bombay High Court vide order dated 15.07.2011 approved the amalgamation scheme, whereby Solvay Pharma India Ltd. amalgamated with Abbott India Ltd. By letter dated 10.08.2011, the assessee had informed the AO about the fact of amalgamation. Despite of this, all the orders by TPO, AO and DRP, including the final assessment order, were passed in the name of Solvay Pharma. The ITAT held that the assessment order passed in the name of the said non-existing entity is void and liable to be quashed. Relied New Age Buildtech (P.) Ltd. v NFAC [2023] 151 taxmann.com 66 (Bom) (HC), PrCIT v. Maruti Suzuki India Ltd. [2019] 265 Taxman 515/416 ITR 613 (SC). PCIT v. Mhagun Realtors (P) Ltd (2022) 287 Taxman 66/443 ITR 194 (SC) is distinguished. (AY. 2008-09, 2009- 10)
Abbott India Ltd v. ACIT (2023) 202 ITD 287(Mum) (Trib)
558. S. 144 : Best judgment assessment – Demonetization -Books of accounts cannot be rejected without issuing any show cause notice – Stock register – Purchases verified by the Assessing Officer – Rejection of books of account is not justified – Cash sales – Deposited in the Banks – Books of account is audited by Chartered Accountant – Not justified by estimating income by applying NP Rate and books of accounts were to be accepted. [S. 68, 115BBE, 133(6) 143(3), 145(3):
Assessee is engaged in manufacturing and trading of jewellery. The assessee-company derived income from manufacture and trading of jewellery. Books of the assessee were audited by an independent chartered accountant and the audit report and statement of profit and loss account were filed by the assessee. Assessee had deposited cash during demonetization period. Assessee claimed that cash deposited out of cash sales, realisation from debtors and advances from customers. AO rejected the books of accounts and made addition by treating the same as unexplained cash credit u/s. 68 r.w.s. 115BBE of the Act. In first appeal, CIT(A) deleted the addition made by the AO u/s. 68 of the Act. However, upheld the rejection of books of account and the estimation of net profit at the rate of 2.59% as against 2.36% declared by the assessee. On appeal the Tribunal held that the AO had verified the purchases, assessee had submitted stock records, all the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of cash from customers such amount standing in the books of account of the assessee would not attract section 68. There was no fault in the detailed reasoned finding in the order of the Commissioner (Appeals). No Show Cause Notice u/s. 144 / 145 of the Act was issued to the assessee and assessment was completed vide Order u/s. 143(3) and not u/s. 144. Further, rejection of the books of account on the basis of insignificant defects in all respects, was not justified and the books of account deserved to be accepted. The CIT (A) had examined the genuineness of purchases from parties and found it to be genuine. Thus, when all the purchases were genuine which have been verified by the AO u/s. 133(6) and which have been correctly recorded in the books of account as well as the stock register, the books of account could not have been rejected under section 145(3) of the Act. Before invoking the provisions of section 145(3) of the Act, the Assessing Officer has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. The instant was not a case where the assessee had not followed either the cash or mercantile system of accounting. The assessee maintained proper books of account audited by a chartered accountant and the profits could have been derived from the audited books of account. Relied on Harshila Chordia (Smt) v. ITO (2008) 298 ITR 349 (Raj) (HC). (AY. 2017-18)
ACIT v. Motisons Jewellers Ltd. (2023)104 ITR 304 (Jaipur)(Trib)
559. S. 144C : Reference to dispute resolution panel – International Transaction – Limitation – Assessment order passed beyond one month from the end month in which directions of DPR received – Relaxation under TOLA Act not applicable – Assessment order is barred by limitation. [S. 144B 144C(13), 147, 148]
Held, that under section 144C(13) of the Income- tax Act, 1961, the Assessing Officer is duty- bound to pass the final assessment order within a period of one month from the end of the month in which the directions of the Dispute Resolution Panel were received. The relaxation under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 would not be applicable to assessment orders passed in consequence of directions of the Dispute Resolution Panel. The assessment order dated September 30, 2021 was barred by limitation and without jurisdiction.(AY. 2015-16)
Supermax Personal Care Pvt. Ltd. v. Dy. CIT (2023)101 ITR 29 (SN)(Mum)(Trib)
560. S. 144C : Reference to dispute resolution panel – Transfer pricing – Draft assessment order – Failure to give effect to the direction of DRP – Order was quashed. [S. 144C(10), 144C(13)]
The DRP provided directions to rework the transfer pricing adjustment, but the Assessing Officer retained the same adjustment in the final assessment order. The assessee challenged the validity of the final assessment order, arguing a violation of provisions of section 144C (10) r.w.s. 144C (13) of the Income-tax Act.The Tribunal quashed the transfer pricing adjustment, emphasizing that the AO’s failure to adhere to the DRP’s directions rendered the final assessment order invalid.(AY. 2012-13)
Tata Power Solar Systems Ltd. v. DCIT (2023) 200 ITD 226 (Bang (Trib.)
561. S. 144C : Reference to dispute resolution panel – Limitation – No variation is proposed – Extended period is not available for concluding assessment – Draft assessment order is not required to be issued – Order is barred by limitation – DTAA-India- Cyprus.[S. 153 (1), Art. 11(2)]
The AO held that the Assessee is not a beneficial owner of the interest income and thereby issued a draft assessment order and final assessment order on 28.12.2018 and 22.02.2019 taxing the said income at 30%. Tribunal held that there was no proposal for variation in the returned income of the Assessee in the instant case. Further, while referring to other orders of the co-ordinate bench on the same issue, held that for the AYs before the amendment in section 144C which came into effect from 01.04.2020, the cases in which no variation in the return of income or loss were proposed, the draft assessment orders were not required to be issued. Accordingly, no extended period for concluding the assessment was available. Order is barred by limitation. (AY.2016-17)
Amadoroco Ltd. v. ACIT (IT (2023) 200 ITD 415 (Delhi(Trib.)
562. S. 145: Method of accounting – Rejection of books of accounts – Audited books not declared to be incorrect – Rejection solely on the basis of photocopies of bills produced instead of original – Rejection of books not sustainable.[S. 145(3)]
Held, that The Assessing Officer was not justified in rejecting the books of account which were audited and without any qualification solely because photocopies of the bills had been produced instead of the original bills. Decision of CIT (A) to set aside the matter justified. (AY. 2013-14)
Blue Stampings And Forgings Ltd. v. Dy. CIT (2023)101 ITR 81 (SN)(Delhi) (Trib)
563. S. 147: Reassessment – Best Judgement assessment – No addition is made on the basis of recorded reason – Reassessment is bad in law – Levy of penalty is not valid.[S. 144, 148, 271(1) (c)]
The Tribunal held that the reasons for reopening the assessment revealed that assessment was reopened on the question of excess loss claimed by the assessee but no addition of this amount was made in the reassessment order. The addition made in the reassessment order was totally silent on the ground on which the addition was made. The Assessing Officer simply observed that he received information from the National Multi-Commodity Exchange at Ahmedabad in response to notice under section 133(6) of the Act that the assessee had earned profit. There were totally in contradiction to each other.
There was no application of mind at the end of the Assessing Officer. Although it was a best judgment assessment order the Assessing Officer was obliged to conduct a proper enquiry and ascertain the complete facts before reopening the assessment and pass the reassessment order under section 147 / 143(3) of the Act. The quantum addition in itself ought to have not been made and might be deleted in the appellate proceedings. CIT v. Jet Airways (I.) Ltd. (2011) 331 ITR 236 (Bom)(HC) Ranbaxy Laboratories Ltd. v. CIT (2011) 336 ITR 136 (Delhi)(HC) CIT v. Mohmed Juned Dadani [2013 355 ITR 172 (Guj) (HC) (AY. 2010-11)
Babita Devi Kajoria v. ITO (2023)101 ITR 17 (SN) (Kol) (Trib)
564. S. 147: Reassessment – No fresh material with – Opinion based on incorrect basis – Proceeding on the basis of conjectures – Reassessment is without jurisdiction. [S. 148]
The Tribunal held that in the absence of nexus between the prima facie inference arrived in the reasons recorded and information vis-a-vis material tangible, credible, cogent and relevant to form a reason to believe, there was no basis to assume jurisdiction, the reasons recorded were highly vague, far-fetched and could not lead to a conclusion of escapement of income. The proceedings initiated were purely based on surmises, conjectures and suspicion and therefore, they were without jurisdiction and deserved to be quashed. (AY. 2011-12)
Milind Madhukar Edke v. ITO (2023) 101 ITR 88 (SN) (Pune) (Trib)
565. S. 147: Reassessment – Loose slip – Information received from Central Bureau of Investigation (CBI) – Affidavit – Assessment completed without verification of books of accounts as the same were impounded by CBI was in violation of natural justice – Matter remanded back to AO.[S. 148, ITAT R.29]
Assessment was completed by the AO after making addition on the basis of loose slips and report of CBI that assessee – a manufacturer of pharmaceutical products, has sold products in market at rates higher than invoice price. Addition was made by AO without verification of books of accounts as the same were impounded by the CBI. The assessee filed affidavit under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 before the bench which were never be filed before any of the lower authorities. Thus, the matter was remitted back to the AO for further verification. (AY. 2005-06 to 2007-08)
Gold Star Pharmaceutical Pvt. Ltd. v. ITO (2023) 104 ITR 630 (Amritsar)(Trib)
566. S. 148: Reassessment – Notice – Dissolution of Company – Name of the company had been struck off from Register of Companies – Not intimidated to Assessing Officer – Notice is valid – Sanction – Reassessment for the assessment year 2003-04 is quashed as the Commissioner had granted approval instead of the Additional Commissioner or Joint Commissioner as prescribed under the law – Quantum of addition – Matter remanded. [S. 69, 147, 151]
Held that although the name of the company had been struck off from Register of Companies, the assessee officially did not communicate to the Assessing Officer about the striking off of the name of the company. Thus, the assessee’s contention that the notice of reassessment issued after dissolution of the company was invalid and the consequent reassessment proceedings null and void was not tenable. Reassessment for the assessment year 2003-04 is quashed as the Commissioner had granted approval instead of the Additional Commissioner or Joint Commissioner as prescribed under the law. As regards the quantum of addition,the matter is remanded. (AY. 2003-04 to 2005-06)
Pawan Green Channels Pvt. Ltd v. Dy. CIT (2023)101 ITR 19 (SN) (Chennai) (Trib)
567. S. 151: Reassessment – Sanction for issue of notice – Sanction of CIT instead of A/JCIT – Notice is bad in law. [S.147, 148, 151(2)]
Held that for the AY 2003-04, the Commissioner had granted approval instead of the Additional Commissioner or Joint Commissioner as prescribed under the law and thus, notice issued under section 148 of the Act, was bad in law and consequent assessment proceedings were null and void. (AY: 2003-04)
Pawan Green Channels Pvt. Ltd v. Dy. CIT (2023)101 ITR 19 (SN) (Chennai) (Trib)
568. S. 153A: Assessment – Search – Cash Credits – No incriminating material found during search – Unabated assessment – Additions not sustainable. [S.68]
Held that it was undisputed that no incriminating material was found during search and this was an unabated assessment. Hence, the addition was not sustainable. (AY. 2006-07)
ACIT v. Paramount Probuild Pvt. Ltd. (2023)101 ITR 36 (SN) (Delhi) (Trib)
569. S. 154 : Rectification of mistake – Mistake apparent from the record – Capital or revenue – Excise duty refund and Interest subsidy as revenue receipts Rectification application pursuant to jurisdictional High Court – Tribunal held that CIT(A) is right in directing AO to carry out necessary rectification. [S. 4]
Assessee received Excise duty of refund and Interest subsidy and offered the same as revenue receipts in return of income. Regular assessment completed after making addition of petty expenses. Assessee filed rectification application u/s. 154 to reduce Excise duty refund and Interest subsidy and to treat the same as capital receipt in view of the judgment of Jurisdictional J&K High Court in the case of Shree Balaji Alloys v. CIT (2011) 333 ITR 335 (J&K)(HC). On appeal, ITAT held that CIT (A) was right in allowing the appeal of assessee by directing the AO to carry out necessary rectification. Section 154 has been enacted to enable the authorities to rectify the mistake whether the mistake is done by assessee or by AO. A liberal construction of the statute has to be made else the object of the legislation shall be forfeited. (AY. 2007-08)
DCIT v. Kashmir Steel Rolling Mills (2023) 104 ITR 684 (Amritsar) (Trib)
570. S. 154 : Rectification of mistake -Mistake apparent from the record – First appeal was dismissed – Second appeal – Abuse of process of Court – Appeal is dismissed. [S. 80IB, 253]
Where first appeal filed by assessee against order of Commissioner (Appeals) was dismissed by Tribunal as withdrawn, second appeal filed by assessee again against same order of Commissioner (Appeals) before Tribunal was nothing but abuse of process of Court and, hence, same deserved to be dismissed.(AY. 2012-13) – Kishor Shankar Garve v. Dy. CIT (2023) 200 ITD 461 (Pune)(Trib)
571. S. 154 : Rectification of mistake – Mistake apparent from the record – Capital gains – Compensation for compulsory acquisition of commercial land from National Highways Authority of India (NHAI) – Clarificatory circular was issued by CBDT subsequent to the date of filing return – Eligible to file rectification application, claim of exemption of assessee under RFCTLARR Act was directed to be allowed by the AO.[S. 45, 56(2)(viii), 139, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 S.96]
Assessee received compensation for compulsory acquisition of commercial land from National Highways Authority of India (NHAI) for compulsory acquisition of land under RFCTLARR Act, 2013. Compensation for both agricultural and non-agricultural land exempt under RFCTLARR Act. However, assessee filed its return of income declaring compensation received taxable as capital gain without taking exemption as per Section 96 of RFCTLARR Act, 2013. Assessee filed rectification application before AO for rectification of mistake apparent from record after considering the CBDT Circular No. 36 of 2016 dated 25.10.2016 (2016) 388 ITR (St.) 48 and to allow exemption to the assessee in view of CBDT Circular. However, AO rejected the application. On appeal, ITAT held that clarificatory circular was issued by CBDT subsequent to the date of filing return and assessee therefore was eligible to file rectification application, claim of exemption of assessee under RFCTLARR Act was to be allowed by the AO. (AY.2015-16)
Satish Kumar v. ITO (2023) 104 ITR 694 (Chd)(Trib)
Urmila Garg (Smt.) v. ITO (2023) 104 ITR 694 (Chd) (Trib)
572. S. 192: Deduction at source – Salary – Difference between sums reported in 26AS and sums reported by assessee – Matter remanded to the Assessing Officer. [Form 26AS]
Held that explanation of the assessee in so far as the difference of amounts reported in form 26AS though the assessee had furnished copies of invoices with its submission, neither the Assessing Officer nor the Dispute Resolution Panel had considered them. Therefore, issue was to be remitted to the Assessing Officer to examine the evidence and decide the issue afresh. (AY. 2015-16, 2017-18)
Panasonic Holdings Corporation v. Dy. CIT (2023)101 ITR 5 (SN) (Delhi) (Trib)
573. S. 194A : Deduction at source – Interest other than interest on securities – Assessee in default – The tax deducted was deposited – The assessee could not be treated as assessee in default under section 201(1) – The assessee would be liable to pay interest u/s. 201(1A) of the Act. [S. 201(1) 201(IA)]
The AO passed orders under section 201(1) & 201(1A) of the Act making the assessee as an assessee in default and also levied interest on the tax demand. The CIT(A) upheld the orders passed by the AO. The Tribunal rejected the contention of the assessee that a part of the interest charged to the P&L Account has neither been paid nor credited to the customers account, rather credited to the interest payable account and therefore the same is not liable to TDS under section 194A of the Act. However, the Tribunal accepted the contention of the assessee that since the tax was deducted at source at later stage i.e. at the time of maturity, it cannot be said that there was any default in deducting tax at source. The Tribunal further held that the assessee would be liable for interest under section 201(1A) of the Act in respect of the said amount.(AY. 2016-17 to 2019-20)
Wayanad District Co-op. Bank Ltd. v. ITO (TDS) (2023) 200 ITD 500 (Cochin)(Trib)
574. S.194A: Payment for delayed allotment of plot of land by the builder/ developer
Assessee-builder had taken registration amount from applicants from allotment of plots/flats for its upcoming projects at Ghaziabad but could not deliver the promises of allotment of plot/flat on time to the applicants/allottees. Assessee due to said delay paid compensation/damages for non- compliance to the respective applicants/allottees and claimed deduction. AO disallowed deduction for want of TDS under section 194A.
Payment by the builder/developer for delayed allotment of plot flats was not interest under section 2(28A). Since there was neither any borrowings of money nor there was incurring of debt on part of assessee, therefore, TDS provision of section 194A could not applied so as to treat the assessee as assessee-in-default alleging the non-companies. (AY 2015-16)
M/s. Sawhney Builders Pvt. Ltd. v. ACIT (TDS), Noida [ITA No.6205/Del/2012, dated 11/04/2023]
575. S. 194C : Deduction at source – Contractors – Common area maintenance charges – Paid to malls – Tax dedcutable 2 percent under section 194C and not 10 %. [S. 194I]
The Assessing officer held that tax should have been deducted at 10% under section 194I instead of 2% under section 194C. CIT(A) held that there was no distinction between CAM charges and lease rent payment, except for separate invoices, and upheld the views of the Assessing officer. Tribunal lease rentals are paid based on a fixed percentage on the net revenue while the CAM charges are based on the per sq. ft. area. Further, the determination of the rent or CAM are separate, and the CAM arrangements are not essential and an integral part of the use of premises. CAM involves the employment of separate staff and separate operations while expenses against rent are generally only for general building maintenance and municipal charges. The distinction above being apparent it is held that rent provisions are governed by section 194I while CAM charges by section 194C of the Act. (AY. 2012-13)
Aero Club v. DCIT [2023] 200 ITD 318 (Delhi) (Trib.)
576. S. 194I : Deduction at source – Rent – TDS credit cannot be denied to assessee HUF as a consequence of wrong PAN mentioned in the sale deed mistakenly, when corresponding capital gain on relevant transaction was taxed in the assessee HUF’s name.[S.199, Rule 37BA(2)]
The Tribunal held that no credit was claimed
in Shri Anand Singhania’s return of income and an affidavit to the said extent was filed by Assessee before the first appellate Tribunal. Considering the facts of the case, the Tribunal held that TDS cannot be denied to Assessee by taking benefit of the mistake in the sale deed when the corresponding capital gain was taxed in Assessee’s name. Accordingly, the claim for TDS by the Assessee was allowed. (AY 2018-19)
Anant Singhania HUF v. ITO (2023) 202 ITD 46 (Mum)(Trib)
577. S. 194IA: Deduction at source- Immoveable property – Real estate – Percentage Completion method – Tax deducted by buyer at the time of execution of deed – Assessee to produce certificates to substantiate tax deducted on income offered in earlier or current year – AO is directed to carry out necessary verification – Matter remanded. [S. 145, 198, 199]
Held that if the income had been offered by the assessee following the percentage completion method, in the current year or in any earlier year, while tax had been deducted subsequently by the buyer at the time of execution of sale deed and the assessee was able to produce the requisite certificates to substantiate that tax had been deducted on the income which had been offered to tax by the assessee and the assessee was able to correlate the income offered to tax with the tax deducted, credit for the tax so deducted should be allowed to the assessee. Thus, matter was remanded for verification. (AY. 2018-19, 2019-20)
Neelkanth Developers v. ADIT (2023) 101 ITR 44 (SN) (Ahd)(Trib)
578. S. 194J : Deduction at source – Fees for professional or technical services – Educational institute – Monthly remuneration to guest faculties – Contract for service – Below taxable limit on individual basis – Not laible to deduct tax at source. [S. 201(1), 201(IA)]
Assessing Officer held that the assessee had not deducted TDS on payments made to guest faculty rendering professional services which was covered under section 194J and, thus, he held assessee as assessee in default and raised demand under section 201(1)/201(1A) upon it. The Tribunal held that the guest faculties were rendering identical services as regular staff. Relationship between management and teaching faculties involved an obligation to obey orders and work to be supervised and, thus, said relationship could not be called ‘contract for services’. Monthly remuneration paid to guest faculties were in nature of ‘contract of service’ between assessee and guest faculties. Teaching staff did not render any professional or technical service to assessee. Teaching staff was appointed on ad hoc basis and such ad hoc salary paid to them was below taxable limit on individual basis. No tax at source was to be deducted by assessee on remuneration paid to guest faculty. (AY. 2017-18)
Government Polytechnic Education Society v. ITO (TDS) (2023) 200 ITD 134 (Delhi) (Trib)
579. S.194J: Deduction of tax at source – Fees for professional or technical services – Payments to contract teachers – Remuneration did not exceed Rs.5 lakhs – Not liable to deduct tax at source. [S.87A]
Assessees were authorities appointed by and working under directions of the State Government with their main function to disburse honorarium/remuneration to teachers with whom colleges agree to perform teaching work entrusted by the college committee under the curriculum of the intermediate syllabus. Teachers were paid a fixed monthly honorarium/ remuneration which did not exceed Rs.5 lakh. The AO held that the payments made to such contract teachers fell within the definition of the expression ‘fee for professional services’ u/s. 194J and same were liable for deduction of TDS on payments made to contract teachers. The Tribunal held that the words ‘fee for professional services, would not leave any scope for interpretation and categories mentioned therein as on date were exhaustive by explanation itself or by notification of CBDT and by necessary implication, such an exhaustive definition excludes payments made to contract teachers in intermediate colleges. Further, slab rates and rebates u/s. 87A, there would be no tax liability in the hands of teachers. Therefore, payments made to contract teachers did not answer the description of ‘fee for professional services’ and were not liable to TDS u/s. 194J. (Followed Notification No. 88/2008, dated 28-1-2008)(AY. 2020-21)
Dist. Intermediate Educational Office v. ITO (TDS) [2023] 201 ITD 74 (Hyd)(Trib.)
580. S. 206C : Collection at source – Trading – Alcoholic liquor – Forest produce – Scrap – Time limit for furnishing form – No time limit is prescribed – The matter was to be remanded back to file of ITO (TDS) to take into consideration Form no. 27C furnished by assessee and pass order in accordance with law. [S. 206C(6), 206C(7), Form No 27C]
ITO held assessee as ‘assessee-in-default’ and tax demand of certain amount (including interest) was raised upon it. It was noted that assessee had duly obtained Form No. 27C, belatedly from buyers to whom goods were sold and same was submitted before Commissioner (TDS). However, same was not considered by ITO (TDS) and he proceeded to levy tax and interest in terms of section 206C(6) and 206C(7). Since there was no time-limit provided in section 206C(1A) to furnish declaration in Form no. 27C, delay in filing said declaration by assessee to prescribed income-tax authority would not be a ground to deny benefit to assessee. The matter was to be remanded back to file of ITO (TDS) to take into consideration Form no. 27C furnished by assessee and pass order in accordance with law. (AY. 2012-13)
Gopallal Ramprasad Kabra v. ITO (2023) 200 ITD 295 (Rajkot)(Trib)
581. S. 220 : Collection and recovery – Assessee deemed in default – The return of income was uploaded without consent of the assessee by the Chartered Accountant in connivance with other partners – Matter remanded to the AO to decide after taking into account the outcome of criminal case filed by the assessee against the Chartered Accountant and other partners. [S. 2(24), Indian Penal Code, 1860, S. 418, 419 420, 468, 471, 477A]
The assessee was partner in the firm that carried liquor business. Due to heart related ailments, the assessee did not carry any business and did not file any return of income. However, the Chartered Accountant with the connivance of the partners of the assessee prepared fake documents to support the ITR which was uploaded without the knowledge of the assessee. Therefore, before the CIT(A) the assessee contended that there was no real income in his hands and whatever the return of income that were furnished by the Chartered Accountant was false and without his knowledge. However, the CIT(A) rejected the contentions and upheld the additions made to the income of the assessee.
On appeal, the Tribunal took cognizance of the fact that Indian Institute of Chartered Accountant had held the Chartered Accountant guilty of preparing false documents and that the criminal complaint filed by the assessee was pending before Judicial Magistrate. Taking these factors into consideration, the Tribunal remanded the issue to the Assessing Officer for a decision based on the criminal case’s outcome.(AY. 2014-15)
Venkata Ramana Anupa v. ITO [(2023) 201 ITD 561 (SMC) (Hyd) (Trib)
582. S.234E: Fee-Default in furnishing the statements – Applicable only prospectively i.e. from 01.06.2015. [S.200A]
The Tribunal referred to the decision of the Hon’ble Kerala High Court in the case of Olari Little Flower Kuries (P.) Ltd. v. UOI (2022) 440 ITR 26 (Ker)(HC) wherein it was held that no late filing fee could be levied for processing of statement u/s 200A (1) for the period before 01.06.2015. In light of the said decision, the Tribunal held in favor of the Assessee that before 01.06.2015, there being no enabling provision for raising a demand in respect of levy of fees u/s 234E of the Act, no such levy could have been effected. (AY. 2013-14, 2014-15)
Anumod Viswambharan v. ITO (TDS) (2023) 201 ITD 743 (Cochin) (Trib.)
583. S. 250 : Appeal – Commissioner (Appeals) – Procedure -Delay of 9 years in filing appeal – Order sent to E-mail ID of accountant who had left job – Assessee came to know when refund of AY 2019-20 was proposed to be adjusted against demand of AY 2010- 11 – Assessee filed affidavit. Sufficient cause for not filing appeal within time. Matter remanded back to CIT(A) to pass order on merits, denovo. [S.80IB, 245, 251, Limitation Act, 1963, S.5]
Assessee’s claim u/s. 80IB denied by CPC vide Intimation u/s. 143(1) dated 15.03.2011. Assessee filed appeal before CIT(A) on 30.01.2020 after delay of 9 years. CIT(A) was dismissed and delay was not condoned. Delay due to Intimation sent on E-mail ID of accountant who had left job and did not informed assessee about such Intimation. Assessee came to know about outstanding demand when assessee received Notice u/s. 245 for adjustment of refund of AY 2019-20 with demand of AY 2010-11. Delay unintentional and without any fault on the part of assessee. “Sufficient cause” under Sec. 5 of Limitation Act should be liberally construed so as to advance substantial justice when no negligence or any inaction or want of bona fides is imputable to a party; that is, the delay in filing an appeal should not have been for reasons which indicate the party’s negligence in not taking necessary steps which he could have or should have taken. Matter remitted back to CIT(A) for adjudication on merits.
M.K. Hotels & Resorts Ltd. v. ACIT (2023) 104 ITR 204 (Amritsar) (Trib)
584. S. 250: Appeal – Commissioner (Appeals) – Procedure – Appeal arising from penalty order – Appeal to Appellate Tribunal – To be decided after finalization of Quantum Proceeding.[S. 253, 254]
Held that an appeal arising from penalty order is to be decided after finalisation of the quantum proceedings. The CIT (A) or the Tribunal must wait for completion of the quantum proceeding at the appellate level. (AY. 2010-11)
Babita Devi Kajoria v. ITO (2023) 101 ITR 17 (SN) (Kol) (Trib)
585. S. 250: Appeal – Commissioner (Appeals) – Procedure – CIT(A) cannot go beyond the assessment year other than the one under consideration – Direction to A.O. to take remedial action for other Assessment year not sustainable.[S. 246A, 251]
Held, the Commissioner (Appeals) could not go beyond the assessment year under consideration before him. The Commissioner (Appeals) had erred in passing the direction to take remedial action to the Assessing Officer for other years. (AY. 2014-15)
Wieden+Kennedy India Pvt. Ltd. v. Dy. CIT (2023)101 ITR 63 (SN) (Delhi) (Trib)
586. S. 253: Appellate Tribunal – Monetary limit – 50 lakhs monetary limit for appeal by Department – Circular laying down limit applicable to retrospectively even to pending appeals. [CBDT Circular No. 17 Of 2019, Dated August 8, 2019] [S. 268A]
Held, that in view of the CBDT Circular No. 17 of 2019, dated August 8, 2019 no appeal should be filed by the Revenue before the Tribunal which has tax effect of Rs. 50 lakhs or less and this circular is also applicable retrospectively to all pending appeals. Therefore, the appeal filed by the Revenue was dismissed as not maintainable. (AY. 2014-15)
Saranya Agro Foods Pvt. Ltd. v. ITO (2023) 101 ITR 60 (SN)(Chennai) (Trib)
587. S. 253: Appellate Tribunal – Appeal by assessee – Assessee not putting appearance – Not adducing material before Tribunal to controvert findings – Order of CIT(A) justified.[S. 250]
Held that since there was no no appearance from the side of the assessee on the various dates and no material had been placed by the assessee before the Tribunal to controvert the findings of the lower authorities nor had the assessee pointed to any fallacy in the findings of lower authorities, there was no reason to interfere with the order of the Commissioner (Appeals). (AY. 2015-16)
MGS Securities P. Ltd. v. Dy. CIT (2023) 101 ITR 95 (SN)(Delhi) (Trib)
588. S. 254(1) : Appellate Tribunal – Powers – Limitation – Condonation of delay – Assessee’s CA expired – Assessee made aware only upon intimation of penalty order-Assessee, a cardiac patient undergone treatment – Sufficient cause – Delay condoned. [S. 253]
Held, that the assessee was about 69 years old whose chartered accountant regularly handling his Income-tax matters expired during the pendency of the appeal before the Commissioner (Appeals) and thereafter he had no regular chartered accountant to advise him properly on the matter. The assessee claimed that only upon intimation regarding the penalty order was he informed by his chartered accountant that quantum appeal had been dismissed by the Commissioner (Appeals). It was further evident from the medical report that the assessee was a cardiac patient and had undergone treatment. There was nothing to show that the assessee stood to benefit by the late filing of the appeal. There existed sufficient cause for not filing the appeal within time and therefore the delay in filing the appeal was to be condoned.(AY. 2013- 14)
Vijay Liladhar Mohmaya v. ITO (2023)101 ITR 33 (SN) (Mum) (Trib)
589. S. 254(1): Appellate Tribunal – Powers – Transfer – Any transaction involving the allowing of the possession of any immoveable property – Joint Venture (JV) agreement for construction of building – Capital gains – Matter remanded to CIT(A) [S. 2(47) (v), 45, 54F, Transfer of Property Act, 1882, S.53A]
A Joint Venture (JV) agreement for construction of building/s was entered into by seven co-owners with the Developer on 4th February, 2011. Both the GPA and JV agreement were not registered. In view of the Assessing Officer, it amounted to a transfer under Section 2(47(v) in view of part performance, as defined under Section 53 of Transfer of Property Act, 1882. CIT (A) held that since the portion of land was transferred by assessee for transferee’s disposal in its capacity as owner, construction by such transferee on portion of land belonging to transferor would amount to consideration for said transfer of land to him, hence, provisions of Section 2(47) (vi) would squarely apply irrespective of the fact that the construction remained incomplete. Since the Commissioner (Appeals) did not extend any opportunity to assessee before applying the provisions of Section 2(47(vi) in the interest of justice, matter was remanded back to the CIT(A) to decide the issue of deduction under Section 54F and also the Board Circular 672 dated 16th December, 1993 and give the hearing to both the parties and pass the Speaking Order. (AY. 2011- 12)
Pulikkaparambil George Jacob v. ITO [2023] 200 ITD 773 (Cochin)(Trib.)
590. S. 254(1): Appellate Tribunal – Powers – Residence in India – Derivative Income claimed as exempt as per DTAA between India and Singapore – CIT(A) denied examining the issue on merits on the ground that proper medium of communication not used-Matter remanded for fresh adjudication on merits – DTAA-India- Singapore [S. 6(3), 250, Art. 13(5)]
Held, that the matter was remanded to the CIT (A) for adjudication on the merits after ascertaining the facts and applicable position of law thereon. The CIT (A) shall also take appropriate measures to direct the Assessing Officer to carry out the rectification of the adjustments made in accordance with law giving reasonable opportunity of hearing to the assessee. (AY. 2019-20)
Canlah Investments Pte. Ltd. v. Asst. CIT CPC (2023) 101 ITR 9 (SN.)(Delhi) (Trib)
591. S. 254(1): Appellate Tribunal – Powers – Transfer – Any transaction involving the allowing of the possession of any immoveable property – Joint Venture (JV) agreement for construction of building – Capital gains – Matter remanded to CIT(A). [S. 2(47) (v), 45,54F, Transfer of Property Act, 1882, S.53A]
A Joint Venture (JV) agreement for construction of building/s was entered into by seven co-owners with the Developer on 4th February, 2011. Both the GPA and JV agreement were not registered. In view of the Assessing Officer, it amounted to a transfer under Section 2(47(v) in view of part performance, as defined under Section 53 of Transfer of Property Act, 1882. CIT (A) held that since the portion of land was transferred by assessee for transferee’s disposal in its capacity as owner, construction by such transferee on portion of land belonging to transferor would amount to consideration for said transfer of land to him, hence, provisions of Section 2(47) (vi) would squarely apply irrespective of the fact that the construction remained incomplete. Since the Commissioner (Appeals) did not extend any opportunity to assessee before applying the provisions of Section 2(47(vi) in the interest of justice, matter was remanded back to the CIT(A) to decide the issue of deduction under Section 54F and also the Board Circular 672 dated 16th December, 1993 and give the hearing to both the parties and pass the Speaking Order. (AY. 2011- 12)
Pulikkaparambil George Jacob v. ITO [2023] 200 ITD 773 (Cochin)(Trib.)
592. S. 254(1): Appellate Tribunal – Powers – Residence in India – Derivative Income claimed as exempt as per DTAA between India and Singapore – CIT(A) denied examining the issue on merits on the ground that proper medium of communication not used – Matter remanded for fresh adjudication on merits. – DTAA-India -Singapore [S. 6(3), 250, Art. 13 (5)]
Held, that the matter was remanded to the CIT (A) for adjudication on the merits after ascertaining the facts and applicable position of law thereon. The CIT (A) shall also take appropriate measures to direct the Assessing Officer to carry out the rectification of the adjustments made in accordance with law giving reasonable opportunity of hearing to the assessee. (AY. 2019-20)
Canlah Investments Pte. Ltd. v. Asst. CIT CPC (2023)101 ITR 9 (SN.)(Delhi) (Trib)?
593. S. 254(1): Appellate Tribunal – Powers – Transfer – Any transaction involving the allowing of the possession of any immoveable property – Joint Venture (JV) agreement for construction of building – Capital gains – Matter remanded to CIT(A) [S. 2(47) (v), 45,54F, Transfer of Property Act, 1882, S.53A]
A Joint Venture (JV) agreement for construction of
building/s was entered into by seven co-owners with the Developer on 4th February, 2011. Both the GPA and JV agreement were not registered. In view of the Assessing Officer, it amounted to a transfer under Section 2(47(v) in view of part performance, as defined under Section 53 of Transfer of Property Act, 1882. CIT (A) held that since the portion of land was transferred by assessee for transferee’s disposal in its capacity as owner, construction by such transferee on portion of land belonging to transferor would amount to consideration for said transfer of land to him, hence, provisions of Section 2(47) (vi) would squarely apply irrespective of the fact that the construction remained incomplete. Since the Commissioner (Appeals) did not extend any opportunity to assessee before applying the provisions of Section 2(47(vi) in the interest of justice, matter was remanded back to the CIT(A) to decide the issue of deduction under Section 54F and also the Board Circular 672 dated 16th December, 1993 and give the hearing to both the parties and pass the Speaking Order. (AY. 2011- 12)
Pulikkaparambil George Jacob v. ITO [2023] 200 ITD 773 (Cochin)(Trib.)
594. S. 254(1): Appellate Tribunal – Powers – Residence in India – Derivative Income claimed as exempt as per DTAA between India and Singapore – CIT(A) denied examining the issue on merits on the ground that proper medium of communication not used-Matter remanded for fresh adjudication on merits – DTAA-India -Singapore [S. 6(3), 250, Art. 13 (5)]
Held, that the matter was remanded to the CIT (A) for adjudication on the merits after ascertaining the facts and applicable position of law thereon. The CIT (A) shall also take appropriate measures to direct the Assessing Officer to carry out the rectification of the adjustments made in accordance with law giving reasonable opportunity of hearing to the assessee. (AY. 2019-20)
Canlah Investments Pte. Ltd. v. Asst. CIT CPC (2023)101 ITR 9 (SN.)(Delhi) (Trib)
595. S. 263: Commissioner – Revision of orders prejudicial to revenue – Assessing officer made enquiries – Contention of the PCIT that examination not done incorrect – Contention that A.O. had only one day to pass order invalid – Revision not Justified.[S. 143(2)]
Held, that the A.O. had made enquiries and based on the reply given by the assessee the
A.O. who had passed the order had satisfied himself by accepting the return of income of the assessee. Further, the A.O. had only one day time to pass the assessment order since the case was getting time-barred could not be a ground for the Principal Commissioner to exercise power conferred under section 263 of the Act. The Principal Commissioner had committed an error in exercising power under section 263. (AY. 2011- 12)
ADM Agro Industries Kota And Akola Pvt. Ltd. v. PCIT (2023)101 ITR 93 (SN) (Delhi)(Trib)
596. S. 263: Commissioner – Revision of orders prejudicial to revenue – Failure of Assessing Officer to inquire loss on disposal of assets/expenditure – Assessing Officer duty bound to disallow expenditure which is not of revenue expenditure in P & L account – Revision is justified.[S. 37(1)]
Held that Assessing Officer did not inquire about the loss on assets disposed of or any expenditure debited in the P & L account. Further, Assessing Officer was duty bound to look at the P & L account and disallow expenditure which was not of revenue in nature. Thus, the revision of PCIT was justified. (AY. 2017-18)
Bombay Transport Co-Operative Consumer Society Ltd. v. ITO (2023) 101 ITR 72 (SN) (Mum) (Trib)
597. S. 263: Commissioner – Revision of orders prejudicial to revenue – Failure to verify wages expenditure – Failure to deduct tax at on payments-Casual labour accepted without verification – Assessing Officer accepted certificates filed by assessee without recording reasons – Revision is justified. [S. 37(1), 40(a)(ia)]
Tribunal held that failure to verify wages expenditure and failure to deduct tax at on payments, casual labour accepted without verification. Assessing Officer accepted certificates filed by assessee without recording reasons. Revision is justified. (AY. 2010-11)
M. K. S. Engineering Co. Pvt. Ltd. v. PCIT (2023)101 ITR 65 (SN)(Jabalpur) (Trib)
598. S. 263: Commissioner – Revision of orders prejudicial to revenue – Assessing Officer calling for details of advertisement and sales promotion during assessment – Possible view taken after going through evidences – Order of Assessing Officer is not erroneous – PCIT is not justified – Revision is not warranted.[S. 37(1)]
The Tribunal observed that the Assessing Officer, after conducting necessary inquiries by calling for information and having gone through the details furnished by the assessee had taken a possible view. When the Assessing Officer had made detailed inquiries by raising query on which the case was selected for scrutiny and the assessee had filed requisite details, the order could not be held erroneous so as to invoke the jurisdiction under section 263 of the Act since the twin conditions thereunder were not fulfilled. Thus, the PCIT was not justified in invoking jurisdiction under section 263. (AY. 2016-17)
Mylan Pharmaceuticals Pvt. Ltd. v. ITO (2023)101 ITR 26 (SN) (Hyd) (Trib)
599. S. 263: Commissioner – Revision of orders prejudicial to revenue – Order of Tribunal – Weightage to Tribunal order not given – Against fundamental Principles of judicial discipline – Revision is not sustainable.[S. 2(22)(e), 254(1)]
Held that that the PCIT in his revision order had not given due weightage to the appellate order passed by the Tribunal, which was against the fundamental principle of judicial discipline, required to be followed by all the lower authorities. The revision order passed by the Principal Commissioner was unsustainable for failure to consider the higher judicial forum’s decision in the assessee’s own case for earlier AY 2013-14 on an identical issue. (AY. 2015-16)
Parag Prakash Doshi v. PCIT (2023)101 ITR 42 (SN) (Ahd) (Trib)
600. S. 263: Commissioner – Revision of orders prejudicial to revenue – Possible view taken by Assessing Officer after pursuing all the evidences – In line with view taken by Tribunal – Revision not warranted. [S. 54]
The Hon’ble Tribunal held that Assessing Officer took a possible view after conducting proper enquiries, in line with order of the Tribunal. Thus, the revision was quashed. (AY. 2016-17)
Prerak Goel v. P CIT (2023) 101 ITR 30 (SN.)(Mum) (Trib)
601. S. 263: Commissioner – Revision of orders prejudicial to revenue – Capital or Revenue expenditure – Consumables revenue expenditure allowable in the year in which put in line of production – Allowance in previous years not erroneous – Assessing Officer taking sustainable view after enquiry – Revision is not warranted. [S. 32, 37(1)]
Held, that an identical view had been taken by the A.O. after detailed examination in earlier years and the view taken by the A.O. was not found to be erroneous. When the judicial precedents were in favour of the assessee that consumables are revenue expenditure and were allowed to the assessee as deduction in the year in which those are put in line of production and no judicial precedent was shown to the effect that consumables were capital expenditure and not allowable in the year of use in production line, the view taken by the A.O. was a plausible and sustainable view. Thus, revision was not warranted. (AY. 2009-10, 2010-11)
SI Group India P. Ltd. v. ACIT (LTU) (2023)101 ITR 70 (SN)(Mum) (Trib)
602. S. 263 : Commissioner – Revision of orders prejudicial to revenue – CIT set aside assessment order to AO holding it as erroneous on the issue of excess deduction allowed, since issues considered by CIT were purely on facts, CIT himself has to decide – Matter remitted back to him to consider material and draw conclusion. [80IC]
The AO allowed deduction u/s. 80IC to assessee. Subsequently CIT took revisional proceedings against assessee and issued show cause notice to effect that AO had allowed excess deduction and he had not verified substantial expansion made by assessee, and set aside assessment order holding it as erroneous. The Tribunal held that, since issues considered by CIT were purely on facts which were verifiable from records of assessee, he had to himself decide whether the assessment was erroneous and thus, matter remitted back to CIT to consider material placed on record and draw conclusion as to whether the order being erroneous insofar as prejudicial to interest of revenue. (AY. 2014-15)
C & E Ltd. v. PCIT [2023] 201 ITD 816 (Kol)(Trib.)
603. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Limited scrutiny – AO recorded specific finding that books of accounts produced were examined on test check basis – AO even disallowed certain expenditure in assessment proceedings – Order could not be treated as erroneous – Revision order is set aside.
The allegations raised by PCIT were linked to initial Show Cause Notice and it could not have been contended that PCIT did not provide sufficient opportunity of being heard. Further, during assessment, AO had verified costs and other expenses and AO had called relevant details alongwith supporting documentary evidences which were submitted by the assessee. AO passed Order holding that assessee did furnished some handmade bills, vouchers and even disallowed some expenses. Assessee had duly furnished ledger accounts of unsecured loans. Even in the assessment order, the AO has stated that books of accounts produced examined on test check basis. Thus, assessment order was passed after proper examination and verification and thus, Order u/s. 263 was set aside. (AY. 2017-18)
Ruhela Construction Co. Pvt. Ltd. v. PCIT (2023) 104 ITR 426 (Lucknow)(Trib)
604. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Survey – AO completed assessment after considering survey statement, issued specific notice in this regard during assessment – assessee filed explanation – Order of AO could not be held erroneous – Revision order is set aside. [S. 115BBE, 133A]
During assessment, AO had taken cognizance of findings of survey team, documents found during the survey, surrender letter and return of income and explanations of assessee against specific Show Cause notices during the course of assessment proceedings and after examination thereof and due application of mind, income has been rightly assessed under the head “business income”. Surrender is excess cash arising out of past business dealings and advance given to farmers against procurement of agriculture produce regularly dealt with by the assessee in normal course of its business and which have not been recorded in the books of accounts. View of AO taken after due application mind. Order of AO cannot be held to be erroneous. Order of Ld. PCIT u/s. 263 set aside and that of Assessing Office sustained. (AY. 2017-18)
Ved Parkash and Durga Dass Surender Kumar v. PCIT (2023) 104 ITR 613 (Chd)(Trib)
605. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Provision for doubtful debts – Revision bad in law where the A.O. has taken view possible in respect of standard asset where there was inherent risk of going these debts bad – Revision is upheld in cases where amount was receivable from Government in respect of debts waived off. [S. 36(1)(vii), 36(1) (via)(2)]
The Tribunal quashed the direction which related to disallowance of provision created for standard assets as issue was debatable. However, the Tribunal upheld the revision regarding disallowance related to short provision for waiver of loans as it was held that the reimbursement of debts waived receivable from the government could not be held to be doubtful debtor.(AY. 2009- 10 to 2012-13, 2014 -15, 2017-18)
Virudhunagar District Central Co-operative Bank Ltd. v. PCIT (2023) 201 ITD 573 (Chennai Trib)
606. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Salary income – Detailed enquiries into claim of assessee’s income being ‘exempt’ under the Act – Revision is held to be not valid. [S.5, 192]
Tribunal held that AO had made detailed enquiries into claim of assessee’s income being ‘exempt’ under the Act. CIT was not justified in revising said order. Followed: Smt. Sumana Bandyopadhyay v. Dy. DIT (IT), [2017] 88 Taxmann. com 847/396 ITA 406 (Cal.), Asim Kumar Bera v. Dy. DIT (IT) [2017] 147 ITD 509 (Agra) (Trib) (AY. 2016-17)
Pralay Pradyotkanti Gosh v. Income-tax Officer (IT) [2023] 201 ITD 363 (Ahd) (Trib)
607. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Property held for charitable purposes – Spending from accumulation of income of earlier year The Assessing Officer had conducted necessary enquiries regarding utilization of income for purpose for which it was accumulated and had accepted same which was a plausible view, impugned revision order was untenable.[S. 11(3), 11(5)]
Assessee charitable trust, claimed exemption under section 11(5) on income which was accumulated in preceding year and was spent during relevant year. Assessment was completed allowing exemption to assessee. Subsequently, Commissioner invoked revision proceeding under section 263 on ground that assessee had not submitted documentary evidence to support its claim of utilization of said accumulated income for purpose of trust and, thus, there was breach of clauses (a), (b) and (c) of section 11(3). He further held that assessment order was erroneous as it was passed without making verifications and inquiries. It was noted that Assessing Officer had made specific enquiries and called for details of accumulated income and utilization of same which was duly furnished by assessee during assessment proceedings. Even before Commissioner, assessee had furnished specific details of utilization of funds. So it could not be said that it was a case of no enquiry but at best Commissioner could say it was lack of enquiry in manner he thought enquiry ought to be conducted. Since the Assessing Officer had conducted necessary enquiries regarding utilization of income for purpose for which it was accumulated and had accepted same which was a plausible view, impugned revision order was untenable.(AY. 2017-18)
Impact Foundation (India) v. CIT, (E) (2023) 200 ITD 213 (Mum) (Trib.)
608. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Corpus donation – Assessment completed after due verification / examination by AO of corpus donation including bank statements, balance sheet and confirmation of donation from donor which was also registered u/s. 12AA – Revision order was quashed. [S.12AA]
Assessee is a society registered u/s. 12AA of the Act. Corpus donation of Rs. 1 Crore was received by society from one donor. Assessee has mentioned details of corpus donation of Rs. 1 Crore in computation of income. Even in the balance sheet forming part of tax audit report reflects corpus donation. Corpus of Rs. 1 Crore was duly reflected in bank statement of donor. The donor itself was a charitable trust / society registered u/s. 12AA and therefore, there can be no doubt regarding the genuineness of the donor. Thus, allegation of CIT is contrary to the material available on record. Even otherwise, if the corpus donation is assumed to be general donation, then also the assessee society has utilized more than 85% of the income. Thus, no tax liability will arise on the assessee society and as such, the revision proceedings would be tax neutral. Thus, on overall analysis, it was held that AO had passed order after conducting required inquiry and applying his mind with due diligence, such assessment order cannot be considered to be erroneous and prejudicial to the interest of Revenue. Accordingly, Order u/s. 263 of the was quashed and Order of AO was restored. (AY. 2015-16)
Reliable Educational Alliance Society v. CIT(E) (2023) 104 ITR 448 (Trib)(Delhi)
609. S. 263 : Commissioner – Revision of orders prejudicial to revenue – High Court held that the assessee to be a society providing public utility services within the meaning of section 2(15) which was eventually affirmed by the Supreme Court – PCIT was wrong to hold Assessment Order to be erroneous and prejudicial to the interest of revenue – Revision order was quashed. [S. 2(15), 11, 12, 13(8), 143(3)]
On appeal the Tribunal held that the PCIT erred in holding that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. That the PCIT had failed to appreciate the Gujarat High Court which had already decided the issue in favour of the Assessee by holding that the assessee was a charitable organization providing general public utility services within the meaning of section 2(15) of the Act. That, subsequently the Hon’ble Supreme Court had also affirmed the view of the High Court. It is in this background that the Hon’ble Tribunal conclusively held that the order passed by the Assessing Officer cannot be held to be erroneous and prejudicial to the interest of the Revenue. (AY. 2017-18)
Ahmedabad Urban Development Authority v. DCIT (E [2023] 201 ITD 274 (Ahd(Trib.)
610. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Rental income – The Assessing officer has taken one plausible view based on exhaustive inquiries and detailed submissions unless the view adopted is not at all sustainable in law – Revision is held to be not valid.[S. 22, 28(i)]
The Hon’ble Tribunal held that the Assessing Officer, after adequate enquiry, has taken a judicious view. Revision under section 263 is not permissible merely because the Commissioner may entertain a different view on the issue. The stand adopted by Assessing Officer is one which is plausible supported by CBDT Circular and Supreme Court decision and, therefore, cannot be said to be erroneous in terms of the provisions of section 263. The interpretation of the CBDT circular No. 16/2017 dated 25-04- 2017 emphasizes that lease rent received by the assessee from letting out the building along with other amenities in a software Technology Park would be chargeable to tax under the head ‘Income from House Property’. Therefore, every case of letting out the building along with other amenities would automatically fall in the income from business and it will not be merely restricted to software Technology Park only as misunderstood by the commissioner. Lastly as far as the supreme court decision is concerned, i.e., Chennai Properties & Investments Ltd. v. CIT (2015) 373 ITR 673/ 231 Taxman 326 (SC) which stipulates that where object as per object clause of the company was to do business of letting out, the same must be taxed under the head income from business and profession, also could not be distinguished by the commissioner. In this backdrop, the Hon’ble Tribunal held that the commissioner had erred in assuming jurisdiction under section 263 and the order passed by him was quashed (AY. 2018-19)
Agrani Buildestate v. PCIT [2023] 202 ITD 231 (Jaipur)(Trib.)
611. S. 263 : Commissioner – Revision of orders prejudicial to revenue -Stock in trade – Builder – Business income – Income from house property – Revision is held to be not valid.[S.22, 28(i)] Allowing the appeal the Tribunal held that there was no error in order of Assessing Officer who had accepted the explanation of the assessee that no income from completed units was assessable under the head “Income from House Property” and thus, order of Commissioner under Section 263 was set aside. Followed: CIT v. Neha Builders Pvt. Ltd. [2007] 164 Taxmann 342 / 298 ITR 661 (Guj.)(HC) (AY. 2017-18)
Othello Developers v. PCIT, [2023] 201 ITD 370 (Ahd)(Trib.)
612. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Cost of acquisition of asset – The amount paid to intermediary allottee from builder would form part of cost of acquisition – Revision is held to be not valid. [S. 45, 48]
The AO completed the reassessment proceedings and accepted the return filed by the assessee. The AO had examined the flat purchase agreement between the assessee and Mrs. Sangita Gupta (the original allottee of the flat by the builder)
PCIT held that the A.O. had not verified the source of repayment of bank loan. The assessee explained that these aspects were duly enquired by the A.O. The assessee also pointed out that Mrs. Sangita Gupta had certificate from the builder that she had paid for the property, she being original allottee and the assessee, along with her wife, had purchased property from her by making payment of consideration through banking channels. The source of income of wife and repayment of loan were also duly explained. However, the PCIT rejected the contentions and set aside the assessment order and directed the A.O. to re-compute capital gains. On appeal the Tribunal held that ‘cost of acquisition of the asset’ not only includes the sales consideration incorporated in sale deed or value of asset taken by registration authority for the purpose of stamp duty but also any amount paid to any intermediary under the preceding agreement to sell or any enforceable liability provided intermediary had a enforceable and transferable interest or an interest in the form of an encumbrance upon the asset and sale deed can be executed only on redemption of that interest. Therefore, The amount of consideration agreed in the agreement to sell between the original allottee and the assessee thus forms part of the cost of acquisition of asset. The Tribunal held that the order of the PCIT was not sustainable. (AY. 2012-13)
Vishal Aggarwal v. PCIT (2023) 200 ITD 603 (Delhi) (Trib.)
613. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Limited scrutiny – Co-operative societies – Deduction allowed by AO in limited scrutiny assessment to examine “Deduction under Chapter VI-A” – Possible view – Revision is not valid. [S. 80P(2)(d)]
Tribunal held that where AO has taken one plausible view and, on this issue, there is a specific finding and reference in assessment order regarding deduction claimed in return of income. There was no defect found in the enquiry. AO collected the information based on upon which he has allowed the claim to assessee and has verified the point raised in the limited scrutiny. Further, PCIT did not pin pointed any enquiry which was required to be made by AO. Merely because the AO did not write specific reasons for accepting the explanation of the assessee cannot be reason enough to invoke powers under section 263, and non-mentioning of these reasons do not render the assessment order “erroneous and prejudicial to the interest of the revenue”. Order u/s. 263 is quashed. (AY. 2007-08)
Shri Keshoraipatan Sahkari Sugar Mills Ltd., Kota v. PCIT (2023) 104 ITR 566) (Jaipur) (Trib)
614. S. 270A: Penalty for under -reporting and misreporting of income – Deemed provisions – Cannot fall in the category of under-reporting of income. Also pertinent for the Assessing officer alleging under-reporting/misreporting of Income is to specify the limb under which penalty proceedings have been initiated. [S.43CA, 562(2)(x)]
Tribunal held that the sections concerning additions are deeming provisions. In case of deeming provisions there is no option provided in the statute except to make adjustment as per figures derived from deeming section vis-à-vis figures disclosed by the Assessee. This being the case, case of the assessee does not fall in the category of under reporting of the income/ income concealment. Penalty initiated is not only erroneous but also arbitrary and bereft of any reason as no limb has been specified for under reporting or misreporting of income for initiating penalty proceedings. (AY. 2018-19)
Alrameez Construction (P.) Ltd v. NFAC [2023] 202 ITD 379 (Mum) Trib.)
615. S. 270A: Penalty for under -reporting and misreporting of income – Addition made is estimate made by DVO – The levy of penalty is not valid. [S.43CA]
Tribunal held that the assessee sold land at a price less than stamp duty value and AO made additions on basis of difference between value declared by assessee and value determined by DVO, since value determined by DVO was an estimate based on value of other properties, said addition made on basis of estimation could not be foundation for under-reported income for purpose of imposition of penalty under section 270A.(AY. 2017-18)
Jaibalaji Business Corporation (P) Ltd. v. ACIT (Pune) 200 ITD 58 (Pune)(Trib)
616. S. 270A: Penalty – Suppression of facts or misreporting of income – No Suo motu disallowance claimed under section 14A – on the investments bearing tax free income – forming part of assessee’s balance sheet
During the concerned assessment year (2017-18) year, assessee received exempt dividend income as investments, and fresh investments were made during the year but assessee claimed no suo motu disallowance under section 14A. The case was selected for scrutiny and assessment order was passed under section 143(3) by making disallowance under section 14A read with rule 8D. @1% of the average investments. Also, AO levied penalty under section 270A which was the subject matter of dispute before ITAT.
Entire investments were shown in the balance sheet of assessee and it was filed during the course of assessment proceedings. Thus, all the required facts based on which addition was made, were fully disclosed and, therefore, there were no suppression of the facts and there was no misreporting of income as contemplated in sub-section (9) of section 270(A), imposition of penalty was not justified.[A.Y.: 2017-18]
M/s. Windsor Gardens Private Limited v. ACIT, Circle -7(1)(2), Bangalore [ITA No. 1162/Bang/2022; dated 08/02/2023]
617. S. 271(1)(c) : Penalty – Concealment – Capital gains – Denial of special deduction claimed against income from long term capital gain – No business income shown – High court decision in favour – Tribunal Denying Deductions On Basis Of Later Supreme Court Ruling – Deduction admissible – Not a case of furnishing inaccurate particular – Penalty not leviable. [S.45, 80G, 80HHC, 112(2)]
Held, that, in identical facts and circumstances, the High Court had held that the deduction was allowable despite there being no positive business income by the assessee. The assessee cannot be charged with having furnished any inaccurate particulars of income so as to be liable to levy of penalty. Thus, the penalty was deleted. (AY. 1999-2000)
Atul Ltd. v. Dy. CIT (2023) 101 ITR 11 (SN)(Ahd) (Trib)
618. S. 271(1)(c): Penalty – Concealment – Additions during reassessment – Reasons recorded for reopening assessment and additions made on different grounds. A.O. failed to prove that assessee concealed income or furnished inaccurate particulars of income – Additions deleted – Penalty deleted.
Held, that the reasons for reopening the assessment revealed that assessment was reopened on the question of excess loss claimed by the assessee but no addition of this amount was made in the reassessment order. The assessment order was totally silent on the ground on which the addition was made. Thus, the penalty and additions were deleted. (AY. 2010-11).
Babita Devi Kajoria v. ITO (2023)101 ITR 17 (SN) (Kol) (Trib)
619. S. 271(1)(c): Penalty – Concealment – Notice – No specific charge – Assessment year mentioned in title notice different from assessment year mentioned in body of notice – Penalty not sustainable.
Held, that in the title of the show-cause notice, AY was mentioned as 2010-11, whereas in the body of the notice, the AY was mentioned as 2015-16. Thus, there was no specific charge levied against the assessee by the Assessing Officer for the AY 2010-11. Penalty deleted. (AY. 2010-11).
Babita Devi Kajoria v. ITO (2023)101 ITR 17 (SN) (Kol) (Trib)
620. S. 271(1)(c) : Penalty – Concealment – Domain name – Appeal pending before High Court – Debatable – Penalty is set aside – DTAA-India-USA [S. 9(1)(vi), r.w.s. 115A, Art. 12] penalty set aside.
In an appeal filed before by the Revenue, the ITAT relied on the decision of CIT v. Liquid Investment and Trading CO. (ITA No. 240/2009) and held that since the issue involved in the present appeals was debatable and since a substantial question of law had been framed by the Delhi High Court in the quantum appeal filed by the assessee, the penalties imposed in both AYs were not exigible and dismissed the said appeals. Editorial note: The Delhi High Court held that fees received by the assessee for providing domain name registration services were not taxable as a royalty because the U.S. company was merely acting as a registrar and it did not have any proprietorship rights in the domain name and could not grant the rights or transfer the right to use the domain name to another person or entity.(AY. 2013-14, 2014-15)
ACIT (IT) v. Godaddy.com LLC USA (2023) 201 ITD 525 (Delhi) (Trib)
621. S. 271(1)(c): Penalty – Concealment – Bogus purchases – Information from Sales Tax Department regarding bogus purchases made by assessee – Ad-hoc addition – Estimate basis – Penalty is deleted. [S.69C]
The AO has made addition in the assessee’s case on the basis of information received from the sales tax authorities that the assessee had made purchases from various suspicious parties, i.e. bogus purchases. AO made addition by applying GP Rate of 12.% of the bogus purchases amount. ITAT reduced the addition by applying GP Rate of 5% in AY 2009-10 and AY 2011-12. Further, adhoc addition made by AO, i.e. addition made on estimate basis, cannot be treated as concealment of income so as to warrant penalty under section 271(1)(c). (AY. 2009-10 to 2011-12)
Sawailal Bhatti v. ITO (2023) 104 ITR 92 (Mum) (Trib)
622. 271(1)(c): Penalty – Concealment – AO did not struck off irrelevant portion – Show cause notice not specifying limb of Section 271(1)(c) is defective – Penalty proceeding is quashed.[S. 274]
Tribunal held that Notice u/s. 274 should specifically state whether penalty is proposed for concealment of particulars or for furnishing inaccurate particulars. A printed form where all the grounds set out in section 271 are mentioned would not satisfy the requirements of the law. Initiating penalty proceedings on one limb and imposing penalty on another limb of section 271(1)(c) of the Act too would not be proper. The show-cause notice under section 274 of the Act was defective as it did not specify the ground on which the penalty was sought to be imposed. Penalty could not be levied.(AY. 2008-09)
Thomas Muthoot v. ACIT (2023)104 ITR 557 (Cochin) (Trib)
623. S. 271(1)(c) : Penalty – Concealment – Quantum addition stood deleted by Tribunal there remained no basis for levy of penalty under section 271(1)(c)
Tribunal held that profits embedded in freight receipts were not taxable in India and deleted demand raised on assessee Thus when the quantum addition made by AO was deleted by Tribunal, there remained no basis for levy of penalty under section 271(1)(c). (AY. 2013-14)
LRS Management v. Dy. CIT (IT) (2023) 200 ITD 19(Rajkot)(Trib)
624. S. 271(1)(c): Penalty – Concealment – If directions of Tribunal given effect by Assessing Officer basis Transfer Pricing Adjustments would not survive – Levy of penalty is not valid. [S. 92C, 92CA (3), 271C]
The Tribunal directed the inclusion of certain comparables and exclusion of others. The contention of the assessee that if the directions of the Tribunal for inclusion or exclusion of comparables was carried out by the Assessing Officer there would remain no basis for making any transfer pricing adjustments had not been controverted by the Department. In such a situation, no adjustment on the transfer pricing issue would subsist and there would be no question of penalty under section 271(1)(c) on such addition. Therefore the penalty under section 271(1)(c) was to be deleted.(AY.2011-12)
Trip Advisor Travel India Pvt. Ltd. v. A CIT (2023)101 ITR 28 (SN)(Delhi) (Trib)
625. S. 271A: Failure to maintain Account – no audit can be made 44AB – assessee has not maintain books of accounts
The assessee had no audit can be made u/s 44AB of the Act. CIT(A) confirming levy penalty u/s 271A of the Act by the Assessing Officer.
The ITAT observed that the assessee had not been maintaining the books of accounts. As such, there is no question of auditing the same under section 44AB of the Income Tax Act. Consequently, there cannot be any question of levying penalty under section 271B of the Income Tax Act.
Additionally, the bench held that the penalty imposed by the assessing officer was not as per the law and is liable to be deleted while allowing the appeal filed by the assessee. A.Y. 2017-18
Bandenawaz Mulla v. ACIT – ITA No. 137/Bng/2023, dated 07/06/2023 (Bang) (Trib)
626. S. 271B: Failure to get accounts audited – No books of account maintained by assessee – AO already levied penalty under section 271A
As assessee committed the default for not maintaining the regular books of accounts as required under section 44AA. AO imposed penalty of accounts audited did not arise. Once there was violation of section 44AA the said violation could not be extended to section 44AB and once penalty was levied for non-maintenance of book of accounts, there could not be further default for not getting the same audited as required under section 44AB and, therefore, no penalty could be levied under section 271B. [AY 2012-13]
Rakesh Kumar Agarwal v. ITO, Ward 4(4), Jaipur [ITA No.330/JP/2022, dated 06/03/2023]
627. S. 271B : Penalty – Failure to get accounts audited – Audit report filed along with the return – Levy of penalty is not justified.
Tribunal held that assessee got his account audited but same was filed along with return of income which was filed belatedly, penalty could not be imposed under section 271B.(AY. 2015-16)
Jigneshbhai Rasikbhai Savalia v. ITO (2023) 200 ITD 271 (SMC) (Surat) (Trib)
628. S. 271C : Penalty – Failure to deduct at source – Interest payable to Uttarakhand Environment Protection and Pollution Control Board on FDs with the assessee – Board not a taxable entity, established under Central Act – Penalty not leviable. [S. 194A(3)(iii)(f), Notification No. S. O. 3489(E), Dated 22-10-1970]
Held, that the depositor had been formed by an Act of the State Legislature and was a non- taxable entity. Hence no penalty was leviable on the assessee-bank under section 271C. (AY. 2013- 14, 2014-15)
Yes Bank Ltd. v. Add. CIT (TDS) (2023)101 ITR 13 (SN) (Dehradun) (Trib)
629. S. 272A(1)(d): Non-compliance to notices-No mala fide on assessee’s part:
AO issued statutory notices under section 142(1) but those notices were not responded/ complied with by the assessee. Assessee contended that counseld assessee was busy on some occasions in complying filing of return/audit and on other occasions, he had undergone eye operation and therefore, no compliance was made. But AO rejected contention of assessee and imposed. Penalty under section 272A(1) (d). Assessee should not be penalized for any bona fide non-compliance on the part of AR of assessee. Assessee duly explained the reasons for noncompliance. The failure in compliance to the notices was not deliberate on the part of assessee. The reasons cited by the assessee for failure in compliance of the statutory notices under section 142(1) not mala fide. Ultimately the assessment order was passed under section 143(3). Accordingly, levy of penalty was not justified. [A.Y.: 2013-14]
Sai Prerana Co-op Credit Society Ltd. v. ITO17(3)(2), Mumbai [ITA No. 217/Mum/2023; dated 27/04/2023]